Phillips Edison and Company to Conduct Reverse Stock Split in March 2021
As recently reported, Phillips Edison & Company, Inc. (PECO, f/k/a Phillips Edison Grocery Center REIT I, Inc.) has announced its approval for an upcoming one-for-four reverse stock split. The reverse stock split is expected to occur on March 9, 2021, and as a result, all issued and outstanding PECO shares will be automatically combined on a four-to-one basis. Following the reverse split, PECO will continue to operate as a publicly registered, non-traded REIT, with a newly assigned net asset value (NAV) of $35 per share.
In addition, as recently disclosed by PECO on December 31, 2020, through a filing with the SEC, PECO has concluded a tender offer to purchase up to 17.4 million shares of PECO stock at a price of $5.75 per share. As disclosed by PECO, “Based on the preliminary count… approximately 13.5 million shares were tendered pursuant to the Tender Offer, and accordingly, PECO expects to purchase 100% of the tendered shares for an aggregate cost of approximately $77.7 million.” The number of shares accepted by PECO through the tender offer amount to roughly 4% of the fully diluted share count.
Formed as a Maryland corporation in 2009, PECO is structured as a REIT focused on investing in “well-occupied, grocery-anchored, neighborhood and community shopping centers… in strong demographic markets throughout the United States.” As a publicly registered non-traded REIT, PECO was initially offered to retail investors nationwide through various third-party broker-dealers at a price of $10 per share. In November 2018, PECO finalized a merger with an affiliated REIT, Phillips Edison Grocery Center REIT II, which was effectuated by a 100 percent stock-for-stock transaction. Currently, the combined PECO entity manages a portfolio of 309 properties, including 283 wholly-owned properties comprising approximately 31.7 million square feet across 31 states (as of September 30, 2020).
PECO investors may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (FINRA), in the event that the investment was recommended by a financial advisor without a reasonable basis, or the investor was otherwise misled into investing in PECO without being adequately informed of the investment’s many risk components, including illiquidity. As a non-traded REIT, investors cannot easily exit their investment position in PECO, as they might with a publicly traded stock by simply selling their shares on a liquid national securities exchange. Rather, investors in non-traded REITs such as PECO typically must hold their investment for a lengthy period of time, in some instances for as long as 10 years, or more, until such time as a liquidity event transpires.
As it currently stands, investors in PECO have limited recourse if they wish to exit their investment. Although some illiquid non-traded REITs and similar complex financial products can be sold on a thinly traded secondary market, the pricing is usually very disadvantageous. Publicly available information suggests secondary market pricing for PECO has recently been about $5 per share. Therefore, exclusive of any distributions received to date, investors may have sustained unrealized losses approaching 50% on their initial PECO investment.
The attorneys at Giarrusso Law Group LLC have considerable experience in handling claims on behalf of investors in non-traded REITs, as well as similar complex and illiquid investment products. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and no-obligation consultation.