Equus Shareholders Grant Authorization to Withdraw BDC Election

Rhea-AI Summary

Equus Total Return, Inc. (NYSE: EQS) announced that shareholders, holding 53.01% of shares, authorized the withdrawal from its classification as a Business Development Company under the Investment Company Act of 1940. This is part of a strategic transformation to operate as an operating company, enabling potential mergers and acquisitions in sectors like oil and gas. The company plans to complete this withdrawal by February 28, 2023, contingent on a definitive acquisition agreement. Risks related to this transformation are noted, and the company emphasizes potential advantages from this operational shift.

Positive

• Shareholders authorized withdrawal from BDC status, providing flexibility for strategic transactions.
• Potential for increased growth opportunities through mergers and acquisitions.
• Shift in valuation criteria to typical operating metrics (earnings, revenue, gross profit).
• Lower compliance costs as a result of no longer being regulated under the 1940 Act.
• Increased ability to issue various types of equity for acquisitions.

Negative

• Transformation subject to various risks and uncertainties that could impact execution.

Authorization Supports Company’s Intent to Effect a Transformative Transaction

HOUSTON, Nov. 03, 2022 (GLOBE NEWSWIRE) -- Equus Total Return, Inc. (NYSE: EQS) (“Equus” or the “Company”) today announced that shareholders, collectively holding 7,166,015 shares (53.01% of the Company’s issued and outstanding common stock), have authorized the Company’s Board of Directors (hereinafter, the “Board”) to cause the Company’s withdrawal of its election to be classified as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”) as part of a potential strategic transformation of Equus into an operating company. In connection with this authorization, the Company has filed an Information Statement on Schedule 14C, dated November 3, 2022.

Over the past several years, the Company has examined a number of potential transactions in a variety of sectors, including natural resources, containers and packaging, real estate, media, technology, telecommunications, and energy. Recently, the Company has concentrated its efforts on evaluating potential transactions in midstream and upstream oil and gas production and development. These evaluations have included consideration of potential strategic transactions to maximize value to shareholders as an operating company not subject to the 1940 Act. The authorization granted by the Company’s shareholders allows the Board to withdraw the Company’s BDC authorization on or prior to February 28, 2023 as part of a potential strategic transformation of Equus into an operating company. Although Equus has been authorized to withdraw and terminate the Company’s BDC election under the 1940 Act, it will not submit any such withdrawal unless and until Equus has entered into a definitive agreement to acquire an operating company.

Risks and Uncertainties

The transformation of Equus into an operating company is subject to various conditions, risks, and uncertainties. Such risks should be considered in addition to the items identified as “Risk Factors” in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2022.

Potential Advantages

The Company believes that an operating company structure, in lieu of a closed-end fund structure, could be advantageous to Equus and its shareholders in various ways, including: (i) a greater number of growth opportunities through merger with and acquisition of other operating companies, (ii) a valuation of Equus based on typical operating criteria such as earnings, revenue, and gross profit, instead of net asset value, (iii) lower proportional compliance costs due to Equus not being regulated under the 1940 Act, and (iv) greater flexibility to issue common and preferred equity, as well as other types of securities as consideration for acquisitions and growth of the Company.

Forward-Looking Statements

This press release contains certain forward-looking statements regarding possible future circumstances. These forward-looking statements are based upon the Company’s current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements including, in particular, the performance of the Company, including our ability to achieve our expected financial and business objectives, our ability to execute our reorganization under the Plan and complete the transactions contemplated thereby, the other risks and uncertainties described herein, as well as those contained in the Company’s filings with the SEC. Actual results, events, and performance may differ. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of any statement in this release does not constitute an admission by the Company or any other person that the events or circumstances described in such statements are material.

Contacts:

Patricia Baronowski
Pristine Advisers, LLC
(631) 756-2486

FAQ

What did Equus Total Return, Inc. announce on November 3, 2022?

Equus announced that shareholders authorized the withdrawal from its BDC classification, aiming for a transformation into an operating company.

What percentage of shares authorized the withdrawal from BDC status?

Shareholders holding 53.01% of shares authorized the withdrawal.

What is the deadline for Equus to withdraw from its BDC election?

The withdrawal must be completed on or prior to February 28, 2023.

What sectors is Equus considering for potential transactions?

Equus is evaluating transactions primarily in midstream and upstream oil and gas production and development.

What are the potential advantages of Equus becoming an operating company?

Advantages include more growth opportunities, different valuation criteria, lower compliance costs, and greater flexibility in equity issuance.