Legal
SEC

SEC Says Corrupt Touter Raked in $16M

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Regulators accused a stock promoter of fraudulently touting stocks in bogus research publications, according to a civil suit that alleges Canadian promoter Colin McCabe made baseless claims about ten companies including Guinness Exploration and PIPE-financed Global Health Ventures (GHLV). Global Health is now Kedem Pharmaceuticals (KDMP). The allegedly improper touting of Global Health shares took place in a period when the company engaged in several equity-linked financings that took its share price up to a reverse split-adjusted $208, only to fall to less than a penny once the pump ended. McCabe allegedly received $16 million in payments from issuers for extolling their stocks in publications that did not disclose that he was being paid to prepare the "research" marketed from 2008 through 2011, according to a suit filed by the Securities and Exchange Commission. The action was filed in the Salt Lake City U.S. District Court.

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Epstein_The Perfect Corporate Board

Addressing the Unique Challenges of Small Cap Corporate Governance

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Over the course of the decade I have spent writing about the financing of emerging growth companies I have been contacted regularly by mainstream financial news reporters working on stories involving this or that small cap management team that they suspect has engaged in accounting fraud, stock manipulation, self-dealing, or worse. Inevitably, they are looking for some confirmation of their suspicions and validation of their sense that the activities they are investigating are beyond the pale of acceptable behavior for the senior management of small public companies. I try to be helpful, to place the situations they present in context, but often I disappoint them. “Look,” I find myself saying, “finding a small or microcap company with accounting irregularities, conflicted directors, promotional senior management, or unscrupulous investors is like shooting fish in a barrel. It’s a dog-bites-man story,” I tell them, meaning there is little that’s newsworthy in one more tale of a young public company practicing poor corporate governance, even if they’ve broken a few securities laws in the process.

Markets

PhotoMedex Rises as Reverse Merger Phoenix

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The reverse merger market is littered with the remains of companies that were ill-prepared to go public, but the 16-month old union of PhotoMedex (PHMD) and Radiancy tells a different story, a story of success for both parties to the reverse merger – at least so far. The merger between serial PIPE issuer PhotoMedex and Radiancy created a profitable business, which PhotoMedex had not been able to achieve on its own even after ten PIPE financings dating back to 1999, when the company was known as Laser Photonics. While reverse mergers often involve a shell with no operations, the 2011 reverse merger of PhotoMedex and Radiancy combined two active skin treatment companies. The survivor of the transaction markets products including PhotoMedex’s Xtrac laser treatment systems and Radiancy’s no!no! hair removal products. Prior to the merger, which closed in December 2011, PhotoMedex had been in business for well over a decade.

Deals

Venture-backed Baxano Goes Public in $23M APO with TransS1

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Venture capital and PIPE financing joined forces as two spinal therapy companies agreed to merge in a deal that made privately held Baxano the successor of publicly traded TranS1 (TSON). TranS1 paid for the merger with $550,000 in cash and 10.4 million shares of stock worth about $23 million. The deal also calls for the refinancing of $3 million in Baxano debt. The transaction was approved by shareholders on March 3 and is expected close early in the second quarter. The transaction is the largest reverse merger and PIPE combination, referred to as an alternative public offering or "APO", since BioCryst Pharmaceuticals (BCRX) became public in a $25 million APO in October 2012.