Deals

Accelr8’s 190% Mystery Bounce

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Antibiotic analysis developer Accelr8 Technology Corp.’s (AXK) stock nearly doubled since the announcement of a $14 million PIPE on April 23, when the stock traded around $1. Investor Abeja Ventures, also known as Crabtree Partners, agreed to buy 14 million shares of common stock at $1.03, but the shares closed at $2.75 on June 26, the acquisition date indicated in regulatory filings. The company plans to use the PIPE proceeds to finish development of its BACcel antibiotic resistance testing system for bacteria and fungal pathogens. On June 27, the company announced the departure of longtime CEO and board director Thomas Geimer. Former Ventana Medical Systems and Roche Tissue Diagnostics executive Lawrence Mehren has assumed Geimer’s roles. Mehren, along with Jack Schuler and John Patience, controls Abeja, which in turn controls 71.6% of Accelr8’s common stock.

Markets

KBC Contests Kenneth Cole Take-Private

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When footwear and fashion designer Kenneth Cole Productions (KCP) announced in February that it was planning to go private, the proposed deal immediately drew complaints that company namesake, chief creative officer and board chairman Kenneth Cole was shoehorning other investors into a deal that would benefit Mr. Cole while selling the company at a lowball valuation in a deal that detrimental to other shareholders. Now an institutional investor with over $150 billion under management has taken legal action to stop the transaction. (Mr. Cole holds 46% of the company’s common stock and retains overall voting rights of 89%. The company has Class A and B shares outstanding, and the take-private would buy back common stock at $15.25 per share.)

KCP recorded gross revenues of $479 million and a $3 million shortfall in net income for the year ending last December. Its stock had traded as low as $10 and as high as $16.41 over the last 12 months.

Markets

Investors Funding Brick-and-Mortar Resistance

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Tech companies aiming to help retailers turn their stores back into places where people buy stuff rather than just showrooms for online competitors keep ramping up and fetching funds. Landlords are even taking an interest in the firms and could begin investing themselves if they haven’t already. It’s hardly a big leap considering the fact that the Circuit City and Borders bankruptcies, as well as the hundreds of store closures announced by Best Buy, Sears, Abercrombie & Fitch and others, have littered the landscape with empty space that in some cases could lead to foreclosures. One of the latest investments of note occurred last month when Accel Partners pumped $30 million into LightSpeed, a Montreal-based software firm that makes no small boast with its goal to “revolutionize in-store shopping.”

LightSpeed develops point-of-sales programs for Apple devices, which are placed in the hands of retailers to drive in-store sales. An upgrade to its LightSpeed for iPad product launched on June 27, for example, is designed to help retailers cross-sell and give customers more information about products.

Legal

Tonga Ruling Sheds Light on the Bad Old Ways of the Structured PIPE Market

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Whatever the relative merits and ultimate disposition of the legal arguments Cannell Capital intends to use to appeal yet again a federal judge’s ruling that the San Francisco-based hedge fund manager violated the Section 16(b) short-swing insider trading rule and is liable to disgorge nearly $5 million in profits from a 2004 variable-priced convertible financing of a small Texas-based digital mapping company called Analytical Surveys, the public appeals by J. Carlo Cannell that his fund’s investments were long-term value-based investments that “saved the company” don’t pass the sniff test. Indeed, the most cursory inspection of the events that transpired at Analytical Surveys in the aftermath of Cannell’s involvement illustrates much of what is wrong with the structured PIPE market, then and now, from the perspective of shareholders seeking sustained growth of common equity. In an early June decision by the U.S. Second Circuit Court of Appeals in the case of Analytical Surveys vs. Tonga Partners LP, Cannell Partners LLC and J. Carlo Cannell (No. 09-2622-cv), a three-judge panel re-affirmed a 2009 district court ruling from the Southern District of New York that Cannell Capital, its sole managing member Mr. Cannell, and its fund Tonga Partners were liable for Section 16(b) trading violations in Analytical Surveys totaling $4.96 million in profit disgorgement to the company, now known as Axion International Holdings (AXIH).