Financial Select Sector

Russell 2000

The Diluter

Comparable Companies - OXSQ

No open-market insider trades were found in the last 12 months. Institutional ownership data for the quarter ending 2025-09-30 shows 15 top holders, with Millennium Management LLC as the largest at 0.96% ownership. Short interest data as of 2025-12-31 shows 2,447,417 shares short, representing 3.3% of float with 2.5 days to cover.

Chief Executive Officer & Interested Director

President & Chief Operating Officer

Chief Financial Officer, Chief Accounting Officer, Treasurer & Secretary

Chairman of the Board

Independent Director

Director

Jonathan H. Cohen

Saul B. Rosenthal

Bruce L. Rubin

Steven P. Novak

Barry A. Osherow

George Stelljes III

Charles M. Royce

Jonathan H. Cohen's tenure as CEO of Oxford Square Capital Corp. is marked by a consistent strategy of funding operations and dividends through significant stock issuances, leading to substantial shareholder dilution. While his background includes experience in technology equity research, his leadership at OXSQ has primarily involved capital allocation decisions that prioritize distributions over reinvestment or share buybacks. His roles across multiple affiliated entities suggest a deep involvement in the management of the Oxford group's investment activities.

Saul B. Rosenthal's extensive tenure as President and COO at Oxford Square Capital Corp., alongside his roles in affiliated entities, indicates a deep operational involvement. His background as a tax attorney from a prominent law firm suggests a strong foundation in legal and financial structuring, which is crucial for a BDC. While specific performance metrics tied to his operational leadership are not readily available, his consistent presence across the Oxford group of companies points to a stable and experienced operational executive.

Bruce L. Rubin's long-standing career within Oxford Square Capital Corp. and its affiliates, progressing from Controller to CFO, demonstrates a deep understanding of the company's financial operations and reporting. His consistent role in financial oversight suggests a key contributor to the company's financial stability and compliance. Specific performance indicators related to his financial management are not detailed, but his sustained tenure indicates a reliable financial steward for the organization.

Steven P. Novak's diverse background as a founder of investment management firms and technology companies, coupled with his experience on multiple acquired company boards, provides a strong foundation for his role as Chairman. His expertise in capital markets and venture investing, along with his CFA designation, suggests a strategic and analytical approach to board oversight. His leadership in founding and managing companies, and his role in acquisitions, indicates a proven track record in business development and financial management.

Founding of Palladio Capital Management LLC

Barry A. Osherow's experience as a partner at Level Equity Management, focusing on software and technology, combined with his prior roles in private equity and his foundational involvement with Oxford Square Capital Corp., provides a strong blend of investment and operational insight. His expertise in credit and middle-market companies is directly relevant to the BDC sector. His current role in structured capital at Level Equity suggests a sophisticated understanding of financing and capital allocation strategies.

Founding team member of Oxford Square Capital Corp.

George Stelljes III's extensive experience as a managing partner in private equity and his leadership roles in investment funds, including his chairmanship of Bluestone Community Development Fund, provide him with a deep understanding of capital allocation and investment strategy. His background as a former board member and regional president of the National Association of Small Business Investment Companies highlights his engagement with the broader investment community. His MBA from the University of Virginia further solidifies his financial acumen.

Charles M. Royce's legacy as the founder and long-time leader of Royce & Associates, LP, a prominent investment management firm, underscores his deep expertise in the financial services industry and investment valuation. His decades of experience in managing investment portfolios and his current role as Senior Advisor to the firm provide invaluable perspective. His minority interest in Oxford Square Management further aligns his interests with the company's success.

Founding and leadership of Royce & Associates, LP

Business Development Company focused on providing financing solutions to middle-market companies, primarily through senior secured debt and equity investments.

Single operating segment comprising investment activities and portfolio management.

Business Development Company providing direct lending solutions to U.S. upper middle market companies backed by top private equity sponsors.

Single operating segment focused on direct lending to middle-market companies.

Business Development Company focused on lending to middle market companies, primarily through senior secured debt and select junior capital positions.

