An investigation on behalf of current investors Patriot Capital Funding, Inc. (Public, NASDAQ:PCAP), who purchased the shares before August 03, 2009, over potential breaches of fiduciary duty and other violations of state law in connection with an alleged unfair takeover price were announced.

The investigations by law firms focus on potential breaches of fiduciary duty and other violations of state law by the Board of Directors of Patriot Capital Funding, Inc. (Public, NASDAQ:PCAP) arising out of their attempt to sell Patriot Capita to Prospect Capital Corporation. Prospect Capital Corporation (NASDAQ: PSEC) announced on Monday, August 03, 2009, that it has entered into a definitive agreement to acquire Patriot Capital Funding, Inc. (NASDAQ: PCAP). Prospect Capital Corporation said it is acquiring Patriot Capital Funding for $197 million, comprised of (a) cash to repay all Patriot Capital Funding debt, anticipated to be $110.5 million when the acquisition closes, plus (b) Prospect Capital Corporation shares exchanged at a ratio of approximately 0.3992 Prospect Capital Corporation shares for each Patriot Capital Funding, Inc. (NASDAQ: PCAP) share. The acquisition was unanimously approved by both of Prospect Capital's and Patriot Capital's Board of Directors and ,Prospect Capital Corporation expects to close the takeover in the next 60 days.

But according to one investigation the transaction appears to be unfair to current investors of Patriot Capital Funding, Inc. (Nasdaq:PCAP) by failing to conduct an open and fair auction process for Patriot Capital and the offer to purchase Patriot Capital appears opportunistically timed to take advantage of the current economic downturn. Another investigation states the deal is unfair given that the Company has a book value of over $8.12 per share.

Patriot Capital Funding, Inc., located in Westport, CT, is a closed-end and non-diversified investment company. It is a specialty finance company that provides financing solutions to small- to mid-sized companies. The Company typically invests in companies with annual revenues between $10 million and $100 million, and companies, which operate in various industrial sectors.

Patriot Capital Funding, Inc reported in 2007 Total Revenue of $38.96million with a Net Income of $18.43million and in 2008 Total Revenue of $42.30million. Shares of Patriot Capital Funding (NASDAQ:PCAP) traded at $3.84 per share after the announcement and at $1.949 per share the day before the announcement. Shares of Patriot Capital Funding (NASDAQ:PCAP) were down from a 52weekHigh of $.784 per share, $11.61 per share in 2008 and over $15 per share in 2007.