Broadmark Realty ($BRMK) Misleading Proxy, Deceptive Financial Projections, and Post-Merger Collapse Case
$BRMK investors filed a claim against Broadmark Realty and Ready Capital for misleading shareholders with inflated financial forecasts and omitting material risks in the lead-up to their 2023 merger.
After Ready Capital's earnings collapsed and its loan portfolio deteriorated, the stock fell over 60%, dropping from $10.11 to below $4.00 per share post-merger.
$BRMK investors can join this case to be notified about potential recovery.
Case Details:
On May 30, 2023, Broadmark shareholders approved a merger with Ready Capital based on a proxy promising strong returns, higher dividends, and future growth. Shareholders were told they’d receive 0.47233 shares of $RC for each $BRMK share, with projected annual dividends of $1.60.
But the merger was built on misleading forecasts. Ready Capital failed to reveal that many borrowers were already struggling with rising interest rates and that a $504 million Ritz-Carlton project acquired through a previous deal was in serious trouble. That property later required a $130 million write-down and sparked litigation.
After the merger, Ready Capital’s condition worsened fast. By mid-2024, it had modified over $800 million in loans, reported $28.5 million in non-cash interest, and saw earnings crash to just $0.07 per share—nowhere near the promised $1.60. The annual dividend was cut to $0.50, and over $1.2 billion in troubled loans were shifted to a liquidation portfolio.
Based on these events, $BRMK investors filed a claim against Broadmark and Ready Capital, accusing the companies of the following:
It provided inflated forecasts for earnings, dividends, and asset values.
It failed to disclose distress in the Mosaic loan portfolio, including a failing $504M Ritz-Carlton project.
It omitted internal concerns about rising borrower delinquencies and liquidity issues.
Considering all the representations, investors believe the companies concealed material financial deterioration to secure the merger and protect executive compensation.