Sierra Income Corp. BDC Merges with traded BDC after NAV Declines
Sierra Income Corporation and Barings BDC Inc. (NYSE: BBDC) have reportedly completed a planned merger. The completion of the merger marks the end of a long liquidity process for Sierra Income Corporation.
Sierra shareholders reportedly received cash ($0.9784) and stock (0.44973 shares of BBDC common stock) totaling $5.85 per Sierra’s shares, which represents a 10% increase over the most current net asset value per share of $5.32 as of September 30, 2021.
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.
Complex, High-Risk Alternative Investments
The White Law Group continues to investigate potential claims involving broker dealers who may have unsuitably recommended high risk Business Development companies (BDCs) such as Sierra Income Corporation to unsuspecting investors. The firm has received numerous calls from investors looking to recover financial losses from investments in BDCs like Sierra.
The high commission structure of these products leads to the possibility that unscrupulous financial advisors will push these products unsuitably to maximize their own commissions.
Brokerage firms are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor in light of that particular investor’s age, investment experience, net worth, risk tolerance, investment objectives, and income.
Firms that fail to perform adequate due diligence or that make unsuitable recommendations can be held responsible for investment losses in a FINRA arbitration claim.
Sierra Income Corp. Declining NAV
The company’s Net Asset Value has continued to decline at $5.32 per share as of September 30, 2021. Shares of Sierra Income Corp recently sold on Central Trade and Transfer, a secondary market for alternative investments, for just $2.06 per share.
Disappointing Distribution Rate
In August the company elected to extend the suspension of distributions through September 30, 2020, claiming the suspension was in the best interest of the shareholders “during this volatile economic environment.”
In April, the company then announced that, on April 28, 2021, its Board of Directors declared a series of paltry monthly distributions for April, May, and June 2021 of just $0.010 per share. The company also authorized a limited share repurchase program, equal to $5.28, which represents the Company’s net asset value per share as of March 31, 2021.
Failed Merger Plans
This is apparently the second attempt for a merger for Sierra Income. In May 2020, the company announced that its Board of Directors terminated its previously announced mergers with Medley Capital Corporation (“MCC”) and Medley Management Inc. (“MDLY”).
Sierra noted that changes were due to the relative valuations of the Company, MCC, and MDLY, and the “unpredictable economic conditions resulting from the global health crisis caused by the coronavirus (COVID-19) pandemic, and the uncertainty regarding the parties’ ability to satisfy the conditions to closing in a timely manner,” according to a press release.
Potential to Recover Financial Losses
If you suffered losses investing in a Sierra Income Corporation with your financial advisor, please call the securities attorneys of The White Law Group at 888-637-5510 for a free consultation.
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. The firm represents investors in FINRA arbitration claims throughout the country. For more information on the firm, visit https://www.whitesecuritieslaw.com.
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