Business Development Company investing primarily in privately held U.S. middle-market companies through senior secured loans, financing leases, and to a lesser extent, unsecured loans and equity securities.

Single operating segment focused on investing in middle-market companies.

The company is a closed-end, non-diversified management investment company with its headquarters located at 8 Sound Shore Drive, Greenwich, Connecticut. It does not own physical manufacturing facilities or production assets.

The management team at Oxford Square Capital Corp. is rated poorly, with a holistic score of 1.25, reflecting a failure to execute the core mandate of a Cyclical Operator: preserving capital through the cycle. The financial narrative is defined by a structural reliance on shareholder dilution to sustain dividend payments, resulting in a 60% increase in share count and a 23.5% decline in Tangible Book Value per share over two years. Capital allocation has been value-destructive, with negative ROIC (-0.7%) and interest coverage collapsing to 0.7x. While the board possesses financial expertise, it lacks the specific cyclical experience to discipline management's dilutive strategy. The incentive structure, based on profit participation for the investment adviser rather than direct shareholder returns, fundamentally misaligns management interests with long-term value creation.

The company notes that the effect of global climate change may impact the operations of its portfolio companies. Climate change creates physical and financial risks, and some portfolio companies may be adversely affected. For example, the needs of customers of energy companies vary with weather conditions. To the extent weather conditions are affected by climate change, energy use could increase or decrease. Increases in the cost of energy could adversely affect the cost of operations of portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some portfolio companies' financial condition through decreased revenues. Extreme weather conditions can require more system backup, adding to costs, and can contribute to increased system stresses. Energy companies could also be affected by the potential for lawsuits against or taxes or other regulatory costs imposed on greenhouse gas emitters, based on links drawn between greenhouse gas emissions and climate change.

The company has zero full-time employees. All investment management and administrative functions are performed by personnel of Oxford Funds, an external investment adviser, under the terms of the Investment Advisory and Administration Agreements.

The company is a business development company that invests in debt and equity securities of technology-related companies. It does not manufacture products or provide services directly to end consumers. The company's primary customer is its shareholder base. The company maintains a Code of Ethics and Insider Trading Policy that establishes procedures for personal investments and restricts certain transactions by personnel. The company also discloses that it may enter into transactions with portfolio companies that may be considered related party transactions, and it has implemented policies and procedures to screen each transaction for any possible affiliations.

The company does not have a traditional supply chain as it does not manufacture goods. The company's 'supply chain' consists of its portfolio companies. The company's due diligence process includes an assessment of potential regulatory/legal issues. The company does not disclose specific responsible sourcing audits or community engagement programs. The company notes that changes to United States tariff and import/export regulations may have a negative effect on its portfolio companies and, in turn, harm the company.

The financial backdrop is one of persistent capital destruction, with Net Asset Value per share declining to $1.95 from $2.35 year-over-year and Net Investment Income frequently insufficient to cover the $0.105 quarterly distribution.

As a Business Development Company (BDC), OXSQ does not engage in traditional CapEx or R&D. The 'Innovation Dossier' confirms that CapEx is 'Not Applicable' and R&D investment metrics are 'Not Disclosed.' The company's investment strategy, per the MD&A, focuses on deploying capital into portfolio companies (debt and equity securities of CLOs and private/public companies) rather than internal R&D or physical assets.

The asset base consists entirely of financial assets (investments) and cash. The auditor identified 'Income from securitization vehicles and investments' as a Critical Audit Matter (CAM), citing significant judgment in estimating cash flows and timing. The MD&A notes risks related to the valuation of portfolio investments. The transcript analysis reveals a history of realized and unrealized losses ($20.6 million in FY 2024), indicating that book value is frequently adjusted downward.

The company's reinvestment involves purchasing CLO equity and leveraged loans. The transcript analysis notes that the company has hit 'max capacity' for adding CLO equity without rotating the portfolio, suggesting diminishing opportunities. The negative ROIC aligns with the realized and unrealized losses reported in the financials.

