JOBS ACT Unintended Consequences: Already-Public Companies Reaching Out For More Cash

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Brokerdealer.com blog update courtesy of extracts from the WSJ story “Rules Eased For StartUps Benefit Older Companies”

But another breed of company is angling to benefit from the Jumpstart Our Business Startups Act: freely traded firms, a few of which have been operating for a long time.

Salon Media Group Inc., SLNM -21.05% a 19-year old financially fighting Internet media business, and Giggles N Hugs Inc., GIGL 21.28% a seven-year old food-and-play-space chain, are among dozens of publicly traded companies that have signaled they intend to solicit investors using the new independence in the JOBS Act. Both trade on the over-the-counter market, and auditors have raised worries about their capability to continue operations.

The businesses are seeking new investors using some of the JOBS Act that lets small-scale private businesses advertise to affluent people, known as “accredited investors,” changing an 80-year old “general solicitation” marketing prohibition designed to safeguard investors.

The companies’ use of advertising independence meant for young start-ups exemplifies how a surprisingly extensive array of players expect to obtain an advantage under the brand new law. “You can place it in the class of unintended effects,” says New York securities attorney Douglas Ellenoff, referring to using the JOBS Act by publicly traded firms. “The entire purpose” of the law “was to allow it to be simpler for private companies to raise money,” he adds. Continue reading →

UK BrokerDealers Stepping In To Hot IPO Season; Jimmy Choo To Offer High Heel Deal

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BrokerDealer.com blog update courtesy of news extracts from various outlets..

In what appears to be a stellar outlook for brokerdealers across the UK IPO market, Luxury shoe designer Jimmy Choo has confirmed plans to float in London as the IPO market in the City reopens following the summer lull.

Aldermore, a UK retail bank owned by private equity group AnaCap is also on tap for what is anticipated to be a bumper crop of fall listings.

Several private equity-backed floats had been put in recent weeks, partly as a result of investor concerns regarding the chance for a Yes vote in the autonomy referendum that was Scottish. In the event, Scotland voted to stay in the Union.

Carlyle-owned roadside assistance group RAC is expected to float in the coming weeks – possessed by the Clayton Dubilier & Rice in New York – likely to follow suit.

One business thought to have selected not to join the float queue is the London cab business Addison Lee,. The business, whose people carriers really are a familiar sight is reportedly set to change hands in a pass-the-share deal between Carlyle and another buy out group.

Merrill Lynch has been employed by Jimmy Choo as lead, co-ordinator and joint bookrunner to the IPO, with HSBC additionally acting as German private bank and joint bookrunner. The luxury goods group said it planned to make use of the proceeds to “pursue growth without compromising the brand”, opening between 10 and 15 shops annually.

For information regarding brokerdealers in the UK who specialise in initial public offerings, please visit the BrokerDealer.com database.

Alibaba IPO: Minority BrokerDealer Owned by Service-Disabled Vets Wins IPO Selling Group Mandate

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Courtesy of CNBC coverage (see below clip), Mischler Financial Group, the financial industry’s oldest minority broker-dealer owned and operated by service-disabled veterans was one of the few minority broker-dealers chosen by Alibaba executive management to serve as a member of the selling group for the world’s largest IPO to date. BrokerDealer.com salutes the capital markets and syndicate team at Mischler Financial.

BrokerDealer Arbitration: Investors Now Beware of Being Counter-Sued

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Brokerdealer.com blog update courtesy of extract from 17 Sept NYT DealBook, and reporter Susan Antilla

Cheryl Gerber for The New York Times

Cheryl Gerber for The New York Times

Ron Vaerewyck was making his way through the convention floor at the annual World Money Show in Orlando, Fla., in February 2008 when he stopped by the booth for Reef Securities of Richardson, Tex.

The brochures for Reef’s private placements in the energy industry showed an impressive track record, Mr. Vaerewyck said. By May, after a phone pitch from a Reef broker, he had made the first of several investments that would total $90,000.

After receiving an initial payment in the range Mr. Vaerewyck had expected, though, Reef’s distributions dropped from monthly to quarterly to zero. Mr. Vaerewyck, his wife, and seven other investors wound up suing Reef.

And then, much to their surprise, Reef countersued.

“They said we’d be liable for their legal expenses,” which could have been $400,000 or more, Mr. Vaerewyck said. “That’s a pretty significant piece of change for a group of retired individuals.”

Like Mr. Vaerewyck and the other Reef customers, investors who lose money in private placements face a new obstacle when they take their cases to arbitration before the Financial Industry Regulatory Authority, or Finra, as they are required to do in any dispute. The brokers they have sued are suing them back, accusing them of reneging on indemnification agreements.

The practice, which can intimidate investors already reeling from investment losses, is not widespread. About half of the at least two dozen scattered examples come from one brokerage firm — Berthel Fisher & Company, based in Marion, Iowa. But lawyers who represent investors say it could dissuade the public from making claims against brokers if the strategy were to catch on with other financial products.

“Every brokerage firm out there would do it if they thought they could get away with it,” said Michael D. Kennedy, a lawyer at the White Law Group in Chicago, who represented Mr. Vaerewyck and the other investors who were sued by Reef.

For the full story, please visit the NYT DealBook Blog:

Broker-Dealer ETF $IAI Shines

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Brokerdealer.com blog update courtesy of extract from article in ETFtrends.com by Todd Shriber and Tom Lydon

A Quiet Rally For Broker-Dealers ETFs

Sep. 18, 2014 12:54 AM ET  |  

Disclosure: The author is long XLF. (More…)

Summary

By Todd Shriber & Tom Lydon

Financial services stocks and exchange traded funds have been lagging the broader market this year. That much is highlighted by a 7.5% gain for the Financial Select Sector SPDR (NYSEArca: XLF) and a 6.3% gain for the iShares U.S. Financials ETF (NYSEArca: IYF).

But as they dithered for much of the earlier part of 2014, financial services ETFs are starting to impress. Over the past month, four of the top-10 performing non-leveraged ETFs are financial services funds and that group is led by the iShares U.S. Broker-Dealers ETF (NYSEArca: IAI).

After enduring a summer swoon at the hands of lethargic trading activity, IAI has come roaring back. Over the past month, the fund is up nearly 5.1%, a performance topped by only three other non-leveraged ETFs. That while trading volumes continue to dwindle, prompting concern from some market observers about the health of the bull market. Trading has been continually slowing down since the sharp uptick after the financial crisis in 2009. Last year, daily average U.S. stock trading volume was down 37%.

Despite its trials and tribulations earlier this year, which were magnified because it was one of 2013′s best-performing financial services ETFs, IAI entered Tuesday trading less than 0.6% below its 52-week high and it looks like more upside could be on the way.

“One of the most recent sectors to step forth and grab the leadership mantle, speaking of warts, has been the broker/dealers. Despite the cyclical (or secular) decline in equity volume and the concern over the lack of bond supply, the stocks of broker/dealers have been exceptionally strong of late. Last Friday, as the S&P 500 closed down 0.6%, the NYSE ARCA Broker/Dealer Index (XBD) was up 0.6%. For the week, the XBD was up over 4%, breaking out to a 6-year high in the process,” according to J. Lyons Fund Management.

The full article can be found by clicking this link.