October 15, 2015
Bernstein Liebhard LLP today announced that a securities class action has been filed in the United States District Court for the Southern District of New York on behalf of a class (the “Class”) consisting of all persons or entities who purchased the common stock of Fifth Street Finance Corp. (“FSC” or the “Company”) (NASDAQ: FSC) between July 7, 2014 and February 6, 2015, inclusive (the “Class Period”).
FSC is a specialty finance company managed by Fifth Street Asset Management, Inc. (“FSAM”) that lends to and invests in small and mid-sized companies, primarily in connection with investments by private equity sponsors. The complaints charge FSC, FSAM and certain of their officers and directors with violations of the Securities Exchange Act of 1934. FSC’s founder and one-time Chairman and CEO Leonard M. Tannenbaum and his associates were the private owners of FSAM before taking it public in an initial public offering (“IPO”) in October 2014.
The complaint alleges that, among other things, Defendants pushed FSC into increasingly risky investments at unsustainable leverage levels, delayed writing down impaired investments to create the appearance of increasing revenues for FSAM, and systematically overstated the income generated by FSC’s investments and its portfolio value while falsely portraying FSC’s business trends and expected performance.
On February 9, 2015, FSC reported its fiscal results for the quarter ended December 31, 2014 – the same quarter in which Defendants conducted the IPO. FSC revealed that (i) around the time its executives were taking FSAM public, the Company had moved $106 million worth of investments to non-accrual status with an additional $17 million likely to be designated non-accrual in subsequent quarters; and (ii) even though the total assets of FSC’s investment portfolio had continued to increase by 28% year-over-year to $2.7 billion by quarter end, the net investment income received by the Company had actually decreased by 6% compared to the prior quarter. In addition, despite having announced a 10% dividend increase only four months before taking FSAM public, FSC declared that it would issue zero dividends for February 2015, while decreasing future dividend payments by more than 30% as part of a more “conservative” dividend policy. After these adverse disclosures, the price of FSC common stock declined nearly 15%.
Plaintiffs seek to recover damages on behalf of all Class members who invested in FSC common stock during the Class Period. If you invested in FSC common stock as described above, and lost money on the transactions, you may wish to join in this action to serve as lead plaintiff. In order to do so, you must meet certain requirements set forth in the applicable law and file appropriate papers no later than November 30, 2015.
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. Under certain circumstances, one or more class members may together serve as lead plaintiff. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Bernstein Liebhard LLP, or other counsel of your choice, to serve as your counsel in this action.
Bernstein Liebhard LLP has pursued hundreds of securities, consumer and shareholder rights cases and recovered over $3.5 billion for its clients. The National Law Journal has recognized Bernstein Liebhard for twelve consecutive years as one of the top plaintiffs’ firms in the country.
You can obtain a copy of the complaint from the clerk of the court for the United States District Court for the Southern District of New York.