Trinity Capital (TRIN) risk factors, 2025 10-K

Other

1. 01Summary of Principal Risk Factors
2. 02The following is a summary of the principal risks that you should carefully consider before investing in our securities and is followed by a more detailed discussion of the material risks related to us and an investment in our securities
3. 03Our business model depends, to a significant extent, upon strong referral relationships with venture capital sponsors, and our inability to develop or maintain these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business
4. 04We are exposed to risks associated with changes in interest rates and inflation rates
5. 05Internal and external cybersecurity threats, as well as other disasters, may adversely affect our business or the business of our portfolio companies by impairing our ability to conduct business effectively
6. 06Our investments are very risky and highly speculative and a lack of liquidity in our investments may adversely affect us

Risks related to an investment in our securities include, but are not limited to, the following

1. 07We may borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us

Risks Related to Our Business and Structure

1. 08We depend upon our senior management team and investment professionals, including the members of the Investment Committee, for our success
2. 09Our business model depends to a significant extent upon strong referral relationships with venture capital sponsors, and our inability to develop or maintain these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business
3. 10Our financial condition and results of operations depend on our ability to manage our business effectively
4. 11We are subject to certain regulatory restrictions that may adversely affect our business
5. 12We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses
6. 13We may need to raise additional capital to grow because we must distribute most of our income
7. 14Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital
8. 15Indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under outstanding indebtedness
9. 16Our ability to meet our payment and other obligations under our debt instruments depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control
10. 17Provisions in our existing and future credit facilities may limit our operations
11. 18Any defaults under a credit facility could adversely affect our business
12. 19We are exposed to risks associated with changes in interest rates
13. 20If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material adverse effect on our business, financial condition and results of operations
14. 21Most or a substantial portion of our portfolio investments will be recorded at fair values determined in good faith by the Board and, as a result, there may be uncertainty as to the value of our portfolio investments
15. 22changes in the interest rate and inflation rate environments and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors
16. 23There is no assurance that any share repurchase programs we implement will result in repurchases of our common stock or enhance long-term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves
17. 24Repurchases will diminish our cash reserves, which could impact our ability to finance future growth
18. 25Any suspension, modification or discontinuance of any future share repurchase plan could result in a decrease in the trading price of our common stock
19. 26We may incur lender liability as a result of our lending activities

Risks Related to Our Investment Management Activities

1. 27Our executive officers and employees, through the Adviser Sub, may manage other investment funds that operate in the same or a related line of business as we do, and may invest in such funds, which may result in significant conflicts of interest
2. 28Investments in the Adviser Funds in the form of loans may create conflicts of interests
3. 29Through the Adviser Sub, we expect to derive revenues from managing third-party funds pursuant to investment management agreements that may be terminated, which could negatively impact our operating results

Risks Related to Our Investments

1. 30The equipment financing industry is highly competitive and competitive forces could adversely affect the financing rates and resale prices that we may realize on our equipment financing investment portfolio and the prices that we have to pay to acquire our investments
2. 31Some types of equipment are under special government regulation which may make the equipment more costly to acquire, own, maintain under equipment financings and sell
3. 32We are subject to risks inherent in the equipment financing business that may adversely affect our ability to finance our portfolio on terms that will permit us to generate profitable rates of return for investors
4. 33Economic recessions or downturns could impair our portfolio companies and harm our operating results
5. 34Our investments are geographically concentrated, which may result in a single occurrence in a particular geographic area having a disproportionate negative impact on our investment portfolio
6. 35Our investments in leveraged portfolio companies may be risky, and we could lose all or part of our investment
7. 36Our investments are very risky and highly speculative
8. 37We may be subject to risks associated with our investments in covenant-lite loans
9. 38Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us
10. 39If the assets securing the loans that we make decrease in value, then we may lack sufficient collateral to cover losses
11. 40Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies
12. 41We may not have the ability to control or direct such actions, even if our rights are adversely affected. In addition, a bankruptcy court may choose not to enforce an intercreditor agreement or other agreement with creditors
13. 42Our portfolio may be exposed in part to one or more specific industries, which may subject us to a risk of significant loss in a particular investment or investments if there is a downturn in that particular industry
14. 43Our investments in the finance and insurance industry may be subject to certain risks, including risks related to complex federal and state laws governing such industry and the risk that regulatory authorities in the jurisdictions in which these products are offered will seek to regulate or restrict these products
15. 44We may invest in technology-related companies that do not have venture capital or private equity firms as equity investors, and these companies may entail a higher risk of loss than do companies with institutional equity investors, which could increase the risk of loss of our investment
16. 45We invest through joint ventures
17. 46Our relationship with certain portfolio companies may expose us to our portfolio companies’ trade secrets and confidential information which may require us to be parties to non-disclosure agreements and restrict us from engaging in certain transactions
18. 47Our investments in portfolio companies may expose us to environmental risks
19. 48The majority of our portfolio companies will need multiple rounds of additional financing to repay their debts to us and continue operations. Our portfolio companies may not be able to raise additional financing, which could harm our investment returns
20. 49If our portfolio companies are unable to commercialize their technologies, products, business concepts or services, the returns on our investments could be adversely affected
21. 50If our portfolio companies are unable to protect their intellectual property rights, our business and prospects could be harmed, and if portfolio companies are required to devote significant resources to protecting their intellectual property rights, the value of our investment could be reduced
22. 51The lack of liquidity in our investments may adversely affect our business
23. 52Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation
24. 53Our portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields
25. 54To the extent original issue discount (“OID”) and PIK interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income
26. 55Even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is supposed to occur at the maturity of the obligation
27. 56OID instruments generally represent a significantly higher credit risk than coupon loans
28. 57Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio
29. 58Because we will not hold controlling equity interests in the majority of our portfolio companies, we may not be able to exercise control over our portfolio companies or prevent decisions by management of our portfolio companies, which could decrease the value of our investments
30. 59Loans may become non-performing for a variety of reasons
31. 60Defaults by our portfolio companies will harm our operating results
32. 61Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies
33. 62The disposition of our investments may result in contingent liabilities
34. 63We may not realize gains from our equity and equity-related investments
35. 64We may be subject to additional risks if we engage in hedging transactions and/or invest in foreign securities
36. 65The market structure applicable to derivatives imposed by the Dodd-Frank Act, the U.S. Commodity Futures Trading Commission (“CFTC”) and the SEC may affect our ability to use over-the-counter (“OTC”) derivatives for hedging purposes
37. 66Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited
38. 67We may be subject to risks related to bank impairments or failures either directly or through our portfolio companies, which, in turn, could indirectly impact our performance and results of operations

