CION Investment Corporation Risk Factors
CION Investment Corporation Risk Factors
An investment in our common stock involves a high degree of risk and may be considered speculative. You should carefully consider the information found in ‘‘Risk Factors’’ before deciding to invest in shares of our common stock. The following are some of the risks an investment in us involves:
- Our investments in prospective portfolio companies are risky, and we could lose all or part of our investment.
- We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.
- As required by the 1940 Act, a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith by our board of directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
- Unless we experience substantial net capital appreciation and realized gains, the purchase price in our periodic repurchase offers will be at a price lower than the price paid for your shares.
- The amount of distributions that we pay is uncertain. We may pay distributions from offering proceeds, borrowings or the sale of assets to the extent our cash flow from operations, net investment income or earnings are not sufficient to fund declared distributions. We have not established any limit on the amount of funds we may use from net offering proceeds or borrowings to make distributions. Our distributions may exceed our earnings. Therefore, portions of the distributions that we pay may represent a return of capital to you that will lower your tax basis in your common stock and reduce the amount of funds we have for investments in targeted assets. In addition, through December 31, 2014, a portion of our distributions resulted from expense support from CIG, and future distributions may result from expense support from CIM, each of which is subject to repayment by us. For the years ended December 31, 2015, 2016 and 2017, none of our distributions resulted from expense support from CIG or AIM.
- Before managing us, CIM had not managed a BDC or a RIC. Therefore, CIM may not be able to successfully operate our business or achieve our investment objective.
- CIM, Apollo and their respective affiliates, including our officers and some of our directors, face conflicts of interest caused by compensation arrangements with us and our affiliates that could result in actions that are not in your best interests.
- We may be obligated to pay CIM incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.
- There may be conflicts of interest related to obligations that CIM’s and Apollo’s respective senior management and investment teams have to other clients.
- Our base management and incentive fees may induce CIM to make, and AIM to recommend, speculative investments or incur leverage.
- The compensation we pay to CIM was determined without independent assessment on our behalf, and these terms may be less advantageous to us than if they had been the subject of arm’s-length negotiations.
- This is a ‘‘best efforts’’ offering and, if we are unable to continue to raise substantial funds, then we will be more limited in the number and type of investments we may make and the value of your investment in us may be reduced in the event our assets underperform.
- Because there is no public trading market for shares of our common stock and we are not obligated to effectuate a liquidity event by a specified date, it will be difficult for you to sell your shares.
- Beginning in the first quarter of 2014, we began offering to repurchase your shares of our common stock on a quarterly basis. As a result, you will have limited opportunities to sell your shares of our common stock and, to the extent you are able to sell your shares of our common stock under the program, you may not be able to recover the amount of your investment in our common stock.
- We will be exposed to risks associated with changes in interest rates. In addition, changes in interest rates may affect our cost of capital and net investment income.
- We expect to borrow money to make investments. As a result, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us. Borrowed money may also adversely affect the return on our assets, reduce cash available for distribution to our shareholders, and result in losses.
- The amended total return swap, or the TRS, entered into by our wholly-owned financing subsidiary exposes us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
- We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy RIC distribution requirements.
- We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
- The net asset value of our common stock may fluctuate significantly.
See ‘‘Risk Factors’’ and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.