SCHEDULE: Herzfeld Fund Stake at 37.89% Amid Reverse Split

Erik M. Herzfeld and advisory clients report a 37.89% beneficial ownership in Herzfeld Credit Income Fund, Inc. following a cash and stock distribution and a 10-to-1 reverse stock split.

Summary

• Erik M. Herzfeld and advisory clients collectively beneficially own 7,381,500 shares of Herzfeld Credit Income Fund, Inc. common stock, representing 37.89% of the 19,483,671 shares outstanding as of December 30, 2025.
• The reported share count differs from a prior amendment due to a cash or stock distribution announced on December 30, 2025, and subsequent transactions.
• A 10-to-1 reverse stock split was effected on February 6, 2026, at 5:00 pm, with current share numbers reported on a pre-split basis.
• The Fund paid a distribution of $0.6867 per share on December 30, 2025, with approximately 80% paid in common stock and 20% in cash, based on stockholder elections.
• The price per share used for the stock portion of the distribution was $2.5799, calculated using the volume-weighted average price on December 12, 15, and 16, 2025.
• Erik M. Herzfeld received 120,584 shares, and advisory clients received 1,141,754 shares in connection with the December 2025 Distribution.
• Advisory clients engaged in numerous open market transactions, including both sales and purchases of shares, between December 24, 2025, and February 5, 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing with caution due to the significant reverse stock split, which often signals underlying issues, and the substantial portion of the distribution paid in stock rather than cash, suggesting potential liquidity management concerns.

Positives

• Erik M. Herzfeld and advisory clients maintain a significant beneficial ownership stake of 37.89% in the company, indicating continued substantial interest.
• The reporting person and advisory clients received a substantial number of shares (120,584 and 1,141,754 respectively) as part of the December 2025 Distribution, increasing their holdings.
• The company distributed $0.6867 per share to stockholders on December 30, 2025, providing a return to investors.

Negatives

• The company implemented a 10-to-1 reverse stock split effective February 6, 2026, which can sometimes be perceived negatively by the market as it often indicates a low share price or efforts to meet listing requirements.
• Advisory clients engaged in numerous open market sales of shares at various prices, including sales at $2.60, $2.7619, $2.2117, $2.0806, $1.9612, $1.949, $1.91, $1.94, $1.9312, $1.92, $1.905, $1.8331, and $1.8704, suggesting some reduction in exposure or profit-taking.

Future Outlook

Future amendments to this Schedule 13D will be reported exclusively on a post-split basis following the 10-to-1 reverse stock split effective February 6, 2026.

Management Comments

• The amount reported represents the actual number of shares, which differs from the estimate reported in a prior amendment to this Schedule 13D (the 'Prior Amendment'), received by the reporting person and the Advisory clients in connection with the cash or stock distribution announced on December 30, 2025.
• The ratio of cash and stock received by the reporting person was based on such person's election as well as elections of other stockholders, subject to the pro-rata limitation.
• All future amendments will be reported exclusively on a post-split basis.

Industry Context

StockSavvy.ai notes that a significant beneficial ownership stake of 37.89% by a key individual and associated advisory clients, as reported by Erik M. Herzfeld, indicates a strong insider commitment to Herzfeld Credit Income Fund, Inc. However, the implementation of a 10-to-1 reverse stock split, while potentially aimed at increasing share price and market appeal, often occurs in companies facing challenges or seeking to meet exchange listing requirements, which could signal underlying concerns within the closed-end fund sector.

Comparison to Industry Standards

• A 37.89% beneficial ownership by a single reporting group is a substantial stake, significantly higher than typical institutional holdings in many publicly traded funds, suggesting a concentrated control structure. For example, in comparison to large diversified funds like BlackRock or Vanguard, individual or group beneficial ownership rarely exceeds 5-10%.
• The 10-to-1 reverse stock split is a notable event. While not uncommon for companies with low share prices, it contrasts with more stable, higher-priced closed-end funds that typically do not require such actions. For instance, funds like PIMCO Income Opportunity Fund (PTY) or Eaton Vance Enhanced Equity Income Fund (EOI) maintain higher per-share values without resorting to reverse splits.
• The distribution of $0.6867 per share, paid partially in stock, is a mechanism used by some funds to manage cash outflows while still providing a return. This approach can be seen in some income-focused funds, but the high proportion of stock (80%) suggests a desire to conserve cash, which might differ from funds that primarily pay cash distributions.

Stakeholder Impact

• Shareholders: The 10-to-1 reverse stock split will reduce the number of shares held by existing shareholders, potentially increasing the per-share price but not changing the total value of their holdings immediately. The stock distribution provides additional shares but dilutes the cash component of the dividend.
• Advisory Clients: These clients, associated with Erik M. Herzfeld, have actively traded shares and received a significant portion of the distribution in stock, indicating their continued involvement and strategic adjustments to their holdings.

Next Steps

• Future amendments to this Schedule 13D will be reported exclusively on a post-split basis.

Key Dates

Recommendation

The 10-to-1 reverse stock split is a strong negative signal, often indicating a company struggling with a low share price and potentially facing delisting. While a distribution was made, the high proportion of stock payment (80%) suggests a desire to conserve cash, which could be a red flag for financial health. The pattern of open market sales by advisory clients, particularly at declining prices, further reinforces a cautious outlook. A seasoned investor would likely view these actions as indicative of underlying issues and consider reducing exposure.

Keywords

Herzfeld Credit Income Fund, common stock, Schedule 13D, beneficial ownership, reverse stock split, stock distribution, open market transactions, Erik M. Herzfeld, investment fund, SEC filing