Risks Related to an Investment in Our Common Stock

1. 68Investing in our common stock may involve an above-average degree of risk
2. 69We may not be able to pay distributions, our distributions may not grow over time and/or a portion of our distributions may be a return of capital
3. 70Provisions of the Maryland General Corporation Law (the “MGCL”) and our Charter and Bylaws could deter takeover attempts and have an adverse effect on the price of our common stock
4. 71Our Bylaws include an exclusive forum selection provision, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other agents
5. 72We cannot assure you that a market for our common stock will continue, which would adversely affect the liquidity and price of our common stock
6. 73A stockholder’s interest in us will be diluted if additional shares of our common stock are issued in the future, which could reduce the overall value of an investment in us
7. 74Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock
8. 75The market value of our common stock may fluctuate significantly
9. 76If we issue preferred stock or convertible debt securities, the net asset value of our common stock may become more volatile
10. 77Stockholders may experience dilution in the net asset value of their shares if they do not participate in our distribution reinvestment plan and if our shares are trading at a discount to net asset value

Risks Related to the Notes and the Series A Notes

1. 78The Notes and the Series A Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future
2. 79The Notes and the Series A Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries
3. 80The respective indentures under which the Notes were issued contain limited protection for holders of such notes
4. 81create restrictions on the payment of dividends or other amounts to us from our subsidiaries
5. 82If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes and/or the Series A Notes
6. 83The optional redemption provision under the respective indentures of the Notes and the Note Purchase Agreement of the Series A Notes may materially adversely affect a holder’s return on such notes
7. 84We may not be able to repurchase either of the August 2026 Notes, the December 2026 Notes or the Series A Notes upon a Change of Control Repurchase Event
8. 85There is no active public trading market for the August 2026 Notes, the December 2026 Notes or the Series A Notes; as a result, a holder may not be able to resell any of such notes
9. 86A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us, the Notes and/or the Series A Notes, if any, or changes in the debt markets, could cause the liquidity and/or market value of the Notes and/or the Series A Notes to decline significantly
10. 87We will be subject to U.S. federal income tax at corporate rates if we are unable to qualify or maintain qualification as a RIC under Subchapter M of the Code
11. 88We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business
12. 89We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income
13. 90corporate-level events) or taxed at increased tax rates at distribution or disposition. In certain circumstances this could require us to recognize income where we do not receive a corresponding payment in cash
14. 91We may choose to pay a portion of our distributions in our own stock, in which case you may be required to pay tax in excess of the cash you receive
15. 92Capital markets may experience periods of disruption and instability, including as recently experienced. Such market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations
16. 93Given the ongoing and dynamic nature of market disruption and instability, it is difficult to predict the full impact of these conditions on our business. The extent of any such impact will depend on future developments, which are highly uncertain
17. 94Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations
18. 95Any public health emergency, including outbreaks of existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies
19. 96We are subject to risks related to corporate social responsibility
20. 97Additionally, we have begun the process of documenting our internal control procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal controls over financial reporting
21. 98There are significant financial and other resources necessary to comply with the requirements of being a public entity
22. 99We may experience fluctuations in our operating results
23. 100Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy
24. 101Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of operations
25. 102Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us
26. 103Terrorist attacks, acts of war, global health emergencies, or extreme weather conditions or other natural disasters, including as a result of global climate change, may impact the businesses in which we invest and harm our business, operating results and financial condition
27. 104Internal and external cybersecurity threats, as well as other disasters, may adversely affect our business or the business of our portfolio companies by impairing the ability to conduct business effectively
28. 105We are subject to risks associated with artificial intelligence and machine learning technology