American Finance Trust (AFIN) Shares Continue to Languish- Post-IPO Shares Trading At Less Than $15 a Share

Investors in American Finance Trust (“AFIN”) may have arbitration claims to be pursued before FINRA, if their AFIN investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the broker. AFIN was initially structured as a publicly registered, non-traded real estate investment trust (REIT). As such, many unsophisticated retail investors participated in the AFIN IPO upon the recommendation of a financial advisor at a price of $25 per share.

In the wake of AFIN’s listing as a publicly-traded stock, AFIN’s stock price has languished at far below the $25 a share price that many investors paid for AFIN stock at the recommendation of stockbrokers or advisors. As of October 18, 2018, AFIN shares closed at $14.26 a share.

Earlier this year — as we have discussed in several recent blog posts — the board of directors of AFIN announced the approval of a plan to list the REIT’s common stock on the Nasdaq Global Select Market (“NasdaqGS”), under the symbol ‘AFIN’. In connection with this planned “liquidity event,” AFIN’s board also approved a phased liquidity plan, pursuant to which certain amendments were made to AFIN’s corporate charter:

• 2-to-1 reverse stock split: pursuant to this reverse split, every two shares of AFIN (par value $0.01) are to be converted into one share of common stock (par value $0.02);
• Share reclassification: the phased liquidity plan also calls for reclassification of shares of common stock into Class A common stock, Class B-1 common stock, and Class B-2 common stock (the Class B-1 shares will convert into Class A shares 90 days after the listing, and the Class B-2 common stock will convert into Class A shares 180 days after the listing).

Subsequent to these amendments, AFIN’s board further announced that it would 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 remain scheduled to convert to AFIN Class A shares on January 15, 2019.

Due to AFIN’s languishing share price, investors may be forced to either sell their investment position at a loss, or hold indefinitely in hopes of a recovery. Alternatively, investors seeking immediate liquidity at a small premium to the current prevailing market price may wish to participate in a recent tender offer on AFIN shares by institutional investor MacKenzie Realty Capital, Inc. (“MacKenzie”). As recently reported, MacKenzie has made a tender offer for all Classes of AFIN shares – including Class A shares and Class B-2 shares – at prices of $15 and $14.01 per share, respectively. Unsurprisingly, MacKenzie’s disparate pricing on Class A and B-2 shares suggests that B-2 share issuance in January 2019 will have a considerable negative impact on AFIN’s share price.

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 various complex and esoteric financial products, including non-traded REITs. Investors may contact an attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net 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).