Did you lose money investing in FS KKR Capital Corp II (NYSE: FSKR)?
Galvin Legal, PLLC is launching an investigation on behalf of investors who suffered losses investing in FS KKR Capital Corp II (NYSE: FSKR), a non-traded business development company, at the recommendation of their financial advisor. If you suffered losses investing in the investment, then Galvin Legal, PLLC may be able to help you recover your losses in a Financial Industry Regulatory Authority (“FINRA“) arbitration claim against the brokerage firm that recommended the investment.
FS KKR Capital Corp II (NYSE: FSKR) was formed from the December 2019 merger of four non-traded BDCs including FS Investment Corporation II, FS Investment Corporation III, FS Investment Corporation IV, and Corporate Capital Trust II. FS KKR Capital Corp II invests primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market companies. The company is advised by FS/KKR Advisor LLC, a partnership between FS Investments and KKR Credit Advisors.
FS KKR Capital Corp II (NYSE: FSKR) specializes in floating rate, senior secured loans-first lien and second lien, senior secured bonds, subordinated debt, collateralized securities, corporate bonds, debt securities, and equities such as warrants and options in middle market private companies. It seeks to invest in various sectors in private companies in the United States. It also invests in non-U.S. securities, which may include securities denominated in U.S. dollars or non-U.S. currencies. The company purchases interests in loans through secondary market transactions in the over-the-counter market for institutional loans or directly from target companies. It also purchases minority interests in the form of common or preferred equity in target companies, either in conjunction with one of its debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm.
FS KKR Capital Corp II (NYSE: FSKR) was listed on the NYSE on June 17, 2020 and a 4-1 reverse stock split was instituted. While a 4-1 reverse split increases the price per share, it does not change the total value of the pre-reverse shareholders investment, it just consolidated the number of shares they had that were previously valued at $3.50 per share. The company has been trading significantly lower than the pre-IPO NAV reported by the company’s board of directors, which has led many investors to liquidate their positions at a substantial loss from what they purchased it for.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
UPDATE 5/28/2020: FS KKR Capital Corp. II (FSK II) has commenced the final steps to prepare for listing on the New York Stock Exchange next month. Subject to market conditions, the company currently anticipates that its shares of common stock will start trading on the NYSE under the ticker symbol “FSKR” around June 17, 2020. In preparation for the proposed listing, the company changed the record and payment dates of its $0.15 per share quarterly distribution, which will now be paid on June 8, 2020 to stockholders of record as of June 8, 2020. The distribution payment was previously expected on July 2, 2020. Following the payment of the distribution, the company plans to enact a 4-to-1 reverse stock split where every four shares of common stock issued and outstanding will be automatically combined into one share. Thus, the number of outstanding shares will be reduced from approximately 684.8 million to approximately 171.2 million, and the net asset value per share as of March 31, 2020 would have been $24.68, instead of $6.17 per share. The company plans to eliminate any outstanding fractional shares of common stock and will round up the number of fractional shares held by each shareholder to the nearest whole number prior to the listing. The board also authorized a stock repurchase program where the company may repurchase up to $100 million of its outstanding common stock in the open market at prices below the current net asset value per share. The timing, manner, price and amount of share repurchases will be determined by the company, and the program is expected to be in effect for one year from the effective date.
UPDATE 5/26/2020: According to reports, FS KKR Capital Corp II (NYSE: FSKR) will provide its shareholders with additional details in the “coming weeks” on its potential listing on the New York Stock Exchange. The BDC previously announced plans to list its shares before the end of the second quarter of 2020; however, in a filing with the Securities and Exchange Commission, the company indicated that “there can be no assurance that the company will be able to complete the listing on the expected timeframe or at all.”
UPDATE 5/12/2020: FS KKR Capital Corp II (NYSE: FSKR) has further postponed its annual meeting of stockholders from May 15, 2020 to June 8, 2020 at 1:00 p.m. EST. The company cited the coronavirus (COVID-19) pandemic as the reason for the postponement. FSK II plans to hold the annual meeting in person at 201 Rouse Boulevard in Philadelphia but may opt for a virtual-only meeting instead.
What is a Business Development Company (BDC)?
A Business Development Company (BDC) is typically a publicly traded company that is similar to closed-end investment funds. They generally invest in small and mid-sized companies that are either developing or that are financially distressed.
BDCs were created in 1980 through a Congressional amendment to the Investment Company Act of 1940. One of the primary differences between a BDC and a venture capital fund is that BDCs typically allow non-accredited investors to invest.
The Investment Company Act of 1940 sets out several requirements for BDC. For example, BDC are required to be a domestic company and must be registered with the SEC. They must maintain at least 70% of their assets in U.S. firms with market values of less than $250 million and must distribute over 90% of their profits.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Due Diligence Requirement
FINRA requires brokerage firms to conduct due diligence on investments, such as FS KKR Capital Corp II (NYSE: FSKR), and to conduct a suitability analysis when recommending securities to a customer that takes into account the customer’s knowledge and experience. FINRA Rule 2111(a) states that “a member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.”
Rule 2111 is composed of three main obligations: reasonable-basis suitability, customer-specific suitability, and quantitative suitability. Brokerage firms that fail to conduct adequate due diligence on investments they recommend, such as FS KKR Capital Corp II (NYSE: FSKR), or that make unsuitable recommendations can be held responsible for the customer’s losses in a FINRA arbitration claim.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Request a Free Consultation with a Securities Attorney
If you suffered losses investing in FS KKR Capital Corp II (NYSE: FSKR) and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
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Galvin Legal, PLLC is a national securities arbitration, securities mediation, securities litigation, securities fraud, securities regulation and compliance, and investor protection law practice. For more information on Galvin Legal, PLLC and its representation of investors, please visit www.galvinlegal.com or call 1-800-405-5117.