Price-to-Tangible-Book-Value

EV/EBITDA (Normalized)

EV/EBITDA

P/Tangible Book Value

Saul Barak Rosenthal

Bruce Lawrence Rubin

Chief Executive Officer of the Company and Oxford Square Management, and managing member of Oxford Funds since 2003. Extensive experience in managerial positions in investment management, securities research, and financial services. Serves as CEO and Director of Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., and CEO of Oxford Gate Management.

Founder of Royce & Associates, LP; served as CEO from 1972 to 2016 and Chairman from 2016 to 2024. Currently a Senior Advisor. Holds a minority, non-controlling interest in Oxford Square Management. Extensive knowledge of financial services industry and investment valuation process.

Extensive capital markets, venture, and public company investing experience. Founded Palladio Capital Management LLC. Previously held senior positions at Harris BankCorp, Sanford C Bernstein & Company, Forstmann-Leff & Associates, and Unterberg Harris. Founded Mederi Therapeutics and Quisk, Inc. Chartered Financial Analyst. Serves as CFO and CCO of LMI Group International, Inc.

Partner at Level Equity Management, LLC, focused on software and technology-driven businesses. Previously with Enhanced Capital Partners, Inc. as Managing Partner and Managing Director. Member of founding team of Oxford Square Capital Corp. and served as Principal from 2002 to 2008. Extensive credit experience with middle-market companies.

Managing partner of St. John’s Capital, LLC, a private equity vehicle. Served as general partner and investment committee member of Patriot Capital and Patriot Capital II (2001-2012). Chairman of the board of Bluestone Community Development Fund. Former board member and regional president of the National Association of Small Business Investment Companies. Holds an MBA from the University of Virginia and a BA in Economics from Vanderbilt University.

Gerald Cummins

Executive Officers and Directors as a Group

Oxford Square Capital Corp. is a Maryland corporation that operates as a business development company (BDC). The company's investment objective is to maximize current income from its investments while seeking to preserve its capital. It invests primarily in debt and equity tranches of secured debt and equity of CLOs and in secured debt of private and public companies. The company's investment activities are managed by Oxford Square Management, an investment adviser.

Held WACC (11.0%) and Terminal Multiple (8.0x) constant, solved for EBITDA

Balance Sheet - Supplemental

Balance Sheet

Cash Flow Statement - Supplemental

Cash Flow Statement

Income Statement - Supplemental

Income Statement

Ratios

Valuation

Historical Ratios & Multiples - OXSQ

The industry is facing a peak capital cycle where the supply of capital is surging while revenue growth is negative. BDCs are struggling with a bifurcation in credit quality, as lower-tier corporate borrowers face maturity walls, keeping default risks elevated for the equity tranches held by vehicles like Oxford Square.

The company is relevant for analysis now due to the collapse in interest coverage to 0.7x and the recent $11.8 million ATM issuance, which signals an accelerating need for external capital to sustain operations.

A material reduction in the monthly distribution is the primary catalyst. Net Investment Income of $0.07 per share is currently 33% below the quarterly distribution of $0.105, making the current payout unsustainable without accelerating capital destruction.

A 'lower-for-longer' credit cycle recovery could lead to a structural impairment of the CLO equity tranches, which are the first to absorb losses in a downturn.

Oxford Square Capital Corp. (OXSQ) operates as a Business Development Company (BDC) primarily investing in debt and equity securities of other companies. The company's asset base consists predominantly of financial instruments, not tangible property, plant, and equipment. The provided balance sheet for December 31, 2024, explicitly reports Net Property, Plant & Equipment (PP&E) as $0. Furthermore, transcript analysis consistently indicates no physical footprint changes or discussions of tangible assets, reinforcing its nature as a financial asset investor.

Cash & Equivalents

Accounts Receivable

Oxford Square Capital Corp. (OXSQ) functions as a Business Development Company (BDC), specializing in investments in debt and equity securities. Its operational structure does not involve the production, storage, or sale of physical goods, and consequently, it does not hold any traditional inventory. The company's balance sheet for December 31, 2024, explicitly reports an inventory value of $0.0. This is further supported by the TTM metrics, which show an average inventory of $0.0 and a null inventory turnover, confirming the absence of this asset class. Given the nature of OXSQ's business, there is no inventory to liquidate, leading to an Orderly Liquidation Value of $0.0 million across all scenarios, with a corresponding 0.0% recovery rate.

