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AFIN Update: Upcoming Conversion of American Finance Trust B-1 Shares May Have Dilutive Effect on AFIN Share Price


Money Whirlpool

As discussed in a prior blog post, on June 29, 2018, the board of directors of American Finance Trust, Inc. (“AFIN” or the “Company”), formerly known as American Realty Capital Trust V, Inc., announced the approval of a plan to list AFIN common stock on the Nasdaq Global Select Market (“NasdaqGS”), under the symbol ‘AFIN’.  Pursuant to that plan, half of AFIN’s shares — AFIN Class A shares — were recently listed on NasdaqGS.  Specifically, since July 16, 2018, shares of AFIN have been publicly traded and are currently priced around $17.50 per share.  Therefore, investors who participated in the IPO and paid $25 per AFIN share and continue to hold their position have incurred substantial unrealized losses on their investment of approximately 30% (exclusive of commissions, as well as distributions paid, to date).

Most recently, the AFIN board of directors announced that in connection with their public listing, the former non-traded REIT now intends to convert its Class B-1 shares, which represent approximately 25% of AFIN shares outstanding, into Class A shares one week earlier than previously planned, on October 10, 2018.  At this time, Class B-2 shares are still scheduled to convert to AFIN Class A shares on January 15, 2019, as previously planned.

AFIN shareholders have expressed concern that the Company’s plan to list its shares on NasdaqGS in such an incremental, phased manner will likely serve to dilute the value of the AFIN Class A shares, thus creating downward selling pressure on a stock that has already suffered considerable decline from its IPO pricing.  In addition, some shareholders have expressed concern over the fact that AFIN recently cut its dividend from approximately $1.30 to $1.10, effective July 1, 2018.  This amounts to a reduction in distribution of approximately 15% and is of particular concern to the many retail investors who initially purchased AFIN shares for their income component.

Due to the fact that AFIN was registered with the SEC, the formerly non-traded REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a stockbroker or financial advisor.  AFIN commenced its initial public offering in April 2013, which closed approximately six months later, raising $1.6 billion in investor equity.

Non-traded REITs are extremely complex and risky investment vehicles, and pose many risks that may not be readily apparent to many retail investors, or adequately explained by the financial advisors who recommend such investments.  For example, one significant risk associated with non-traded REITs has to do with their high up-front commissions, typically between 7-10%.  In addition to high commissions, non-traded REITs like AFIN generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.


Attorneys at Law Office of Christopher J. Gray, P.C. have successfully resolved a number of disputes on behalf of investors, including losses sustained due to investments in REITs and other non-conventional investments.  Investors may contact us by telephone at (866) 966-9598, or by e-mail at for a no-cost, confidential consultation.

Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

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