United Development Funding IV (UDF IV) Merger

UDF IV shareholders Approve Merger with Ready Capital Corp. (NYSE: RC)

United Development Funding IV (UDF IV) shareholders have reportedly approved the company’s merger with Ready Capital Corporation (NYSE: RC), according to certified voting results from First Coast Results Inc. The REIT, a Maryland real estate investment trust, was formed primarily to generate current interest income by investing in secured loans and producing profits from investments in residential real estate.

According to Alternative Wire, at the special shareholder meeting, 61.2% of shares were voted, with 58.3% of outstanding shares (95.3% of votes cast) supporting the merger. The transaction is expected to close in Q1 2025, pending customary conditions.

NexPoint’s Competing Proposal

NexPoint Real Estate Opportunities LLC had reportedly submitted a competing proposal, claiming it offered superior financial terms, including higher pre-closing dividends and full entitlement to contingent value rights (CVR) loan proceeds. NexPoint reportedly urged shareholders to delay voting, but the merger vote proceeded.

The dispute between NexPoint and UDF IV reportedly dates back to 2018, when the SEC fined UDF executives for misleading investors. NexPoint later filed a lawsuit against UDF IV, alleging misuse of shareholder funds. In 2024, NexPoint sought a full election of independent trustees, but UDF IV opposed its board nominees despite a recommendation from proxy firm Egan Jones to support them.

NexPoint and its affiliates have reportedly held an activist stance on UDF IV since July 2020, after first investing in 2017. They now collectively own over 6% of UDF IV’s common stock.

United Development Funding IV Delisted, Fails to File Financial Reports

United Development Funding IV, a non-traded real estate investment trust, has been embroiled in scandal over the past few years. 

UDF IV previously traded on NASDAQ under the ticker “UDF” from June 2014 until December 2015. The company was delisted in October 2016 for failing to file its 2015 annual financial reports and subsequent quarterly reports with the SEC. 

On Sept. 27, 2021, United Development Funding IV announced that it recommends Trust shareholders reject the eighth extended unsolicited tender offer made by hedge fund NexPoint Strategic Opportunities Fund to purchase all Trust common shares for $1.10 per share. 

Shares of UDF IV were originally sold for $20 per share.  

The SEC launched an investigation into United Development Funding IV in 2014 after a hedge fund manager accused the REIT of a Ponzi-like scheme. Kyle Bass, hedge fund manager and founder of Hayman Capital Management, publicly accused UDF IV of operating a “Ponzi-like real estate scheme,” in 2016, by using new investor money to pay existing investors. Hayman reportedly held a short position in the company’s common stock. 

In February of 2016, United Development Funding IV disclosed that it received a grand jury subpoena. The FBI seized documents and computers in a raid of the UDF corporate offices in Grapevine, Texas. UDF has vehemently denied the Ponzi allegations and has since sued Hayman Capital and Bass. 

FINRA Lawsuits to Recover Investment Losses

Investors who purchased UDF investments in reliance upon the recommendation of a broker-dealer firm may also be eligible to pursue claims in arbitration against the firm and seek compensation for any losses they suffered as a result of those investments.  These claims are distinct from the class action filed directly against UDF and could be pursued concurrently. 

Brokers have a fiduciary duty to perform due diligence on any investment and to ensure that investment recommendations are consistent with their client’s age, net worth, risk tolerance, investment experience and objectives, risk tolerance. If a broker overlooks suitability requirements, investors may have an actionable claim to recover their losses in a product in a claim through FINRA dispute resolution. 

The Financial Industry Regulatory Authority (FINRA) operates the largest securities dispute resolution forum in the United States, and has extensive experience in providing a fair, efficient and effective venue to handle a securities-related dispute. 

Free Consultation with Securities Attorneys

If you have suffered investment losses, the securities attorneys at The White Law Group may be able to help you. Please call 888-637-5510 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington. The firm represents investors in FINRA arbitration claims throughout the country.