Inventory

Other Current Assets


**Replacement/Scrap Data:**
No data on new construction/replacement costs or published valuation guidelines are applicable, as Oxford Square Capital Corp. (OXSQ) does not possess tangible Property, Plant & Equipment.

Net PP&E

Accounts Payable

Other Current Liabilities

Situation: Oxford Square Capital Corp. is experiencing structural capital destruction, with Net Asset Value (NAV) per share declining 23.5% over the last two fiscal years to $1.95, while interest coverage has collapsed to 0.7x.Debate: While management maintains a 22% dividend yield to attract retail capital, the underlying Net Investment Income of $0.07 per share fails to cover the $0.105 quarterly distribution.Conclusion: The company is a value trap where 100% of distributions are effectively funded by dilutive equity issuances (60% share count increase over the analysis period), leading to a fair value of $1.27 and representing significant downside risk.

Executive Summary

Oxford Square Capital Corp. is a melting ice cube where shareholders are diluted to fund a yield that the underlying asset base cannot support. The structural reliance on At-The-Market (ATM) equity issuances to plug the Net Investment Income (NII) coverage gap ensures a persistent decline in per-share value.<ul><li>Driver: Structural capital destruction and NAV erosion.</li><li>Catalyst: Inevitable dividend reduction or structural recapitalization.</li><li>Protection: None; Net Liquidation Value is estimated at $0.00 due to the absence of tangible assets.</li></ul>Our variant perception is that the market is incorrectly pricing the stock as a sustainable high-yield vehicle, whereas our analysis of the NII coverage gap and NAV erosion suggests the company is a value trap with a terminal value significantly below the current price. While the market focuses on the 22% yield, we see a structural failure to preserve capital, evidenced by the $80.2 million in stock issued since 2020 to fund $123.1 million in dividends while generating a negative ROIC of -0.7%.This is a defensive recommendation to exit a value-destructive position before further NAV erosion and an inevitable dividend cut materialize, as the company's interest coverage has collapsed to 0.7x and organic cash flow has turned negative to -$21.8 million.

Core Investment Rationale

Oxford Square Capital Corp. operates as a business development company (BDC) primarily focused on investing in the debt and equity tranches of Collateralized Loan Obligations (CLOs) and secured debt of private and public companies. The company generates revenue through interest income and distributions from its portfolio, which is managed externally by Oxford Square Management. The strategy relies on accessing capital markets to fund new investments, as organic cash flow generation is currently insufficient to cover operating expenses and mandatory distributions.Revenue (Net Investment Income) declined 10.4% YoY to $40.1 million on a trailing twelve-month (TTM) basis, reflecting the impact of credit deterioration and pricing dispersion in the leveraged loan market.The company's assets consist of high-leverage CLO equity tranches and corporate loans, which provide significant operational leverage to the credit cycle. However, the lack of scale (market capitalization of $151.9 million) and an exorbitantly high expense ratio exceeding 12% result in negative operating leverage during periods of credit dispersion. The asset base is entirely financial, with zero physical manufacturing facilities or production assets, and is subject to significant valuation judgment, as evidenced by the auditor's designation of investment income as a Critical Audit Matter.The BDC sector is highly fragmented, with Oxford Square competing against larger, more scaled players like Eagle Point Credit (ECC) and New Mountain Finance (NMFC). Oxford Square is currently positioned as a laggard, trading at a persistent discount to NAV while peers with better capital preservation track records often trade at premiums. The industry is currently in a destructive phase where the supply of capital in the CLO market is surging, but regulatory headwinds from NAIC capital rules are compressing returns for mezzanine and equity tranches.Over the last full business cycle, the company has failed to navigate volatility effectively, resulting in a consistent pattern of dilution and NAV erosion. Net Asset Value per share has fallen from $2.55 in FY 2023 to $1.95 in the most recent quarter, a 23.5% decline. Management has navigated this volatility by increasing the share count by 60% over the last five years to fund dividend payments that exceed Net Investment Income.Disruptive Context: Analyst engagement has effectively collapsed, with Q&A sessions absent in six of the last eight earnings calls. Furthermore, the auditor (PricewaterhouseCoopers) has identified the valuation of securitization vehicles as a Critical Audit Matter, highlighting the high degree of subjectivity in the reported asset values.

