Chicago Atlantic Real Estate Finance ($REFI), a mortgage REIT that lends to cannabis operators, agreed on June 17, 2026 to convert into a business development company and merge into its affiliate Chicago Atlantic BDC ($LIEN) in an all-stock swap priced on net asset value. The deal was still pending at the latest filings, with closing targeted for the fourth quarter of 2026. Both stocks trade well below their stated book values, which leaves a small, measurable gap between REFI's price and what the swap implies.
The terms
The June 18, 2026 Form 8-K and the companies' joint release set out the structure:
- Two steps: REFI first elects to be regulated as a BDC under the Investment Company Act, then merges into LIEN. LIEN survives and keeps trading on Nasdaq as $LIEN. No new company is formed.
- Exchange ratio: REFI's adjusted NAV per share divided by LIEN's adjusted NAV per share, both measured no earlier than 48 hours before closing. There is no fixed ratio and no premium.
- Ownership: based on March 31, 2026 NAVs, former REFI holders would own about 50.5% of the combined LIEN.
- Size: pro forma NAV of $613 million and $771 million of investments, using March 31, 2026 figures.
- Management: Peter Sack, co-CEO of REFI and CEO of LIEN, runs the combined company. Chicago Atlantic BDC Advisers stays as the external adviser.
- Sweeteners: the LIEN board will consider "in good faith" a buyback of up to $25.0 million after closing, and Chicago Atlantic will fund $2.0 million of REFI's deal expenses.
- Votes: REFI holders must approve the BDC election, a new advisory agreement and the merger. The merger also needs a majority of unaffiliated REFI shares voted, and LIEN holders must vote too. Support agreements cover about 4.8% of REFI and 12.9% of LIEN, but those shares are excluded from the majority-of-the-unaffiliated test.
Sack was candid about why REFI is doing this: "For REFI, this transaction is a path to unlock value that would be difficult to achieve independently in the current evolving cannabis investment landscape," he said in the joint release.
The original version of this article framed this as a generic real estate finance merger and never mentioned cannabis. In fact, both companies are senior secured lenders focused mainly on the cannabis industry, and the deal turns a REIT into a BDC.
What has happened since
- July 9, 2026 (the Koach deal): REFI issued 4,306,754 new shares at $14.53 each in exchange for about $62.5 million of second-lien notes. The notes are secured by 32 retail properties leased to cannabis operators and pay 12.0% a year: 10.0% in cash and 2.0% paid in kind. The new shares were about 16.8% of REFI's stock after the issue. The 8-K says those shares will feed into the exchange-ratio inputs.
- July 31 and September 23, 2026: LIEN filed the Form N-14 registration for the joint proxy statement and prospectus, then an amendment. No stockholder vote results had been filed as of the October 23, 2026 close.
- August 11 and 13, 2026: second-quarter results. REFI's book value per share fell to $14.15 at June 30 from $14.39 at March 31. LIEN's NAV per share fell to $13.26 from $13.33. REFI repeated that it expects the merger to close in the fourth quarter of 2026 and said a special dividend could come in the fourth quarter to meet its 2026 REIT distribution requirements, subject to board approval and the merger agreement.
The math: the NAV swap versus market prices
The amended N-14 shows the inputs used in KBW's fairness opinion for LIEN's special committee: a closing REFI NAV of $14.30 and a closing LIEN NAV of $13.18, giving an illustrative exchange ratio of 1.0849 LIEN shares per REFI share ($14.30 / $13.18). The real ratio will be set just before closing.
| Item | $REFI | $LIEN |
|---|---|---|
| Close, June 17, 2026 | $11.11 | $10.00 |
| Close, June 18, 2026 (announced) | $11.45 | $10.24 |
| Close, October 23, 2026 | $9.37 | $9.09 |
| Change, June 18 to October 23 | -18.17% | -11.23% |
| Book value / NAV per share, June 30, 2026 | $14.15 | $13.26 |
| Price as % of book / NAV, October 23 | 66.2% | 68.6% |
Arithmetic: at the illustrative 1.0849 ratio, one REFI share converts to LIEN stock worth 1.0849 x $9.09 = $9.86 at the October 23 close. That is $0.49, or 5.25%, above REFI's $9.37. Using June 30 book values instead (14.15 / 13.26 = 1.067), the implied value is $9.70 and the gap shrinks to about 3.5%. Either way, the spread is real but thin, and it depends on NAV marks that will not be fixed until days before closing.
The bigger story is the discount. Both stocks trade at roughly two-thirds of stated book value ($9.37 / $14.15 = 66.2%, $9.09 / $13.26 = 68.6%). A NAV-for-NAV merger does not close that discount. It only puts both groups of shareholders into a single vehicle that trades at one.
On the deal day, REFI rose 3.06% ($11.45 / $11.11 - 1) and LIEN rose 2.40% ($10.24 / $10.00 - 1). Both have since fallen, REFI by more. Cannabis-sector M&A has kept going around them, including SNDL's US medical cannabis deal and TerrAscend's New Jersey purchase. Mortgage REIT consolidation, like TPG Mortgage's Cherry Hill deal, is the other backdrop.
What to watch
- The N-14 going effective and a meeting date: nothing can close without both stockholder votes, including REFI's majority-of-the-unaffiliated test.
- The final exchange ratio: set from NAVs measured no earlier than 48 hours before closing, after the Koach shares are counted.
- A fourth-quarter special dividend: REFI flagged one as a possibility, subject to its board and the merger terms.
- The $25.0 million buyback: the LIEN board's decision after closing will show whether management tries to narrow the discount to NAV.
More US deal coverage is on the Trading Tips For You homepage.
Bull/Bear Verdict
Bull Case: A NAV-for-NAV swap protects both sides from dilution, scale lifts the combined NAV to about $613 million, and REFI trades about 5.25% below the illustrative conversion value. A possible $25.0 million buyback and the intended Section 368(a) reorganization treatment add support while both stocks sit near two-thirds of book.
Bear Case: The deal does nothing about the roughly one-third discount to NAV, both lenders remain concentrated in cannabis credit, and NAVs slipped from March to June. The final ratio is unknown until closing, the spread is thin, and the deal needs a majority of unaffiliated REFI votes. REFI has fallen 18.17% since the announcement.
FAQ
What do REFI shareholders receive?
LIEN shares equal to REFI's adjusted NAV per share divided by LIEN's adjusted NAV per share, measured shortly before closing. The fairness-opinion inputs implied 1.0849 LIEN shares per REFI share.
Has the merger closed?
No. As of the latest filings it was pending, and REFI's August 11, 2026 release said closing is expected in the fourth quarter of 2026, subject to votes and other conditions.
Why does REFI have to become a BDC first?
LIEN is a BDC, and the structure requires REFI to elect BDC status, with stockholder approval, before merging into it. REFI's management agreement ends automatically when it does.
Which ticker survives?
$LIEN, on Nasdaq. REFI merges into LIEN and stops trading.
Updated October 26, 2026: rewritten with terms from the June 18 Form 8-K and joint release, the July Koach share issue, the N-14 filings, second-quarter NAVs and price data through the October 23, 2026 close. Correction: the original described a generic real estate finance merger forming a new entity. Both companies are cannabis-focused lenders, REFI must first convert from a REIT to a BDC, and LIEN is the surviving company.