Terra Property Trust, Inc.

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Ademi LLP is investigating Terra Property Trust, Inc. (NYSE: TPTA) for possible breaches of fiduciary duty and other violations of law in its transaction with Western Asset Mortgage Capital Corporation.

In the transaction, TPT shareholders will receive newly designated shares of WMC Class B common stock as merger consideration. The number of shares of WMC Class B common stock to be received by TPT stockholders will be based on an exchange ratio to be determined by dividing TPT’s adjusted book value per share by WMC’s adjusted book value per share, calculated pursuant to the terms of the Agreement. Under the Agreement, the book values of each company will reflect certain agreed adjustments; TPT’s book value will include accumulated depreciation and amortization on real estate assets owned, and WMC’s will reflect the deconsolidation of variable interest entities. For illustrative purposes, as of March 31, 2023, WMC’s and TPT’s adjusted book values per share would have been $17.30 and $13.58 (before transaction expenses), respectively, with every TPT share being exchanged on a pro forma basis for 0.785 WMC shares. The transaction agreement unreasonably limits competing bids for TPT by imposing a significant penalty if TPT accepts a superior bid. TPT insiders will receive substantial benefits as part of change of control arrangements.

We are investigating the conduct of TPT’s board of directors, and whether they are (i) fulfilling their fiduciary duties to all shareholders, and (ii) obtaining a fair and reasonable price for TPT.