Franklin BSP Realty Trust, Inc. Class Action Lawsuit – FBRT

Introduction to Franklin BSP Realty Trust, Inc. (FBRT) Securities Class Action Lawsuit

A securities fraud class action has been filed against Franklin BSP Realty Trust, Inc. (NYSE: FBRT) and certain executives on behalf of investors who purchased FBRT securities between November 5, 2024 and February 11, 2026, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Investors allege that defendants repeatedly overstated the company's $0.355 quarterly dividend sustainability and misrepresented the earnings power of its commercial real estate portfolio. On February 11, 2026, in its fourth quarter and full year 2025 earnings announcement, the company slashed its dividend by 44% to $0.20 per share and admitted it had been "over-distributing capital to investors" while REO liquidations took far longer than anticipated. Shareholders suffered significant losses as the stock price declined over 14% following the corrective disclosure, including a 14.2% drop the next trading day.

Franklin BSP Realty Trust, Inc. (FBRT) Securities Lawsuit Case Details

Case Name: Robert Moses v. Franklin BSP Realty Trust, Inc., et al.

Case No.: 1:26-cv-01107

Jurisdiction: U.S. District Court, Eastern District of New York

Filed on: February 26, 2026

Franklin BSP Realty Trust, Inc. (FBRT) Company Profile

Franklin BSP Realty Trust is a real estate investment trust that originates, acquires and manages a diversified portfolio of commercial real estate debt, an asset-backed business model focused on commercial real estate secured by properties located in the United States. The company trades on the New York Stock Exchange under the ticker symbol FBRT, and its publicly traded common stock is part of the Real Estate/REITs industry sector.

Franklin BSP Realty Trust, Inc. (FBRT) Securities Lawsuit Class Period

November 5, 2024 – February 11, 2026, inclusive.

This lawsuit includes persons or entities who purchased or otherwise acquired publicly traded FBRT securities, including common stock during the Class Period and may be eligible to join the Franklin BSP Realty Trust, Inc. (FBRT) class action lawsuit.

Allegations in the Franklin BSP Realty Trust, Inc. (FBRT) Securities Class Action Lawsuit

The complaint targets Franklin BSP Realty Trust and three of its senior executives: Richard J. Byrne, who served as Chief Executive Officer and Chairman of the Board until February 10, 2026; Jerome S. Baglien, the company's Chief Financial Officer, Chief Operating Officer, and Treasurer; and Michael Comparato, who served as President before replacing Byrne as CEO. Investors allege these defendants made materially false and misleading statements about the company's earnings power and its $0.355 quarterly dividend throughout the class period, misleading investors about dividend sustainability and book value preservation.

The alleged pattern of misstatements began on November 5, 2024, when CFO Baglien acknowledged on the Q3 2024 earnings call that GAAP and distributable earnings were insufficient, leaving coverage below the payout level but assured investors that "we remain confident that our dividend level accurately reflects our portfolio's long-term stabilized earnings potential and we're comfortable with the current level.” On the same earnings call, CEO Byrne reinforced this confidence, stating that the company set its dividend policy based on earnings power over the long term rather than quarter-by-quarter performance. Defendant Byrne further emphasized that with $350 million of cash, "[w]e have a lot more earnings power than we're demonstrating now, and we feel confident in the level of our dividend." On the February 14, 2025 Q4 2024 earnings call, Byrne again stated that despite not reaching dividend coverage that quarter, "we believe that our current dividend level is appropriate given the future earnings potential embedded in our REO and non-performing loans", reiterating long-term earnings over near-term GAAP results. CFO Baglien added that as the company continued to resolve REO and put that equity back to work, "we believe we could generate an additional $0.25 to $0.30 to our distributable earnings on an annual basis," bringing earnings power closer to dividend coverage. By July 31, 2025, on the Q2 2025 earnings call, CEO Byrne declared "[w]e believe there is a clear path to growing this to a level that supports our dividend," while CFO Baglien outlined three key drivers to reach dividend coverage, including plans to call several CLOs expected to generate approximately $0.04 to $0.06 per share quarterly by creating liquidity and freeing up equity for reinvestment. On October 30, 2025, President Comparato stated during the Q3 2025 earnings call that "we are excited to continue the path to dividend coverage," assurances investors claim were materially misleading under Rule 10b-5.

According to the complaint, defendants knew or recklessly disregarded that the company lacked the earnings power to sustain the $0.355 dividend, that REO liquidations were taking longer than represented, and that the company was over-distributing capital while sacrificing book value to maintain the dividend, rendering their public statements materially false and misleading in violation of Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5.

The Truth Emerges

The truth began to surface after the market closed on February 10, 2026, when Franklin BSP Realty Trust announced that CEO Richard Byrne was stepping down and would be replaced by Michael Comparato. After market close the following day, February 11, 2026, the company announced its results for the fourth quarter and full year 2025 along with a dramatic dividend cut from $0.355 to $0.20 per share. In the earnings release, new CEO Comparato admitted that "2025 was a year of transition for FBRT" and that while the company had managed through the credit cycle with minimal losses, "it has taken longer to resolve and sell the real estate than we originally planned." He acknowledged directly: "This has led to over-distributing capital to investors. In order to stabilize our book value and match the earnings power of our company to distributions, our Board reset the quarterly dividend to $0.20", reporting GAAP net income of $18.4 million for Q4 2025 compared to $30.2 million in the prior-year quarter.

On February 12, 2026, during the Q4 2025 earnings call, Comparato stated that “[a]fter a thoughtful analysis, we decided it was no longer prudent to sacrifice book value to pay that dividend.” He explained the reset was driven by declines in SOFR, the timing of originations and repayments, tight spreads reducing returns on new loans, and REO liquidations taking longer than anticipated, locking equity in underperforming investments. According to the complaint, these disclosures revealed information that was inconsistent with defendants’ prior assurances about dividend sustainability and coverage.

Market Reaction

On February 11, 2026, following the leadership transition announcement, FBRT stock fell 0.97%, trading on the NYSE. The following day, February 12, 2026, after the company disclosed the dividend cut and admitted to over-distributing capital to investors, the stock price fell another $1.44 per share, a 14.2% single-day decline, closing at $8.71 on the New York Stock Exchange.

Next Steps

●      The Court will issue its order for lead plaintiff and counsel in the weeks after submissions are due.

●      The Court will then consider motion for class certification.

●      The Court will later consider a Motion to Dismiss.

Disclaimer: This shareholder alert is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for personalized guidance. No specific outcomes are guaranteed.

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