Investor Lawyers Blog
Despite FS Investment Corporation II’s (“FSIC II”, or the “Company”) providing an estimated value of $8.31 a share, recent publicly-available information concerning pricing suggests a lower value, with secondary market transactions reportedly at prices of between $7.20 and $7.31 a share and a third-party tender offer being completed at $5.15 a share.
FSIC II is a publicly registered, non-traded business development company (“BDC”) that may have been marketed to some public investors as a relatively safe investment offering a steady yield of income. However, as a non-traded BDC, the Company carries with it considerable risks. Accordingly, in those instances where retail investors were solicited by a financial advisor to invest in FSIC II without first being fully informed of the risks associated with the investment, including the potential for principal losses, high upfront fees and commissions, and the illiquid market in the Company’s shares, investors seeking to recoup their losses may have legal claims against stockbrokers or investment advisory firms who sold them the shares.
Organized under Maryland law in July 2011, FSIC II commenced its operations on June 18, 2012 and is structured as a publicly registered, non-traded BDC under the Investment Company Act of 1940 (’40 Act). Publicly-available information suggests numerous retail investors participated in FSIC II’s initial offering, priced at approximately $10 per share. FSIC II is managed by FS Investments (formerly known as Franklin Square), a Philadelphia-based alternative asset management firm sponsoring a number of non-traded BDCs. As of June 30, 2018, FSIC II reported assets under management of approximately $4.77 billion.
On November 6, 2018, Sierra Income Corporation (“Sierra”) filed a Registration Statement (on Form N-14) with the SEC, notifying Sierra investors and the public at large of a proposed merger transaction. Specifically, Sierra’s board of directors is seeking shareholder approval on a series of related transactions designed to effectuate a merger between and among Sierra, a publicly registered non-traded business development company (BDC), as well as Medley Capital Corporation (“MCC”), a publicly traded BDC, and Medley Management Inc. (“MDLY”), a publicly traded asset management firm.