Business & Situation

<ul><li>Bull Case: A successful CLO refinancing wave could compress funding costs and stabilize NAV erosion; the stock trades at a discount to its reported NAV of $1.95.</li><li>Bear Case: Net Investment Income of $0.07 per share fails to cover the $0.105 quarterly distribution; interest coverage has collapsed to 0.7x, signaling insolvency risk without constant equity dilution.</li></ul>The consensus view is that Oxford Square is a high-yield income play suitable for retail investors seeking a 22% monthly distribution. The market assumes that the discount to NAV provides a margin of safety and that management can continue to rotate the portfolio to maintain the payout.The industry is facing a peak capital cycle where the supply of capital is surging while revenue growth is negative. BDCs are struggling with a bifurcation in credit quality, as lower-tier corporate borrowers face maturity walls, keeping default risks elevated for the equity tranches held by vehicles like Oxford Square.The market is extrapolating the sustainability of the current monthly distribution, while we see signs of structural insolvency as operating income is insufficient to cover interest expenses. Our analysis of the 1.47% trailing default rate and 2.88% distress ratio in the underlying loan market suggests that the current downturn is structurally deeper than the market is pricing in. The governance structure, which compensates executives via fee-generating assets under management rather than per-share NAV growth, prevents a resolution of the discount and instead incentivizes the dilutive ATM issuances that destroy shareholder value.The debate between yield and capital preservation is being won by the latter's destruction. The company's structural inability to cover its dividend with organic income makes it a value trap, not a value opportunity.Our analytical edge is a granular forensic audit of the capital structure and cash flow conversion, which reveals that Net Cash from Operations has turned negative to -$21.8 million TTM, proving that the company's core operations are consuming cash rather than generating it for shareholders.

Core Thesis

CEO Jonathan H. Cohen has led the company for 22 years, a tenure marked by a consistent strategy of funding operations through significant stock issuances. Under his leadership, NAV per share has declined 23.5% over the last two years, and the company has generated a negative ROIC of -0.7% TTM. There is no evidence of a successful succession plan, and the dual-CEO role he holds at Oxford Lane Capital suggests a potential key person dependency.Capital allocation skill is rated as weak. Management issued $80.2 million in stock between 2020 and 2025 at prices as high as $3.12 to fund $123.1 million in dividends, while the asset base deteriorated and interest coverage fell below 1.0x. This pro-cyclical dilution has been value-destructive for long-term holders.Management's credibility is low; they consistently promise capital preservation while executing dilutive issuances that directly contradict that goal. The guidance hit rate for EPS is only 20% over the last five years.<ul><li>Board Independence: 60% (3 of 5 directors)</li><li>Chairman/CEO Roles: Separate</li><li>Chairman Tenure: 22 years (Steven P. Novak)</li><li>Insider Ownership: 8.6% (Group)</li><li>Shareholder Rights: Classified Board, Plurality Voting</li></ul>Stewardship is fundamentally misaligned with shareholder value creation. The compensation structure, where executives receive profit participation from the investment adviser rather than direct equity tied to NAV growth, incentivizes maximizing fee-generating assets under management.Governance Outcome Tree:1. Status Quo: Continued NAV erosion and dilution to fund the dividend, leading to a terminal value of $1.27.2. Compromise: A dividend cut to preserve NAV, which would likely trigger a 30%+ sell-off in the retail-heavy shareholder base.3. Reset: A reverse stock split or strategic review, which management has not yet signaled despite the stock's underperformance.

