Legal
SEC

SEC Calls John Thomas Funds, “Independent” Agent on the Carpet

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Regulators have accused the manager of two John Thomas Bridge and Opportunity Fund (JTCM) units active in microcap finance, and affiliated PIPE placement agent John Thomas Financial (JTF), of overcharging clients, improperly paying stock promoters with fund cash, and furnishing misleading statements to clients. The Securities and Exchange Commission administrative action alleges that John Thomas fund manager George Jarkesy also yielded to unreasonable fee demands from Anastasios Belesis, CEO of JTF, which the commission says did not live up to claims that it was independent from Jarkesy’s funds. The commission alleges that Belesis often got involved in fund business and rudely demanded unyielding obedience from Jarkesy. “Numerous emails reflect Jarkesy’s subservience to Belesis and efforts to please him by offering him benefits from the Funds’ investment activities, including cash, fees and securities,” the commission says. “Nobody gets access to Tommy [Belesis] until they make us money!!!!!,” Jarkesy allegedly wrote in one communication.

Markets

Scorpio Deal Behind PIPEs March Madness

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The second $200+ million PIPE issued by Scorpio Tankers (STNG) this quarter helped power the growth equity private placement (EPP) market to its biggest week of the year last week. Deals announced that week account for $413 million invested. (Figures are based on deal announcement dates and companies that meet our emerging growth company criteria including a $1 minimum share price and $1 billion maximum market cap.)

The next biggest week of the year was the last one in January, when an earlier $230 million Scorpio offering helped drive dollar volume to $359 million. The $413 million week consisted of growth EPPs issued in several sectors, most prominently industrial transportation. All the deals were common stock offerings, except for a $10 million non-convertible debt and preferred stock issuance from OCZ Technology (OCZ).

Deals
MLNK

Steel Partners, ModusLink Smoke Peace PIPE

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The first PIPE investment by Steel Partners Holdings (SPLP) marked a settlement with ModusLink Global Solutions (MLNK), a supply chain specialist that had explored a variety of restructuring and investment options with Clinton Spotlight Master Fund and Steel Partners portfolio company Handy & Harman Ltd. (HNH). Peerless Systems Corp. (PRLS) has also shown interest in putting nominees on the ModusLink board. All three potential investors noted a decline in the company’s stock price in recent years and suggested changes including refocusing strategies and reducing executive pay.

Markets
BDC

BDC Fundraising Efforts Lead to Private Placement Market

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Business development companies that provide debt and equity to emerging growth companies have turned to the private placement, debt and follow-on markets to stuff their war chests and expand portfolios. As voracious users of capital, BDCs generally keep an eye peeled to opportunities to raise funds in favorable market windows. But the easing of credit markets and an appetite for yield over the past few years have amplified their ability to add leverage and attract cash, and mature BDCs with market capitalizations exceeding $1 billion as well as newer firms with lower valuations are milking the bullish environment. In the private placement market alone, BDCs raised more than $1.2 billion last year in 15 transactions, according to data from Sagient Research’s PlacementTracker database of equity private placement deals. In 2011, the issuers attracted more than $1.6 billion in 14 deals.