Legal

Investors, Now Creditors, Prepare Claims in Wake of Rodman Bankruptcy

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When Rodman & Renshaw, the long-time leading investment bank focused on PIPE financing of emerging growth companies that ceased operations last September, filed for Chapter 7 bankruptcy last month it left creditors questioning how cash was spent in its final days. In late 2011, the investment bank was beset with a money-losing capital markets business in the wake of a severe downturn in capital available for the type of unregistered PIPE deals sold to trading-oriented hedge funds that had made it a perennial growth equity market leader for a decade. In a move alternately seen as bold and desperate by others in the PIPE market, Rodman's senior management announced in January 2012 that the company was building an online platform that would transact PIPE deals without the expense of investment bankers. The announcement came just two months after Rodman successfully raised $6.65 million in a convertible debt placement to some of the very same hedge funds it had sold its small cap clients' PIPE deals to for a decade. Called Direct Markets, the new subsidiary was announced as the future of the equity private placement business for Rodman, and indeed the market.

Legal

Reverse Merger Company Says Digerati Shell Took over, May Grab $8M in Cash

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A reverse merger between oil field services provider Waste Deep and shell Digerati Technologies ended with shell management controlling the surviving company, and the survivor's regulatory filings reveal different parties claiming control. One group has filed a lawsuit against Waste Deep shareholder Oleum Capital, alleging that Oleum is illegally seeking to take over the company in a move that unilaterally added $22 million to the original purchase price. Arthur Smith, who has held management positions with the shell for a decade, signed the company's Jan. 30 8-K filing as CEO. The filing states that the company's board appointed Smith CEO and that the suit against Oleum was filed by "unauthorized parties."

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Tim Keating

Encouraging Analyst Coverage to Help Solve the Orphaned Public Stock Problem

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Pity the research analyst.  In the 79 years since the 1934 publication of Benjamin Graham and David Dodd’s Security Analysis, no other job on Wall Street has been characterized by more reputational and financial volatility. From near obscurity, the creation of Institutional Investor magazine’s “All-America Research Team” concept in 1971 gradually moved the star equity analyst to the top of the investment banking pecking order.  By 2000, the analyst had become the prima donna. But just as Icarus’ wax wings melted when he flew too close to the sun, the equity analyst’s star crashed and burned under the weight of a series of indefensible conflicts of interest and outright abuses that reached a zenith in the dot-com era of 1999 to 2001.

Legal
SEC

PIPE Investor Berger Settles SEC Cherry Picking Claims for $6.8M

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Howard Berger, a principal of two PIPE funds, settled with regulators over claims that he "cherry picked" trades in order to generate profits for himself at the expense of the funds. Syosset, N.Y., resident Berger co-founded and co-managed the Professional Traders Fund and Professional Offshore Opportunity Fund Ltd. "Berger profited from fraudulently allocating profitable trades to an account in his wife’s name while oftentimes allocating his unprofitable trades to [fund] accounts," according to a settlement with the Securities and Exchange Commission. The complaint alleged that Berger received at least $6.8 million from improper trades and avoiding losses in his wife's account from July 2008 through March 2010. Berger did not dispute the commission's allegations when he consented to a final judgment requiring the Bergers to disgorge about $5.4 million.