- What is a BDC?
Congress created Business Development Companies (BDCs) in 1980 to provide public investors another means to invest in the long-term growth of smaller U.S. businesses. BDCs invest their capital primarily in small and middle market private companies in the U.S. Typically, BDCs are structured to originate and hold debt and equity investments and can invest across a portfolio company’s capital structure.
A BDC that is a “regulated investment company”, or a “RIC”, for U.S. federal income tax purposes, such as Main Street Capital, is required to distribute at least 90% of its taxable income to shareholders in order to maintain its RIC election and avoid corporate income tax.
- What is Main Street Capital's primary investment objective?
Our investment objective is to provide long-term debt and equity capital to lower middle market companies and debt capital to middle market companies, with our primary investment objective focused on investments in the lower middle market. Our portfolio investments are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. We seek to partner with entrepreneurs, business owners and management teams and generally provide "one stop" financing alternatives within our lower middle market portfolio. Our lower middle market companies generally have annual revenues between $10 million and $150 million. Our middle market debt investments are made in businesses that are generally larger in size than our lower middle market portfolio companies.
- How is Main Street Capital different from other BDCs?
Our unique investment strategy includes actively investing as an equity owner in virtually all of the lower middle market companies in which we invest. We believe that the lower middle market is a highly attractive segment of the overall market that provides unique and highly valuable equity investment opportunities for Main Street Capital. We believe that these unique equity investments provide for potential realized and unrealized gains to offset any potential credit losses and impairments relating to our debt investments and the opportunity for us to grow our net asset value (NAV) per share over time as these lower middle market portfolio companies perform and the value of our equity investments in these companies increase. We believe this unique investment strategy has provided superior returns to our shareholders for more than a decade. In contrast, most other BDCs primary focus is on debt investments only.
In addition, we are an internally managed BDC whereas the vast majority of other BDCs are externally managed.
- What does it mean that Main Street Capital is an internally managed BDC?
Internally managed means that we are structured much like a typical operating company, with employees that are solely focused on Main Street Capital’s operating activities and with the significant benefits of a typical corporate governance structure relating to the compensation of our employees. As a result, the compensation that we provide to our employees is based on a combination of the overall financial performance and operating achievements of the company and the individual performance of our employees. As a result of these benefits, we believe that the internally managed structure better aligns the interests of our employees and shareholders. In contrast, an externally managed BDC does not have employees and is instead managed by a third-party management firm that charges the BDC an operating cost based on a percentage of assets plus certain incentive fees, meaning that an externally managed BDC’s operating costs will automatically increase as the BDC’s assets increase, irrespective of the BDC’s operating performance. Our internally managed structure has resulted in an overall cost to manage our business that is significantly lower than the average BDC, and such benefits can be measured by comparing Main Street Capital’s ratio of operating cost, excluding interest expense, as a percentage of total assets and Main Street Capital’s efficiency ratio to the average ratios for other BDCs. More details on our internally managed structure and the ratio comparisons can be found in our quarterly Investor Presentation located at our Investors page at https://ir.mainstcapital.com/.
- Does Main Street Capital manage other funds?
Yes, we are the sub-advisor for the HMS Income Fund (https://www.hinessecurities.com/past-offerings/hms-income-fund/), a non-listed BDC that has total assets in excess of $1 billion. We receive 50% of the investment advisor’s base management fee, which equates to 1% of the total assets of HMS Income Fund, and have the opportunity to earn incentive fees under this sub-advisory relationship based upon the fund’s performance. Due to our unique internally managed structure, the benefits derived from this sub-advisory relationship are included in our financial results and therefore passed on to our shareholders.
- What is Main Street Capital’s strategy in terms of how much debt it maintains in its capital structure, or leverage it employs in the execution of its investment strategy?
