It is too early to know whether there was any wrongdoing during preparations for the much-hyped Facebook IPO in May, despite the public outcry. It will be months, and more likely years, before the investigations are over, the lawsuits resolved, and investor angst over whether to still “like” Facebook as an investment are settled. Even so, there is valuable guidance for compliance officers in the events that have taken place so far.
“What is clear is that the Facebook IPO was a complete debacle, with fingers being pointed at the underwriters, NASDAQ and the company itself,” Donna Boehme, principal of Compliance Strategists, a consulting firm in New Providence, NJ, wrote in an email. “What is not yet clear is whether there were any actual violations of securities law. Until all the facts come out, we don’t know whether this is a compliance matter, or whether this is a matter of unintended consequences under existing rules, amplified by technical and PR blunders,” she said. Continue reading “Compliance Lessons from Facebook’s IPO Debacle”
The hedge fund industry is likely to lose some of the risk and entrepreneurial approach that has attracted investors with an appetite for high risk and reward scenarios as a result of new rules being formulated in the US and Europe.
The biggest impact of new rules under Dodd-Frank and the forthcoming Alternative Investment Fund Managers Directive (AIFMD) in Europe, AIFMD regulations will likely make it much more costly for new and smaller funds to operate because of the reporting and compliance infrastructure requirements.
General Motors did it. Air France expected to save $10 million by doing it. Many smaller firms have done it, too, citing cost savings averaging around $500,000 annually.
Since passage of the Sarbanes-Oxley Act in 2002, a number of companies have chosen to “de-register” and move their stocks to foreign or over-the-counter exchanges. While that number has tailed off over the past couple of years, a new rule scheduled to go into effect in December has companies increasing exploring options beyond SEC registration and the major U.S. trading exchanges.
Public companies with annual revenues of $75 million or more whose fiscal years end after Dec. 15 must become fully SOX-compliant. The deadline was pushed back from last year, but there have been no indications so far that there will not be another extension. The deadline is forcing a large number of firms to explore alternatives, experts say.
“When you amalgamate these costs – Sarbanes, litigation, D&O (directors and officers) insurance – you have to be a fairly sizable company from a market cap perspective to bear those costs,” notes Thomas C. Klein, an attorney with the Silicon Valley-based law firm GreenbergTraurig, where he represents public companies and specializes in venture capital deals, mergers and acquisitions and other transactions.
There have been a lot of recent conversations about alternatives to SEC registration with GreenbergTraurig clients, Klein said. “We’re reaching down into the 90 percent of the companies that are listed and applying the SOX 404 to them, and there’s a cost concern for those that are already public. As for those that are not yet public, every one of them now considers … listing on another exchange.” Continue reading “Movin’ on Down: Firms Eye Alternative Listings”
When the owners of family-run A. LoPresti & Sons Inc. decided they could no longer continue in business last year, they chose a less-common method to liquidate the business in place of a traditional bankruptcy. Turning its assets over to an independent trustee through an Assignment for the Benefit of Creditors, or ABC, enabled the century-old food and produce distribution company to cease operations without the legal hassles and high costs associated with the federal bankruptcy process. It most likely shortened the time required to complete the liquidation and may have recovered more funds for creditors.
Cleveland-based A. LoPresti & Sons fell victim to the economic downturn. Despite maintaining its market share, the firm with annual revenues of around $40 million, saw business plummet by 25% and two major customers go out of business, resulting in $500,000 in unrecoverable receivables, Patricia LoPresti, president and CEO, said in a statement. Continue reading “The 1-2-3s of ABCs”
Analysts See Oil Industry as Safe Haven for Investments
Sales of gas-glugging SUVs outpace most other vehicles. The eastern U.S. shivers in the grip of one of the coldest winters in recent memory. War with Iraq grows more likely every day.
These seemingly disparate facts of American daily life all have one thing in common: They are all positive signs for investors in the oil and natural gas industries. Experts say investors haven’t yet warmed to the notion of investing in the oil and gas sector, even though the outlook is encouraging.
