Shareholder Class Action Filed Against Fifth Street Asset Management, Inc. - FSAM

RADNOR, Pa., Jan. 14, 2016

FSAM shareholders who wish to discuss this action and their legal options are encouraged to contact Kessler Topaz Meltzer & Check, LLP (Darren J. Check, Esq., D. Seamus Kaskela, Esq. or Adrienne O. Bell, Esq.) at (888) 299-7706 or at info@ktmc.com. 

For additional information about this lawsuit, or to request information about this action online, please visit https://www.ktmc.com/new-cases/fifth-street-asset-management-inc.

FSAM is the asset manager and investment advisor for two publicly traded asset portfolio companies – Fifth Street Finance Corp. (Nasdaq: FSC) ("FSC") and Fifth Street Senior Floating Rate Corp. (Nasdaq: FSFR) ("FSFR"). FSC and FSFR (the "Funds") lend to and invest in small and mid-sized companies in connection with investments by private equity sponsors. FSAM generates revenue from the Funds for providing investment advisory and administrative services.

According to the shareholder class action complaint, the Offering Documents filed in connection with FSAM's IPO contained 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.

As further detailed in the complaint, since the time of Company's IPO in October 2014, the price of FSAM shares has plummeted 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; and (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.

On December 9, 2015, FSAM stock closed at $4.03 per share, more than 76% below the price of the shares at the time of the IPO.