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KBW: Hercules Capital CEO's removal expected on college bribery scheme charges

B. Riley FBR and Keefe Bruyette & Woods both downgraded their investment opinion on Hercules Capital Inc. after the Federal Bureau of Investigation charged founder and CEO Manuel Henriquez in an alleged college bribery scheme.

KBW's Ryan Lynch said he was "very surprised" by the announcement and he thinks it is "very damaging" to the company. He lowered his rating to "market perform" from "outperform" and the price target to $11.50 from $14.00.

"If convicted, we believe this could result in Mr. Henriquez's eventual removal as CEO," Lynch wrote. Even if he is not terminated, Hercules Capital would take a "major creditability hit," affecting its ability to provide capital to venture-backed companies at the same level as before the charges were made public.

At B. Riley FBR, analyst Tim Hayes expects the company to make "some tough decisions" as it goes into damage control mode. He downgraded the stock to "neutral" from "buy" and lowered the price target to $11.50 from $15.00.