Investors faced the prospect of losses as Corporate Capital Trust, a former non-traded business development company listed its shares on the New York Stock Exchange this week under the ticker symbol CCT. In early trading on November 14 and 15, 2017, the price of CCT shares fluctuated between $16.56 and $18.63 a share. Accounting for the October 31, 2017 2.25-to-1 reverse split in CCT’s shares, this trading range means that a pre-split share of CCT is now worth between $7.36 and $8.28 a share- down from offering prices of between $10.00 and $11.30 a share at which investors purchased shares before the company was publicly traded
CCT is now reportedly the largest publicly-traded business development company, and the company raised billions of dollars in its public offerings of stock. Corporate Capital Trust also commenced a tender offer to purchase up to $185 million in shares of its common stock at $20.01 per share, the company’s most recent net asset value per share, as of September 30, 2017. The tender offer expires at 5:00 p.m. (EST) on December 12, 2017. The tender offer price is a significant premium to the market price.
Corporate Capital Trust’s initial public offering was declared effective by the SEC in April 2011 and raised a total of $3.3 billion before closing its follow-on offering in October 2016. The managing dealer, CNL Securities Corp., sold approximately 141 million shares in CCT’s initial public offering and sold an additional 168 million shares in a follow-on public offering, which closed on November 1, 2016. CNL Securities Corp. was generally entitled to receive selling commissions of up to 7% of the gross proceeds of shares sold in the offerings and a marketing support fee of up to 3% of the gross offering proceeds of shares sold in the offerings, some of which may have been shared with other broker-dealers who sold shares to customers.
Business development companies like CCP (BDCs) were created by Congress with the intent to stimulate investments in privately-owned companies. BDCs are closed-end funds that invest in a company’s debt (loans) or equity with the goal of generating income, capital growth or both. BDCs are registered with the U.S. Securities and Exchange Commission (SEC) and regulated under the Investment Company Act of 1940, and may be either non-traded or publicly traded. In the case of CCT, the company was non-traded for several years before listing its shares on the New York Stock Exchange this week.
As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors who have incurred losses in connection with non-traded investments and non-conventional investments, including recovering losses through FINRA arbitration. Investors may contact our office at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.