Benefit Street Partners Shareholders may have Claims
According to a press announcement on July 26, 2021, Non-traded REIT, Benefit Street Partners Realty Trust, Inc., will merge with REIT Capstead Mortgage Corporation (NYSE: CMO). According to the agreement, Capstead common stockholders will receive a cash payment equal to a 15.75% premium to Capstead’s diluted book value per share and shares of BSPRT common stock calculated on an adjusted “book-for-book” basis.
The book values for Capstead and BSP Realty Trust used to calculate the cash consideration and exchange ratio will reportedly be set at a later date.
Based on the June 30 adjusted book values per share, the implied cash payment would reportedly be $0.99 per share and the total value would be $7.30 per share, representing an implied 20% premium to the last reported sale price of Capstead common stock on the New York Stock Exchange (“NYSE”) on July 23, 2021.
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.
After closing the transaction, which is expected in the fourth quarter of 2021, the combined company will become the fourth largest commercial mortgage REIT and its common stock will trade on the NYSE under the new ticker symbol FBRT.
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 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. For more information on the firm, visit www.WhiteSecuritiesLaw.com.