The Investment Company Act of 1940 provides for strict regulations limiting how much leverage a BDC can employ. Prior to 2018, a BDC was required to maintain an asset to debt coverage ratio of at least 2.0x. In March 2018, BDCs were provided the opportunity to increase leverage through the passage of the Small Business Credit Availability Act, which decreased the required asset to debt coverage ratio to 1.5x, provided the BDC seeking to employ the additional leverage received prior board of director or shareholder approval. We have historically maintained conservative levels of leverage and have proven that our business model does not require the additional leverage provided by this legislation. Therefore, to date, we have not elected to seek approval for the additional leverage.
- Where is Main Street Capital's common stock listed?
Our common stock is listed and traded on the New York Stock Exchange (“NYSE”) under the symbol MAIN. For more detailed stock information, please visit our Investors/Listed Securities Info page at https://ir.mainstcapital.com/listed-securities-information.
- Can I purchase shares directly from Main Street Capital?
Yes, we have a Direct Stock Purchase Plan (“DSPP”) that provides new and existing shareholders the ability to purchase shares of our common stock directly from us without paying any trading fees, brokerage commissions or service fees. Initial purchases of shares may be made between $250 (and $100 if you are a registered shareholder or you sign up for automatic monthly investments) and $25,000, and subsequent investments may be made between $100 and $25,000 per month. You can make optional cash investments by check or by authorizing a one-time debit or automatic monthly deductions from your bank checking or savings account. Sales of shares of our common stock under the DSPP will be effected monthly, on the 15th of each month (or the previous NYSE trading day if the 15th day is not an NYSE trading day) (each, an “Investment Date”). The Plan Administrator must receive full payment for your purchase at least two business days before the relevant Investment Date. You will not pay any trading fees, brokerage commissions or service fees on common stock purchased through the DSPP. You will, however, be responsible for any trading fees, brokerage commissions or service fees paid in connection with your sale of shares from the DSPP, termination of your account and for other actions as described in the DSPP. For more information, please visit our Investors/Listed Securities Information/Dividend Reinvestment and Direct Stock Purchase Plan page at https://ir.mainstcapital.com/dividend-reinvestment-and-direct-stock-purchase-plan.
- Does Main Street Capital issue new shares of equity and why is the issuance of new shares of equity by Main Street necessary?
Yes, we do periodically issue new shares of equity to fund our growth. In order to maintain the benefits of our “regulated investment company”, or a “RIC”, tax structure for U.S. federal income tax purposes, which provides us the opportunity to avoid corporate income tax if we distribute at least 90% of our taxable income to our shareholders, we generally do not retain our taxable income. As a result, we have in the past, and will continue in the future to require additional equity issuances to fund our growth. In addition, due to the unique nature of our investment strategy, which includes making equity investments with long-term or indefinite holding periods, we believe that it is important to fund a significant portion of our capital needs with equity issuances.
To facilitate these equity issuances as necessary to fund our growth, we currently maintain a program with certain selling agents through which we can sell shares of our common stock through at-the-market (“ATM”) offerings, and we seek to utilize our ATM program for these needs.
- What is the CUSIP number for Main Street Capital’s common stock?
The CUSIP number for our common stock is 56035L104.
- Where can I find information on Main Street Capital's net asset value?
The quarterly net asset value per share may be obtained in our public filings (our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K) with the Securities and Exchange Commission via its website www.sec.gov or by accessing our SEC Filings page at https://ir.mainstcapital.com/all-sec-filings.
- Does Main Street Capital pay a Dividend?
Yes, we pay dividends to our shareholders of record on a monthly basis. Since 2013, we have also paid semi-annual supplemental dividends to our shareholders. To view our historical dividends, please visit our Investors/Listed Securities Information/Dividends page at https://ir.mainstcapital.com/dividends.
- Why does Main Street Capital pay semi-annual supplemental dividends and does it plan to continue to pay these dividends in the future?
Due to our unique investment strategy, which includes making equity investments in lower middle market companies, we have historically generated substantial realized gains from our equity investments and we are generally required to pay out these gains in the form of dividends to maintain our regulated investment company tax status. Beginning in 2013, we chose to distribute these realized gains to our shareholders in the form of supplemental dividends in an attempt to better match the periodic nature of the realized gains. Since that time our business model and investment portfolio have matured and our current intention is to fully absorb the semi-annual supplemental dividends into the regular monthly dividends, and in the process maintain and grow our total combined annual dividends, by gradually reducing the semi-annual supplemental dividends while increasing the regular monthly dividends over multiple years beginning in 2019.
