Deals
VelaTel

Investor Sees VelaTel Opportunity

By |

Ironridge Global IV, a San Francisco-based growth equity fund focused on emerging growth companies, is taking a bet on a telecommunications company that’s struggling to gain investor interest despite an ambitious global expansion. In mid-December, Ironridge agreed to invest $12 million in VelaTel Global Communications (VELA), a San Diego-based holding company of telecommunications carriers in China, Europe and South America, to help the company finance a key acquisition in Asia and to fund other growth projects. Under the terms of the deal, Ironridge is buying 1,200 shares of convertible preferred stock from VelaTel in tranches of 60 preferred shares each, according to PlacementTracker, a division of Sagient Research. The fixed conversion price of 20 cents a share was at market when the conventional PIPE was announced, but since then the share price has slid to around 13 cents. The deal includes a 2.5% annual cash dividend and requires VelaTel to file a registration statement by Jan.

Markets
Warrants

CMPO Warrant Creep

By |

Warrants are becoming more commonplace in confidentially marketed public offerings, a trend that’s reminiscent of warrant growth in registered direct deals a few years ago. Whether the options will continue to be included in an even greater proportion of CMPOs going forward will hinge on the perceived quality of the specific issuers and general market sentiment. Already, however, the presence of warrants in so many recent deals has dispelled a widely held notion that investors would be happy with stock discounts only when buying CMPO shares. Both the registered direct and CMPO structures originally were supposed to provide issuers with a friendlier path to the capital markets than traditional PIPEs. Because the shares were registered on a shelf, unlike restricted securities sold in a PIPE, immediate liquidity would make investors less focused on hefty discounts and warrants, the argument went.

Deals
Bitcoin

Digital Currency Company Secures VC Backing

By |

In a sign of growing investor interest in “bankless” financial markets, a “Bitcoin” company has secured the first known venture capital investment of over one million dollars. New York-based BitInstant recently exchanged some of the founders’ equity ownership with a top VC firm for $1.1 million. The investment has not been announced yet but people involved in the transaction said the funds will be used as working capital to support BitInstant’s bitcoin-to-cash conversion business. The money is also needed to help get through challenging start-up costs for the Bitcoin Mastercard that BitInstant is trying to bring to market next year. BitInstant was co-founded by Charlie Shrem, a former hacker, and Gareth Nelson, an autistic computer programmer, who attracted the interest of angel investor Roger Ver.

Legal
SEC

Chinese Affiliates of U.S. Auditors Hit by SEC

By |

The misery afflicting Chinese issuers spread to the Chinese affiliates of big U.S. accounting firms this month when the Securities and Exchange Commission began administrative proceedings against the affiliates for violating the Securities Exchange and Sarbanes-Oxley acts. The action stemmed from the commission’s fruitless efforts to obtain documents from the firms related to nine China-based companies under investigation. Under Sarbanes-Oxley rules, foreign accounting firms are required to give the SEC “audit work papers” upon request for any company trading on U.S. markets. The commission cited BDO China Dahau CPA Co., Ernst & Young Hua Ming, KPMG Huazhen, Deloitte Touche Tohmatsu Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs in the complaint. The move is also part of the SEC’s larger initiative to “address concerns arising from reverse mergers and foreign issuers,” the commission said, which to date has resulted in deregistration of the securities of 50 companies and fraud cases against 40 foreign issuers and executives.