Net Asset Value (NAV)

Net asset value (NAV) is the value of assets minus liabilities. Using a BDC as an example: NAV per share expresses the net assets attributable to common shareholders on a per-share basis. It is a reported balance-sheet measure, not a promise about the price at which investors can buy or sell shares.

NAV and the market price

Listed BDC shares can trade above or below NAV. Above NAV is a premium; below NAV is a discount. The SEC’s BDC investor bulletin explains this distinction and the valuation uncertainty associated with private investments.

A net asset value example

Assume a hypothetical BDC has $1.5 billion of assets and $600 million of liabilities, with no preferred-equity adjustment needed. Net assets are $900 million. Dividing by 50 million common shares gives NAV of $18 per share.

At a $16.20 market price, the shares trade at a 10% discount: $16.20 divided by $18, minus one. At $19.80, they trade at a 10% premium. Neither calculation explains why the market assigned that price.

Now suppose NAV falls to $16.20 while the share price remains unchanged at $16.20. The discount has disappeared without a shareholder making a price gain. That is why a discount should not automatically be described as money waiting to be collected.

What a NAV change can mean

Read the reconciliation between reporting dates. Distributions, operating results, investment valuations and share transactions can affect the movement. A comparison should identify which components contributed rather than treating every decline as an identical event.

Use the same reporting basis and pay attention to timing. A market price updates continuously during trading, while reported NAV comes from a particular measurement date. A precise-looking discount can therefore combine information from different moments.

Dividend analysis

NAV can provide supporting evidence about the investment and its earning assets. It does not substitute NAV growth for the company-specific earnings measure supporting the dividend. Review the relationship between distributions, earning power and capital preservation rather than relying on either a high yield or a discounted price alone.

This article is for education and information, not individualized investment, tax, or legal advice.