FSAM investors may receive additional information about the case by clicking the link "Join this Class Action" above.
According to the complaint, FSAM is a credit-focused asset manager and the investment advisor for Fifth Street Finance Corp. (“FSC”), Fifth Street Senior Floating Rate Corp. (“FSFR”), and various private Fifth Street funds. On October 28, 2014, FSAM filed an amended S-1 Registration Statement for the FSAM IPO, which was declared effective on October 29, 2014 (the “Registration Statement,” and together with the IPO prospectus filed October 30, 2014 (the “Prospectus”), the “Offering Materials”). The defendants sold 6 million FSAM shares to the public in the IPO at $17 per share, generating more than $100 million in gross proceeds for the company’s CEO, Leonard M. Tannenbaum (“Tannenbaum”), and other pre-IPO owners of FSAM, who also retained ownership interests in FSAM worth hundreds of millions of dollars that they could cash out at a later date.
The complaint alleges that in the Offering Materials, the defendants made materially false and misleading statements of fact and failed to disclose facts necessary to make the statements made therein not misleading, including, among other statements, that: (i) FSAM had $4.2 billion assets under management from FSC as of June 30, 2014, when in fact a substantial portion of FSC’s portfolio had been impaired on a cost basis prior to the IPO; (ii) FSAM had increased its management fee revenues by a compound annual growth rate of nearly 50% year-over-year during the six months ended June 30, 2014 due to FSAM’s “outstanding performance,” when in fact the growth in fee revenue was largely due to the overstatement of FSC’s assets and dilutive stock offerings detrimental to the Funds’ shareholders; and (iii) FSAM had “high-quality and predictable earnings,” when in fact FSAM’s revenues were unsustainable and the result of conduct that placed FSAM’s most important asset – its management contract with FSC – at risk.
According to the complaint, the price of FSAM shares fell because, among other reasons: (i) FSC disclosed that a substantial portion of its debt portfolio had entered non-accrual (including about 4% of FSC’s portfolio prior to the IPO); (ii) Fitch Ratings Inc. downgraded FSC to BB+ from BBB- on a negative outlook due largely to FSAM’s poor management of FSC and its credibility problems with investors; (iii) FSC has had to restate its financials for three consecutive quarters, including the quarter in which the IPO was conducted, due to material weakness in its controls over financial reporting; and (iv) RiverNorth Capital Management, LLC, which purports to be FSC’s largest shareholder, has called for the termination of FSC’s advisory agreement with FSAM because of “FSC’s dramatic underperformance, problematic conflicts of interest and an abusive fee structure.”
On December 9, 2015, FSAM stock closed at $4.03 per share, more than 76% below the IPO price.
If you are a member of the class described above, you may no later than March 7, 2016, move the Court to serve as lead plaintiff of the class, if you so choose.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Any member of the purported class may move the court to serve as a lead plaintiff through counsel of their choice, or may choose to do nothing and remain an inactive class member.
Kessler Topaz Meltzer & Check, LLP has not filed a complaint in this matter. If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP.
Kessler Topaz Meltzer & Check, LLP
James Maro, Esq.
Adrienne Bell, Esq.
280 King of Prussia Road
Radnor, PA 19087
1-888-299-7706 (toll free) or 1-610-667-7706