Hercules Capital Hit with Securities Class Action Over Allegations of Misstated Portfolio Valuations and Sourcing Practices

Hercules Capital (NYSE: HTGC) is facing a securities class action lawsuit seeking to represent investors who purchased or otherwise acquired Hercules securities between May 1, 2025 and February 27, 2026.

Background and allegations

The lawsuit follows a critical report by Hunterbrook Media titled “The Myth of Hercules Capital.” The report alleges that Hercules’ deal sourcing process largely copies investments listed on Google Ventures’ website.

Hagens Berman, a national shareholders rights firm, said it is investigating whether Hercules violated federal securities laws. The firm is urging investors who suffered significant losses to submit their losses and encourages witnesses with information that could assist the investigation to contact its attorneys.

What the complaint targets

The case centers on the propriety of Hercules’ disclosures regarding its investment origination and underwriting processes. According to the complaint, Hercules overstated the due diligence used in deal sourcing and loan origination, overstated due diligence related to portfolio valuation, and misclassified portfolio investments.

The lawsuit alleges that these issues resulted in Hercules overstating or misrepresenting portfolio valuations and net asset value (NAV).

Hunterbrook’s findings and market reaction

Hercules’ prior assurances about its origination and due diligence processes were called into question on February 27, 2026, when Hunterbrook published its findings.

Among other claims, Hunterbrook said that, according to a former Hercules analyst who worked on deal sourcing, Hercules’ process amounted to “going on the website for Google Ventures and just see what they invest in and just copy it.”

Hunterbrook also stated that Hercules is among the most software-exposed business development companies, with “about 35% of the value of the company’s loan portfolio” tied to software. It further alleged that, despite billions of dollars of similar industry debt falling into distressed territory, Hercules still marks its software book at “100 cents on the dollar.”

In addition, Hunterbrook said a growing share of Hercules’ income is “phantom,” attributing this to increased use of payment-in-kind (PIK) loans that allow borrowers to pay interest by adding to principal rather than paying interest on their debt.

Hunterbrook also reported speaking with a former member of Hercules’ finance team, who it said raised concerns about the valuation process. Hunterbrook attributed those concerns to a small and overstretched team with few checks in place, unlike other BDCs.

Following the report, Hercules shares fell nearly 8% on February 27, 2026.

Firm statement and next steps

Reed Kathrein, the Hagens Berman partner leading the investigation, said the firm is investigating Hunterbrook’s allegations and whether Hercules misled investors about sourcing, underwriting, marks, PIKs, and ultimately NAV.

Class Period: May 1, 2025 – Feb. 27, 2026
Lead Plaintiff Deadline: May 19, 2026

Whistleblower information

The firm also noted that persons with non-public information regarding Hercules may consider options to assist the investigation or take advantage of the SEC Whistleblower program. It stated that whistleblowers who provide original information may receive rewards totaling up to 30% of any successful SEC recovery.

About Hagens Berman

Hagens Berman is a global plaintiffs’ rights complex litigation firm focused on corporate accountability. The firm said it has secured more than $2.9 billion in this area of law.