On Sept. 2, Miami-based investment firm Diveroli Investment Group announced that it had accumulated a 9.48% stake in Wheeler Real Estate Investment Trust (WHLR), the number one-ranked company in Barchart’s Bottom 100 Stocks to Buy.

“WHLR trades like a penny stock but controls more than half a billion in real estate,” said Aharon Diveroli, CIO at DIG. “With fundamentals improving and strong political tailwinds suggesting rate cuts, we see significant upside as a real potential.”

In the meantime, Diveroli filed a Schedule 13D form on Oct. 2, indicating that it sold all of its shares in Wheeler--101,946 shares sold on Sept. 10 and the 101,054 shares on Sept. 11--one month after buying them. 

In most situations, the one-month buy-and-sell is an unusual turn of events, but Wheeler has attracted a speculative crowd. It’s par for the course for the Virginia REIT. 

On September 22, Wheeler completed a 1-for-5 reverse stock split, an ongoing exercise necessitated by the dilution of its preferred shares, which I will discuss shortly.

Although Diveroli sold its position in Wheeler, the arguments made by it regarding the REIT’s shares do reveal a hidden value in a stabilized, grocery-anchored real estate portfolio.

That said, the REIT remains a stock suitable only for investors with an aggressive approach. Having written about the struggling REIT in August, it is an interesting high-risk/high-reward bet for anyone who can afford to lose their investment in WHLR stock.

Here’s why. 

Who Is Diveroli?

Admittedly, I know very little about the investment firm. It has a website and touts itself as a “family-run investment firm that pursues value creation through opportunities in public and private companies.”

The founder of the investment firm is Efraim Diveroli. He’s best known as one of the founders of AEY Inc., an arms dealer, who won a $300 million contract from the Pentagon in 2007 to supply ammunition to America’s allies in Afghanistan. 

Diveroli and his partner, David Packouz, were both in their 20s at the time. Packouz was sentenced to seven months of house arrest, while Diveroli received a four-year sentence. 

You can read about the entire affair in Guy Lawson’s excellent March 2011 article in Rolling Stone.

Fast forward to June 2025. Diveroli launched the Diveroli Investment Group. The launch comes after completing a lengthy review process of his qualifications to do business with the U.S. Department of Defence. The U.S. Army officially removed his debarment, which enabled him to once again contract with the U.S. Army.

Why Wheeler?

As for why Wheeler, the June press release sheds some light on the investment firm’s plans.

“As a firm, we're not interested in consensus ideas or momentum trades,” said Diveroli. “We specialize in strategic inflection points - undervalued companies with real potential and identifiable catalysts. Our goal is to identify them early, deploy capital, and offer strategic guidance to help them realize their full value.”

According to WhaleWisdom.com, Diveroli Investment Group has two 13D investments: LQR House (YHC) and StableX Technologies (SBLX). Both companies have market caps of less than $10 million. Wheeler currently fits that market cap. 

Perhaps one day, we’ll find out why Diveroli bought nearly 10% of a company and sold the stake a month later. It likely had to do with Wheeler’s preferred shares. I’ll discuss this in the next section.

In its Aug. 30 PowerPoint presentation, it makes four arguments why WHLR stock was attractive:

1) The REIT’s Q2 2025 10-Q showed that its total assets exceeded its total liabilities by over $90 million, or 25 times its market cap at the time. The gap’s about 22 times market cap as of Oct. 13.

2) It’s got blue-chip retail tenants such as Food Lion, Kroger (KR), Aldi, and Dollar Tree (DLTR). Its top 10 tenants accounted for 23.04% of Wheeler’s annualized base rent and 25.39% of its total leasable square feet. Its Q2 2025 same-property NOI (net operating income) increased by 10.7%, to $16.77 million.  

3) More interest rate cuts in 2025 and 2026 will lower the REIT’s financing costs while increasing the industry’s NAV (net asset value) multiples.

4) The simplification of its balance sheet through the retiring of preferred and convertible securities, while painfully dilutive, will make it easier to sell its story to investors. 

These are all reasons why one might take a flyer on Wheeler. Is it enough to overcome the dilution? Maybe. 

A Closer Look at the Balance Sheet

Holding back Wheeler’s common stock are its Series D Cumulative Convertible Preferred Shares and 7% Convertible Notes. 

The Series D preferred shares as of June 30 had a liquidation value of $72.7 million. Each month, holders of the Class D preferred shares can redeem them for common shares based on the “volume weighted average price per share of our Common Stock for the ten consecutive trading days immediately preceding, but not including, the Holder Redemption Date as reported on Nasdaq,” states its Q2 2025 10-Q.

In the first six months of 2025, the REIT redeemed 257,111 Series D preferred shares, in exchange for 226,571 shares of its common at a redemption price of $10.3 million. This includes accrued and unpaid dividends.

At the same time, it had $29.4 million in 7% convertible notes outstanding at the end of June. The interest on these is paid through the issuance of common shares. In the first six months of 2025, the REIT issued $1.08 million to cover this expense. At the same time, it issued 536,477 common shares to settle conversion requests from note holders, resulting in a $900,000 loss.

Until it pays off the $28.3 million in undeclared accumulated dividends in arrears on the Series D preferreds, the REIT can't pay dividends on the common.

Therein lies the rub. Investors purchase REITs for the dividend income they generate. 

Ultimately, Wheeler should prove Diveroli Investment Group’s value thesis accurate. The million-dollar question is why it didn’t hang in there to see it play out.

We may never know—just another reason why WHLR stock is not for the faint of heart. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.