- Does Main Street Capital have a Dividend Reinvestment Plan (“DRIP”)?
Yes, the DRIP provides registered shareholders who hold their shares with American Stock Transfer & Trust Company LLC ("AST"), our transfer agent and registrar, and shareholders holding shares of our common stock through certain brokerage firms that have elected to participate in the DRIP, the ability to purchase additional shares of our common stock automatically by reinvesting all or a portion of their cash dividends paid on shares of our common stock. The DRIP is an "opt-out" program. Therefore, if we declare a cash dividend, registered shareholders who have not elected to receive dividends in cash will have their cash dividend automatically reinvested into additional shares of our common stock. Non-participating brokerage firms and other financial intermediaries may provide a similar dividend reinvestment program. If you hold your shares through a bank, broker or other intermediary, please contact your bank, broker or other intermediary to inquire about their dividend reinvestment options. For more information on the DRIP, please visit our Investors/Listed Securities info/Dividend Reinvestment and Direct Stock Purchase Plan page at https://ir.mainstcapital.com/dividend-reinvestment-and-direct-stock-purchase-plan.
- Are dividends taxable to shareholders and, if so, at what rate?
Following the end of each year we provide a Form 1099-DIV and a tax status letter to our shareholders that describe the tax characteristics of the dividends paid in the preceding year, including a breakdown between ordinary income, capital gains and qualified dividends. DRIP participants are taxed on the dividends as if they had received cash. For information on the tax status of our historical dividends, please visit our Investors/Listed Securities Information/Tax Information page at https://ir.mainstcapital.com/tax-information. For information about taxes in respect of dividends received by you, you should consult your own tax advisor.
- Are dividends paid by Main Street Capital subject to Unrelated Business Income Tax (“UBIT”)?
Unrelated business taxable income (“UBTI”) is income that a tax-exempt entity, such as a charitable organization, religious organization, qualified retirement trust, university, or other similar organization, earns from business activities that are not substantially related to the performance of the organization's exempt purpose and thus does not qualify for exemption from UBTI. In addition, an individual retirement account (“IRA”) can also earn active business income from the investments held by the IRA and UBTI earned in excess of certain statutory limits can cause certain additional tax reporting requirements and tax obligations for the IRA. Since we are a regulated investment company, or a “RIC”, which is a corporation for federal income tax purposes, we are able to act as a “blocker” and “shield” against UBTI and we can therefore pass the income and gains we earn through to our shareholders as dividends that are not subject to UBIT.
- Which research analysts provide research coverage and analysis on Main Street Capital?
Please see the last page of our quarterly Investor Presentation located at our Investors/News & Events/Presentations page at https://ir.mainstcapital.com/presentations to view a detailed list of the analysts who follow the company.
- Am I a registered shareholder?
You are a registered shareholder if you hold shares of Main Street Capital common stock registered in your name and you either hold a certificate representing such shares or such shares are held in book-entry form with American Stock Transfer & Trust Company LLC ("AST"), our transfer agent and registrar. If your shares are not registered in your name, but instead are held in the name of your bank, broker or other intermediary, your securities are considered to be held in “street name.”
- Who do I contact with questions concerning my account activity, replacing lost or stolen certificates, transferring securities, dividend payments, direct deposit information, or processing a change of address?
Registered shareholders should contact American Stock Transfer & Trust Company LLC ("AST"), our transfer agent and registrar, by telephone at (800) 937-5449 or by visiting their website at www.astfinancial.com with any questions.
Shareholders who hold their shares in “street name” through a bank, broker or other intermediary should contact their bank, broker or other intermediary with any questions.
- Whom can I contact for general information about Main Street Capital Corporation?
Dwayne L. Hyzak
Chief Executive Officer
Brent D. Smith
Chief Financial Officer & Treasurer
Dennard • Lascar Associates, LLC