Leadership & Governance

The valuation floor is derived from the historical trough Price-to-Tangible-Book multiple of 0.5x applied to the current tangible book value of $159.0 million.The base case assumes continued NAV erosion and a structural reliance on dilution, with revenue growth fading to -4.1% and operating margins compressing to 75.0% as funding costs rise.A successful CLO refinancing wave compresses funding costs and stabilizes NAV. Bull Case Value: $2.30.The bear case fair value is $0.00, representing the lower of the Fire Sale Net Liquidation Value or the severe operational decline DCF. This scenario assumes a breach of the 150% asset coverage ratio, which would likely wipe out equity value in a credit event.

Valuation Context

<ul><li>A material reduction in the monthly distribution is the primary catalyst. Net Investment Income of $0.07 per share is currently 33% below the quarterly distribution of $0.105, making the current payout unsustainable without accelerating capital destruction.</li></ul>The company is relevant for analysis now due to the collapse in interest coverage to 0.7x and the recent $11.8 million ATM issuance, which signals an accelerating need for external capital to sustain operations.

Catalyst Path & Context

<ul><li>A 'lower-for-longer' credit cycle recovery could lead to a structural impairment of the CLO equity tranches, which are the first to absorb losses in a downturn. The 12-month trailing default rate in the loan market has increased to 1.47%, and the distress ratio stands at 2.88%.</li></ul>

Primary Risks

<ul><li>Entry Target: Not applicable for a Sell recommendation.</li><li>Stop Loss: Not applicable for a Sell recommendation.</li><li>Position Size: Position size is set to None as the recommendation is a Sell. The final size is constrained by the structural risks inherent to the Cyclical Operator model, specifically the risk of a total loss of equity value if asset coverage ratios are breached.</li><li>Time Horizon: Not applicable for a Sell recommendation.</li></ul><ul><li>Net Investment Income (NII) per share vs. Dividend payout</li><li>Quarterly change in Net Asset Value (NAV) per share</li><li>Asset coverage ratio (must remain above 150%)</li></ul>The killer of the sell thesis is evidence that the credit cycle is inflecting positively and NII coverage is improving to above 1.0x without further equity dilution.

Actionable Parameters & Monitoring

Oxford Square Capital Corp. is a structurally flawed Cyclical Operator that is currently destroying shareholder value to maintain an unsustainable dividend. With interest coverage at 0.7x and a persistent decline in NAV per share, the company is a value trap that relies on diluting existing shareholders to survive. We recommend a Sell with a valuation target of $1.27.

Final Conclusion

Structural capital destruction and NAV erosion.

Driver

Inevitable dividend reduction or structural recapitalization.

Catalyst

None; Net Liquidation Value is estimated at $0.00 due to the absence of tangible assets.

Protection

A successful CLO refinancing wave could compress funding costs and stabilize NAV erosion; the stock trades at a discount to its reported NAV of $1.95.

Bull Case

Net Investment Income of $0.07 per share fails to cover the $0.105 quarterly distribution; interest coverage has collapsed to 0.7x, signaling insolvency risk without constant equity dilution.

Bear Case

Situation: Oxford Square Capital Corp. is experiencing structural capital destruction, with Net Asset Value (NAV) per share declining 23.5% over the last two fiscal years to $1.95, while interest coverage has collapsed to 0.7x. 
Debate: While management maintains a 22% dividend yield to attract retail capital, the underlying Net Investment Income of $0.07 per share fails to cover the $0.105 quarterly distribution. 
Conclusion: The company is a value trap where 100% of distributions are effectively funded by dilutive equity issuances (60% share count increase over the analysis period), leading to a fair value of $1.27 and representing significant downside risk.

The strategy has evolved from a defensive posture focused on liquidity and managing unrealized losses (FY2023 Q3-Q4) to an aggressive capital deployment phase utilizing significant ATM equity issuance (FY2024 Q2-Q3), and finally to a sophisticated portfolio optimization strategy in FY2025 focused on duration hedging and CLO equity saturation (FY2025 Q3).

Method	Implied Value	Weight	Weighted Value
DCF	$1.36	55%	$0.75
Comps	$0.95	40%	$0.38
Historicals	$2.78	5%	$0.14
Total Weighted			$1.27

OXSQ

Price History

Key Metrics

Recent Activity

Valuation Table