Companies ranging from the international “super majors” whose operations cover the entire spectrum from searching for new oilfields to filling an automobile’s gas tank to the independent firms with specialty niches like seismic data analysis that are both profitable and undervalued — still a rare combination in today’s markets. Continue reading “Drilling for Profits”
Here’s one more sign the nanotech industry is getting closer to maturity: A former Wall Street analyst is creating what he calls the first investment bank focused solely on the nano business.
NanoTech Financing Solutions LLC was formed late last year by R. Douglas Moffat, who wants to help startups with promising technologies navigate the treacherous waters of corporate finance. It’s a one-man firm right now, but eventually Moffat wants to branch out and launch a venture capital fund to invest in nanotech companies.
New laws and regulations aimed at stemming the tide of corporate fraud will have a lasting impact on mergers and acquisitions. And while the short-term impact is slowing the already glacial pace of merger activity, in the long run, the new rules will help deals get done, experts say.
In late July, President George W. Bush signed the Sarbanes-Oxley act into law. Called the most sweeping reform of U.S. securities laws since the 1930s, Sarbanes-Oxley is part of an all-fronts effort to restore faith in corporate leaders. The SEC has passed rules creating a new accounting oversight board and is beefing up its enforcement efforts.
And there is still more to come: the National Association of Securities Dealers (NASD) is considering new measures, SEC is currently considering new rules to oversee lawyers involved in securities work, and the Financial Accounting Standards Board (FASB) may also review some of its rules. Continue reading “New Corporate Governance Measures Lengthen Deal Cycle”
Building a successful relationship with the press in your target industry is a frequently misunderstood process.
Treat the media the way you treat your customers. Why are the best companies successful? More than pitching their products, they listen. They ask questions to determine the customer’s needs, then try to fill that need. When your client complains he or she doesn’t understand the media, use this sales analogy. It’s a context they recognize.
For most public companies, being “in the pinks” has been a stigma to be avoided at all costs. Savvy investors viewed these stocks as a “pink flag” signifying that the company was in trouble. And for years, the pink sheets were inhabited primarily by over-hyped and often worthless penny stocks foisted off on unwitting investors looking for that one cheap investment that was going to make them wealthy. Others were troubled companies just passing through on their way to oblivion.
But a change is taking place. In recent months, trading volume in pink sheet stocks has increased dramatically, surpassing volume on the soon-to-be-disbanded OTC Bulletin Board. While still nowhere near the tremendous trading volumes of the NYSE or Nasdaq, trading in pink sheet stocks has approached 300 million shares a day. It’s important to keep that figure in perspective; on a recent day in late May, the value of all those trades was slightly more than $100 million, or about 33 cents per share. In contrast, volume on New York’s Big Board has averaged more than 1.4 billion shares daily. Continue reading “Quality Companies Move to the Pink Sheets”
The dot.com phenomenon is streaking back toward Earth in a fiery display even more spectacular than its meteoric rise just a couple of years ago. In the rush to capitalize on readily available venture capital and the promise of huge payoffs through initial public offerings, thousands upon thousands of companies were created in just a few short years.
Some recognized the Internet’s potential as perhaps the most pervasive and flexible media to come along so far and developed truly unique business models, created innovative new tools or simply muscled their way to powerful first-mover advantage in their respective markets. But for every company with a product people will actually pay for and a truly promising revenue model, thousands were just along for the ride.
In just over a year, the market for dot-com companies has become a very different place. Burned by promises of profits that have yet to materialize, the investing public lost its appetite for the stocks of high-flying Internet IPOs and began to severely punish those who turned in quarter after quarter of lackluster performance. In the first quarter of 2000, 128 companies went public. In that same period this year, less than 20 braved those now shark-infested waters. Today, venture capitalists are more circumspect about the deals they will fund. Second-round funding is harder to get and is being doled out in smaller pieces. Continue reading “Prospective Buyers Approach Dot.com Deals with Caution”