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Hercules Technology (HTGC)

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We are downgrading our recommendation on Hercules Technology (HTGC) to Underperform from Neutral based on its rising expenses and weak fundamentals.

Third quarter distributable net operating income came in ahead of the Zacks Consensus Estimate but remained below the prior-year quarter. Increased operating expenses and higher net realized loss on investments primarily pulled back the results.

Despite the capital market disruption and the sluggish economic recovery, a steady pace of new investments by venture capitalists is being viewed. As a result of this, new investment opportunities are expected, though we remain cautious about the company's investment and credit management strategies.

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