Problems at TriplePoint Venture Growth BDC (TPVG)
TriplePoint Venture Growth BDC (NYSE: TPVG — $421 million) describes itself as “a leading global financing provider devoted to serving venture capital-backed companies.” In reality, TriplePoint is encumbered by high fees, weak management, and a weaker loan book saddled by portfolio company bankruptcies and upside-down startups. The Bear Cave believes TriplePoint’s equity may be severely impaired, if it has any value at all.
For a sense of TriplePoint’s troubles, investors need to look no further than its publicly disclosed net asset value, which has declined from $14.01 per share in Q4 2021 to $13.84 in Q1 2022, $13.01 in Q2 2022, $12.69 in Q3 2022, and $11.88 in Q4 2022. Shares closed yesterday at $11.92, a slight premium to net asset value, and the company reports Q1 2023 results tomorrow after the close.
TriplePoint charges investors 1.75% of the fund’s “average adjusted gross assets” and 20% of net investment income above an 8% hurdle rate.
The Bear Cave believes TriplePoint’s net asset value decline will accelerate in the coming quarters as TriplePoint may need to take significant write-downs in its loan book.
For example, last quarter TriplePoint took a full ~$34 million write-down on Medly Health, an online pharmacy that declared bankruptcy in December 2022. TriplePoint disclosed, in part,
“Medly sought bankruptcy protection due to adverse developments and liquidity issues precipitated by the loss of anticipated financing and the discovery of certain operational, financial and accounting irregularities and improper activities conducted by former employees, including the original founders.”
In Q3 2022, TriplePoint carried its $34.2 million in Medly Health loans at $31.9 million.
History seems to be repeating.
Two weeks ago, another TriplePoint borrower, telehealth provider The Pill Club, declared bankruptcy. The Pill Club’s bankruptcy filing follows the company’s $18 million settlement in February with the California Attorney General over alleged insurance fraud. In its 10-K filed March 2023, TriplePoint carries its $20 million loan to The Pill Club at $19.9 million.
This is no isolated incident. In fact, The Bear Cave has identified ten portfolio companies that appear to be in substantial distress with TriplePoint loans totaling over $170 million. Let’s dig in.