Franklin BSP Realty Trust (FBRT) Shareholders may have Claims
Franklin BSP Realty Trust Inc., (formerly known as Benefit Street Partners Realty Trust Inc.) and Capstead Mortgage Corp. have completed their previously announced merger.
According to filings with the SEC, Capstead ceased to be publicly traded on the NYSE, after the close of trading October 18. The new combined company started trading on the same stock exchange under the ticker symbol FBRT, at the open of trading October 19, 2021. The stock closed on the first day of trading at $17.10 per share.
At the effective time of the merger, each issued and outstanding share of common stock of Capstead was converted into the right to receive 0.3288 newly issued shares of Franklin common stock; cash consideration of 21 cents per share from Franklin; and cash consideration of 73 cents per share Franklin’s external manager, Benefit Street Partners LLC. Franklin will pay cash in lieu of any fractional shares of its common stock that would otherwise have been received as a result of the merger.
Each outstanding share of Capstead’s 7.50% series E cumulative redeemable preferred stock was converted into the right to receive one newly issued share of Franklin’s 7.50% series E cumulative redeemable preferred stock. At the open of trading on Oct. 19, the Franklin preferred stock began trading on the NYSE under the ticker symbol FBRT PRE.
Franklin BSP Realty Trust, the new company, will reportedly transition the capital base of Capstead, a residential mortgage REIT, into commercial mortgage loans where Benefit Street Partners is focused, according to the announcement. The combined company will be externally managed by BSP, a leading credit-focused alternative asset manager and a wholly-owned subsidiary of Franklin Templeton.
Benefits Street Partners and its advisor have committed to a 6-month lock-up for approximately 94% of the current shares of BSPRT common stock and a committed common stock repurchase plan of up to $100 million to support the combined company’s stock price beginning four weeks after closing, up to $35 million of which will be funded by BSP and Franklin Templeton.
How Does a Merger Affect Shareholders?
Companies often merge as part of a strategic effort to boost shareholder value, often by creating new business lines and/or gaining greater market share. However, the economic environment at the time of the merger, size of the companies and management of the merger process all play a part in future returns for shareholders.
Shareholders may experience a significant loss of voting power, and while the spike in trading volume tends to inflate share prices, if economic conditions are not favorable at the time of the merger, shareholders may see significant losses.
Potential Lawsuits to Recover Financial Losses
The trouble with non-traded REITs is that they are complex and inherently risky products. Lack of liquidity is often problematic for many investors. Investors looking to sell often have difficulty finding a buyer, and can suffer significant losses on the sale.
According to Central Trade and Transfer, a secondary market for alternative investments, shares of Benefit Street Partners were recently sold for $11.25 per share. Shares were originally offered for $25 per share.
Broker dealers are required to inform clients of the risks associated with investment recommendations and to ensure that those recommendations are suitable for the investor in light of the investor’s age, risk tolerance, net worth, and investment experience. Firms that fail to do so, may be held responsible for any losses.
If you have suffered losses investing in Franklin BSP Realty Trust (Benefit Street Partners Realty Trust), please contact The White Law Group at 888-637-5510 for a free consultation.
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The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington. For more information on the firm, visit www.WhiteSecuritiesLaw.com.