Legal
Eco Building

Eco Building Settles Alpha Capital Suit

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PIPE issuer Eco Building Products (ECOB) settled a suit filed by Alpha Capital Anstalt, which alleged Eco Building failed to pay off a debenture on its Nov. 13 due date last year. The suit also alleged Eco Building improperly issued stock to a third party to which Alpha assigned its interest in the debenture. Alpha has invested over $75 million in 128 stock and debt PIPEs since 2006. It is managed by LH Financial, which has put $292 million into 547 deals since 2003.

Legal

SEC Says Laidlaw Energy Dumped Shares, Hid Problems

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Laidlaw Energy Group (LLEG) and its CEO Michael Bartoszek duped investors into believing Laidlaw was a viable business, even as they profited from illegal backdoor sales of over two billion shares of the company's stock, according to a Securities and Exchange Commission lawsuit. The suit was filed against New York-based Laidlaw on June 5 in a Manhattan U.S. District Court. Bartoszek allegedly orchestrated the "illegal fire sale of more 80 percent of Laidlaw's stock" from 2006 to January of 2010, according to a commission news release. The company formed through a reverse merger with Poly-Eko Systems in 2002. The SEC's Microcap Fraud Working Group assisted in the investigation.

Markets

Premium Underpinnings: Raising Growth Capital Above Market

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As some private placement funds have begun to use the PIPE market as a platform to support emerging growth companies rather than a launch pad for a technical trading strategy, one would expect that more favorable issuer terms would begin to surface. In fact, a review of deals over the last few years reveals that investors are willing to pay above-market prices for a growth company’s securities about a quarter of the time – a practice that’s decidedly out of harmony with broader market tendencies. Growth Capital Investor analyzed growth equity private placements (GEPPs) from Jan 1, 2010 to May 20, 2013 using data provided by PlacementTracker, a division of Sagient Research. GEPPs are offerings of a least $1 million of stock or equity-linked debt that feature fixed purchase, conversion and warrant exercise price terms, and that are sold by companies that have market capitalizations from $10 million to $1 billion as well as a share price of at least $1 at closing. The review included unregistered and registered common stock deals that featured a premium purchase price of at least 1% and no more than 100%.

Legal
ZST Technologies

Chinese Reverse Merger Sponsor WestPark Settles Class Action Suit by ZST Shareholders

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WestPark Capital and its founder Richard Rappaport have settled a class action suit brought by ZST Digital (ZSTN) shareholders who bought the stock from the Los Angeles-based investment banking firm. A judge in the U.S. District Court for the Central District of California found that ZST shareholders could sue Rappaport and litigate to hold him liable for the fraud conducted by Chinese executives of ZST during their initial public offering. WestPark and ZST agreed to the settlement in March just as another shareholder, Peter Deutsch, was winning court orders to raid ZST’s CFO home for company documents and computers. The California class action case, which was litigated for the last two years by New York-based law firm Frank & Bianco, offers participating ZST shareholders a lump sum of $1.7 million. Settlement filings by the plaintiffs lawyers estimate this is around 40 cents on the dollar.