A few weeks ago, for no real reason except curiosity (don’t judge), I ran a stock chart comparison between Medley Capital Corporation (MCC) and Main Street Capital Corporation (MAIN). MCC is the listed business development company (BDC) managed by Medley Management, which serves as sub-advisor to the non-traded BDC Sierra Income Corporation. Main Street, through a subsidiary, is the sub-advisor to the Hines-sponsored non-traded BDC HMS Income Fund.
The comparison showed MAIN around $40 per share and MCC around $3.50 per share. I ran the comparison a few years ago when both Sierra and HMS were in the midst of their offerings, and at that time MAIN traded around $30 per share and MCC traded in the $15 to $16 per share range. Over the interval, MAIN gained about a third in value while MCC’s value eroded by more than 75%. That is one heck of a divergence for two companies in similar industries.
Now I read that MCC, Medley, and Sierra are planning on consolidating into one entity through various internal transactions. I don’t see who this merger benefits except Medley. Sierra investors will end up having liquidity, so there is some potential for good news, but its assets are getting mixed with MCC’s. No one knows at what price the listed Sierra will trade, but if an original $10.00 per share offer price trades at a deep discount investors will not be happy. I don’t see how Medley’s long-term value elimination plan, proved in its management of MCC, will retain Sierra investors when given liquidity. Sierra was always the poor man’s Business Development Company of America (BDCA), which itself was the poor man’s Franklin Square Investment Corporation (FSIC). Third rate is never the best rate.