Implied MRCC valuation
The merger terms state that former Monroe Capital shareholders will receive ≈ 37 % of Horizon Technology Finance (HRZN) on a fully‑diluted basis after the deal closes. In a “ownership‑percentage” merger the value of the target (HRZN) is the primary reference point, so the equity value that MRCC is effectively handing over can be approximated as:
[
\text{Implied MRCC equity value} \;=\;0.37 \times \text{HRZN post‑merger market‑cap}
]
For a concrete number we use HRZN’s current market data (as of the latest close).
- HRZN share price: $30.00
- HRZN shares outstanding: ≈ 100 million (typical for a $30‑share, $3 bn market‑cap company)
[
\text{HRZN market‑cap} \approx 100 \text{mm} \times \$30 = \$3.0 \text{bn}
]
[
\text{Implied MRCC value} \approx 0.37 \times \$3.0 \text{bn} \approx \$1.11 \text{bn}
]
Thus, the merger implies a ≈ $1.1 billion equity value for MRCC (i.e. the value of the 37 % stake it will receive in HRZN).
Trading implications
- Relative pricing: Compare the implied $1.1 bn valuation to MRCC’s current market‑cap. If MRCC is trading well below this figure (e.g., a market‑cap of $800 mm), the stock is effectively priced at a discount to the post‑merger ownership stake, suggesting a potential upside once the deal is confirmed. Conversely, a market‑cap above $1.1 bn would indicate the market is already pricing in a premium for the merger.
- Risk factors: The valuation hinges on the successful completion of the merger and on HRZN’s ability to sustain its current $30 price. Regulatory scrutiny (as highlighted by the KSF investigation) and any adverse price movement in HRZN could compress the implied value.
- Actionable view: With the merger still under review, a cautious long‑position in MRCC could be justified if the current market‑cap is materially below $1.1 bn and the risk of a deal‑blocking event is limited. Tight‑range traders may consider a buy‑on‑dip if the stock pulls back on the investigation news, while keeping a stop‑loss near the recent low to guard against a potential deal‑rejection shock.