CION Investment Corporation: Did You Lose Money on a Business Development Company?

Kurta Law wants to speak with investors who lost money investing with Cion Investment Corporation. Cion Investment Corporation is a business development company (BDC) that provides senior secured loans to U.S. mid-market companies. Business development companies often loan money to companies that have struggled to raise capital, making them riskier loans. Following the pandemic, many struggling companies could no longer pay their loans, which resulted in major losses for many BDCs. Securities lawyers handle investor claims like these on a regular basis. 

Certain investors saw their Cion Investment Corp. dividend take a sharp nose-dive, with losses as high as 40%. This does not account for reinvested dividends.

Kurta Law Can Help Investors Who Lost Money on Cion Investment Corp

Did your broker inform you of the risks associated with Cion Investment Corporation? Your broker should have explained to the potential for big financial losses, with Cion or any other business development company.

If your broker or financial advisor did not accurately characterize the risks of Cion Investment Corporation BDC, you may be entitled to recover your losses. Kurta Law can also help investors, especially if they stated they wanted conservative investments. FINRA Rule 2111 requires that brokers only recommend investments that fits their investor’s age, financial goals, investing experience, liquidity needs, and risk tolerance.

Investors may have been swayed by the opportunity for substantial yields. BDCs have been known to offer dividend yields of 5% to 14%. Brokers may have also inaccurately characterized business development companies as low risk.

Suitability Concerns for CION Investment Company

Until recently, Cion was a non-traded BDC. This means that shares of Cion were not bought or sold on a public exchange. Cion’s SEC Registration Statement states: “If you are able to sell your shares, you will likely receive less than your purchase price.”

Illiquid Shares

Non-traded investments are highly illiquid – since there is no market for the shares, you might struggle to find someone to buy your shares if you decide you no longer want the investment. According to the registration statement, “You should consider that you may not have access to the money you invest for an indefinite period of time until we complete a liquidity event.”

Sales Fees

Shares of Cion Investment Corp BDC came with fees called “sales loads” that equal 10% of the total investment. In addition, there was an offering expense of 1.5%. Cion stated in their SEC filing that Cion investments would have to make a 13% return to recover their expenses and start to see a yield.

What Happens in a Reverse Stock Split?

Cion recently announced its intention to sell on the public exchange, starting October 5, 2021. Cion Investment Corp stock will make its debut at $0.001 per share.

In anticipation of this listing, Cion Investment Company performed a “reverse stock split.”

In a reverse stock split, investors’ shares have the same total value but a smaller number of shares. Companies sometimes perform a reverse stock split after the value of their shares has declined, to boost the price of an individual stock. By consolidating shares, the value of the individual share increases. After a 2-to-1 stock split, instead of having twenty $1 shares, the investor would have ten $2 shares. The total value remains $20.

Cion announced that after the split, investors would have shares worth $16.34 each instead of $8.17.

Kurta Law Can Help

If you lost money investing in Cion, you may be able to recover your losses through FINRA arbitration. Most brokerage firms include pre-dispute clauses in their agreements that require investors to agree to settle their disputes with FINRA arbitration instead of civil court. Securities attorneys at Kurta Law will evaluate your case for free and can guide you through the arbitration process. Contact 877-600-0098 or email info@kurtalawfirm.com.