Ready Capital Corporation (NYSE: RC) is a real estate finance company that provides financing solutions for small to medium-sized businesses. The company specializes in commercial real estate (CRE) loans, which are now at the center of a legal battle. The lawsuit, Quinn v. Ready Capital Corporation, accuses the company and certain executives of securities fraud, alleging misrepresentation of the credit performance of its CRE loans.
The lawsuit claims that Ready Capital falsely assured investors that its loan portfolio was stabilizing, while it was actually burdened with non-performing loans. This misrepresentation came to light when the company announced a $382 million charge in its fourth-quarter 2024 financial results. This charge included $284 million in Current Expected Credit Losses (CECL) and valuation allowances on non-performing loans, leading to a significant 27% drop in the stock price.
Despite these challenges, some executives at Ready Capital are showing confidence in the company. On March 12, 2025, Andrew Ahlborn, the CFO, purchased 10,000 shares at approximately $5.04 each, increasing his total ownership to 310,808 shares. Similarly, on March 10, 2025, COO Taylor Gary acquired 10,000 shares at $5.23 each, bringing his total ownership to 211,097 shares. These transactions suggest that the executives believe in the company's potential recovery.
Ready Capital's financial metrics reveal a mixed picture. The company has a negative price-to-earnings (P/E) ratio of -1.84, indicating current losses. However, the price-to-sales ratio of 1.35 shows that investors are willing to pay $1.35 for every dollar of sales. The enterprise value to sales ratio is 1.84, and the enterprise value to operating cash flow ratio is 3.50, reflecting the company's valuation in relation to its cash flow.
The company's debt-to-equity ratio is relatively low at 0.24, suggesting a conservative approach to leveraging debt. However, the current ratio of 0.33 indicates potential liquidity challenges in covering short-term liabilities. Investors affected by the stock price decline are encouraged to explore legal options, with Bleichmar Fonti & Auld LLP offering representation on a contingency fee basis. The deadline for seeking appointment as lead plaintiff is May 5, 2025.
