Equus Total Return Stock Price, News & Analysis
Company Description
Equus Total Return, Inc. (NYSE: EQS) is a business development company that trades as a closed-end fund on the New York Stock Exchange under the symbol EQS. According to its public disclosures, Equus operates as an investment company with a focus on building a portfolio of holdings and seeking total return for its stockholders through changes in the fair value of its investments.
The company is based in Houston, Texas, and is registered as an investment company under the Investment Company Act of 1940. Equus reports its net asset value and portfolio developments through periodic press releases and SEC filings, giving investors insight into how changes in its investments affect its net assets and net asset value per share.
Business model and investment focus
Equus describes itself as a business development company that trades as a closed-end fund. Public information shows that it invests in portfolio companies and other investment instruments and then reports changes in the fair value of these holdings over time. For example, Equus has disclosed investments in entities such as Morgan E&P, LLC and General Enterprise Ventures, Inc., as well as prior ownership of Equus Energy, LLC. These holdings illustrate that the company participates in transactions involving equity interests and convertible promissory notes, and then measures and reports the fair value of these positions.
Equus has reported that Morgan E&P, LLC is a wholly-owned subsidiary formed to hold development rights in oil and gas acreage in the Bakken/Three Forks formation in the Williston Basin of North Dakota. The company has also disclosed an investment in a senior convertible promissory note and related warrant issued by General Enterprise Ventures, Inc., a developer of fire suppression products whose common stock trades on the OTC Markets under the symbol GEVI. In addition, Equus has reported the sale of its holding in Equus Energy, LLC to North American Energy Opportunities Corp., receiving a combination of cash and preferred stock as consideration.
Key portfolio components mentioned in public disclosures
Morgan E&P, LLC (Morgan) is described in Equus press releases as holding development rights to thousands of net acres in the Bakken/Three Forks formation in the Williston Basin of North Dakota. Equus has repeatedly discussed changes in the fair value of its equity holding in Morgan in connection with movements in the forward price curve for oil, changes in proved reserves, production levels, and acquisitions of additional acreage. The company has also noted that Morgan secured a loan facility to fund near-term drilling and work-over operations on existing wells and that Morgan engaged an energy consultant to lead its asset strategy in the Williston Basin.
General Enterprise Ventures, Inc. (GEVI) appears in Equus disclosures as the issuer of a 1-year senior convertible promissory note purchased by Equus, bearing interest at 10% per annum and convertible into shares of GEVI common stock at a specified conversion price. Equus also received a multi-year common stock purchase warrant to acquire additional GEVI shares at a stated exercise price. The company has reported changes in the trading price of GEVI shares and how those changes affected the fair value of its combined holdings of the note, converted shares, and warrant.
Equus Energy, LLC was a portfolio holding whose fair value was discussed in Equus’s net asset value announcements. Equus reported a decrease in the fair value of its holding in Equus Energy in connection with a decline in the forward price curve for oil. Subsequently, Equus disclosed that it sold Equus Energy to North American Energy Opportunities Corp., receiving cash and redeemable preferred stock as consideration, subject to certain conditions related to operating rights and working interests in the Conger Field.
Valuation approach and reporting
Equus’s public releases emphasize that changes in its net asset value are driven by changes in the fair value of its portfolio holdings. The company has stated that it receives advice and assistance from a third-party valuation firm to support its determination of the fair value of investments such as its equity interest in Morgan and its holdings in Equus Energy. These valuations are reflected in the company’s reported net assets and net asset value per share at the end of each quarter.
Equus also uses financing instruments at the fund level. For example, it has disclosed the issuance of a 1-year senior convertible promissory note in exchange for cash, along with common stock purchase warrants exercisable at a specified price per share. The company has noted that, under applicable accounting rules, certain warrants were reclassified from equity to liability, which affected its reported net assets. Equus has also indicated that shareholder approval may be required for the issuance of common shares upon conversion of notes or exercise of warrants when the conversion or exercise price is below the company’s net asset value per share.
Corporate governance and stockholder actions
Equus holds an annual meeting of stockholders at which stockholders vote on matters such as the election of directors, ratification of independent accountants, advisory approval of executive compensation, authorization to issue shares under specified conditions, and authorization for a potential reverse stock split within a defined ratio range. Public filings show that most proposals at a recent annual meeting were approved, while one proposal relating to the issuance of shares below net asset value did not receive the required level of approval under the Investment Company Act of 1940.
The company has also announced board changes, including the appointment of an independent Chairman of the Board and an independent director, and has described committee assignments such as the Audit Committee, Compensation Committee, and Governance and Nominating Committee.
Listing status and regulatory compliance
Equus has disclosed that it received a notice from the New York Stock Exchange that its average closing share price had fallen below the $1.00 minimum required under a specific NYSE listing rule. The company stated that this notice was a deficiency notice rather than a delisting notice and that it intended to cure the deficiency within the allowed period, including consideration of alternatives such as a reverse stock split, subject to stockholder authorization. Equus has also filed a notification of late filing on Form 12b-25 for a quarterly report, explaining that its financial statements could not be finalized on a timely basis without unreasonable effort or expense and indicating that it expected to file within the permitted extension period.
Through periodic Form 8-K filings, Equus furnishes press releases announcing its net asset value for specific quarters, thereby providing transparency into the performance of its investment portfolio and the resulting impact on net assets.
How Equus fits within the finance and investment landscape
Based on its own descriptions, Equus functions as a business development company and closed-end fund that invests in portfolio companies and other investment instruments and then reports the fair value of these holdings to its stockholders. Its public disclosures highlight exposure to energy-related assets through its subsidiary Morgan E&P and its former holding in Equus Energy, as well as exposure to a developer of fire suppression products through its investment in General Enterprise Ventures. The company’s net asset value announcements, financing activities, and stockholder approvals related to share issuances and potential reverse stock splits are central elements of how it manages its capital structure and communicates with investors.