What happened?
There are a million ways to make a million dollars. Greenmail is one such way. A successful greenmail campaign involves buying a significant interest in a company, threatening activism, and forcing the owners to buy them back at a higher price so that the existing parties retain control.

That's exactly what just happened at Fifth Street Finance (NASDAQ: FSC). Activist investor RiverNorth threw in the towel on Fifth Street, striking a deal to drop its activist campaign. Fifth Street Asset Management (NASDAQ: FSAM) and CEO Leonard Tannenbaum will buy RiverNorth's shares at an above-market price.

Does it matter?
If your thesis for buying Fifth Street Finance was that it could be worth much more in the hands of another manager, yes. That thesis is dead in the water.

RiverNorth's entities acquired Fifth Street Finance shares at a weighted average price of about $6.07 per share starting in October, per my analysis of its 13D filings. It's since collected a few months of dividends.

Today, it announced that it reached an agreement to sell those shares to Fifth Street Asset Management and Len Tannenbaum for $6.25 per share. That's well above the closing price of $4.85 for Fifth Street Finance shares prior to the announcement.

RiverNorth will also get a warrant to buy shares of Fifth Street Asset Management before the expiration of the warrant on March 18, 2017. The warrant entitles RiverNorth to a maximum gain of $5 million. 

In summary, RiverNorth was previously on the side of Fifth Street Finance shareholders. After this deal, however, it has an economic interest on the other side -- Fifth Street Finance's external manager. It's funny how things change. 

And if you needed any further evidence that this deal favors Fifth Street Finance's external manager over its shareholders, just look at the market's response today. Fifth Street Asset Management is up more than 119% as of 10:30 a.m. ET on Friday. Fifth Street Finance is down nearly 6% at the same time.

There are two takeaways here. First, you can rule activism out at Fifth Street Finance. Together, the manager and its CEO will control 14.6% of Fifth Street Finance's shares outstanding. Secondly, RiverNorth has taken stake in many BDCs in recent months, but look at it with skepticism. After all, RiverNorth has to do what's best for the interests of its investors, not the investors with whom it is purportedly aligned.