Stock Analysis & Valuation Oxford Square Capital Corp. (OXSQ)

• Previous Close: $1.86
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	2472990.10	132956357
Intrinsic value (DCF)	1.00	-46
Graham-Dodd Method		n/a
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Oxford Square Capital Corp. (NASDAQ: OXSQ) is a business development company (BDC) specializing in private equity and mezzanine investments in small to mid-sized technology-related firms. Headquartered in Greenwich, Connecticut, OXSQ provides capital through secured and unsecured debt, subordinated debt, preferred and common stock, and syndicated bank loans. The company targets technology sectors such as software, IT infrastructure, telecommunications, semiconductors, and medical devices, focusing on businesses with annual revenues under $200 million and enterprise values below $300 million. With investment sizes ranging from $5 million to $30 million, OXSQ aims for exits within seven years. Formerly known as TICC Capital Corp., the firm has a strategic focus on high-growth tech-enabled companies, positioning it as a key player in the BDC space. Its investment approach combines debt and equity financing, offering investors exposure to niche tech markets while generating income through dividends.

Investment Summary

Oxford Square Capital Corp. presents a mixed investment profile. On the positive side, its focus on technology-related small and mid-sized companies aligns with high-growth sectors, potentially offering attractive risk-adjusted returns. The company’s diversified investment approach across debt and equity instruments provides flexibility, while its dividend yield (currently $0.42 per share) may appeal to income-focused investors. However, risks include exposure to volatile tech markets, high leverage (total debt of ~$123.6M vs. cash reserves of ~$34.9M), and negative revenue in recent filings. The BDC structure also subjects OXSQ to regulatory constraints and interest rate sensitivity. Investors should weigh its niche market positioning against broader macroeconomic and sector-specific risks.

Competitive Analysis

Oxford Square Capital Corp. competes in the crowded BDC space, differentiating itself through a specialized focus on technology and tech-enabled businesses. Unlike generalist BDCs, OXSQ’s sector-specific expertise allows for deeper due diligence and potentially better risk-adjusted returns in high-growth niches. Its ability to structure hybrid debt-equity deals provides flexibility, appealing to startups and growth-stage firms needing non-traditional financing. However, OXSQ faces stiff competition from larger BDCs with greater scale and resources, such as Ares Capital (ARCC) and Main Street Capital (MAIN). Its smaller market cap (~$168M) limits its capacity for large-scale investments, and its concentrated tech focus increases sector risk. The firm’s historical performance, including a recent negative revenue figure, raises questions about underwriting discipline. While its beta of 0.743 suggests lower volatility than the broader market, OXSQ’s success hinges on its ability to identify winners in the competitive tech landscape and manage liquidity amid rising interest rates.

Major Competitors

• Ares Capital Corporation (ARCC): Ares Capital (ARCC) is the largest BDC by market cap, offering scale and diversified exposure across industries. Its strengths include a robust balance sheet, lower cost of capital, and access to Ares Management’s institutional resources. However, its generalist approach lacks OXSQ’s tech-sector specialization, potentially missing niche opportunities.
• Main Street Capital Corporation (MAIN): Main Street Capital (MAIN) is a top-performing BDC with a focus on lower-middle-market companies. Its internally managed structure reduces fees, and its consistent dividend history appeals to income investors. While MAIN has broader sector exposure than OXSQ, it may lack OXSQ’s tech-specific underwriting expertise.
• Hercules Capital, Inc. (HTGC): Hercules Capital (HTGC) is a tech-focused BDC like OXSQ, but with a larger portfolio and emphasis on venture debt. Its strengths include a strong track record in Silicon Valley and higher asset quality. However, HTGC’s premium valuation and concentration in late-stage startups could limit upside compared to OXSQ’s smaller, earlier-stage deals.
• Prospect Capital Corporation (PSEC): Prospect Capital (PSEC) is a diversified BDC with significant exposure to structured credit and CLOs. Its high yield attracts investors, but its complex portfolio and weaker historical performance contrast with OXSQ’s simpler, tech-centric strategy. PSEC’s fee structure has also drawn criticism.