Guru Billionaire Investor Backs Pot Fund

Posted on January 9, 2015 by admin

Brendan Kennedy, CEO of Privateer Holdings, poses for a portrait for Reuters in Seattle

Brokerdealer.com blog update courtesy of Forbes’ Alex Kondrad

Just a year after Colorado legalized sales of recreational marijuana, the fledgling US cannabis industry has secured its first big institutional investor. Peter Thiel’s Founders Fund, a venture capital firm best known for backing tech companies including Facebook, SpaceX, Airbnb and Spotify, has made a multimillion-dollar investment in Privateer Holdings, a Seattle-based private equity firm focused on cannabis.

Brendan Kennedy bristles when you ask him if smoking pot recreationally is still a stigma in the American workplace. In fact, he says that moment passed two or three years ago, as the majority of Americans now support legalizing marijuana, and even more approve its medicinal use.

“Anyone who wants to consume is already consuming it,” Kennedy says.

So what’s Kennedy smoking? As cofounder and CEO of Privateer Holdings, he’s poised to cash in on that trend in a big way, tapping a market that he believes is worth $50 billion in the United States and four times that worldwide. And now with major institutional venture backing, he’s hoping to blaze a trail in making legal, legitimate bucks off that trend.

Privateer Holdings, a private equity firm with three major distinct investments in the legal cannabis space, announced Thursday that it’s raised millions from its first major institutional investor, Founders Fund, as part of an ongoing Series B Round. The firm led by billionaire Peter Thiel has invested undisclosed millions but isn’t leading the round, which will total $75 million between a $60 million raise and a $15 million convertible debt note. That brings the company’s total funding to date to $82 million, the rest of it from earlier wealthy individuals and family offices.

The deal confirms intentions Kennedy made clear in an interview with Fortune in July, when he announced intentions to bring an institutional investor onboard. In December, Business Insider reported the deal could value the company at more than $400 million.

With the investment, Thiel’s Founders Fund has taken up the mantle of first venture firm into the legal pot market. According to partner Geoff Lewis, who led the investment, the diligence on Privateer lasted 18 months–as much as it took to study SpaceX, the company’s big bet on Elon Musk’s space-flight operation.

Privateer primarily operates three fully-owned subsidiaries touching different points in the cannabis industry. In Canada, it operates Tilray, a medical marijuana brand grown and processed in British Columbia and potentially soon Uruguay. In the United States, where the cannabis industry operates in more of a grey area between federal and state regulations, it operates Leafly, an online site for cannabis-related reviews and stores that Kennedy says gets 4 million visitors a month. Most recently, the company partnered with the family of famed performer Bob Marley on lifestyle brand Marley Natural, a 30-year licensing deal to offer Jamaican cannabis strains and hemp-infused products starting later this year.

Privateer and Founders Fund are betting that the marijuana industry in the United States now has the popular support to be ripe for a new wave of trusted major brands. “This will shake out similar to the alcohol industry or the soft drink industry, where economies of scale are very important,” argues Lewis. “You want to have first-move advantage, and I think it will be aggregated to just a handful of companies.”

For the full article from Forbes, click here.

Private Equity Czar J.C. Flowers Secures BrokerDealer License

Posted on January 9, 2015January 9, 2015 by admin

Brokerdealer.com update courtesy of Sarah Kraouse and Shasha Dai from The Wall Street Journal.

The private-equity-firm J.C. Flowers & Co has worked continuously to find ways that allow that allows the company to work on client deals and recently secured a brokerdealer license for the company.

Private-equity-firm J.C. Flowers & Co is eyeing opportunities in mergers and acquisitions advisory work, securing U.S. regulatory approval that allows the company to work on client deals.

The firm, founded by former Goldman Sachs Group Inc., M&A banker J. Christopher Flowers in 1998, has registered an entity as a broker dealer with the Financial Industry Regulatory Authority.

The recently-secured broker dealer license will allow Mr. Flowers and other executives at the firm to perform advisory work for their clients on an “ad-hoc” basis, according to a person familiar with the matter. The move allows executives to advise clients at their request and does not represent a push into a new business line, two people familiar with the matter said.

The new broker dealer, J.C. Flowers Securities Co. LLC, is authorized to work on investment advisory services and private placements, according to Finra documents. James Christopher Flowers is listed as the owner of 75% or more of the firm.

J.C. Flowers Securities Co. will likely work on mandates that J.C. Flowers & Co., the buyout arm, would not invest in, thereby mitigating potential conflicts of interest, one of the people added.

Since starting J.C. Flowers & Co. in the late 1990s, Flowers has at times been asked to look at potential deals by clients, perform due diligence and provide advice, said one of the people. This move formalizes that work.

The former Goldman Sachs partner spent two decades at the U.S. bank, where he started working on M&A in 1979.

At the height of the financial crisis in 2008, Mr. Flowers helped to advise Bank of America on its purchase of Merrill Lynch. Ken Lewis, then-chairman and chief executive of Bank of America, said at the time that Mr. Flowers, who had invested heavily in the financial services industry and considered a potential joint bid for Lehman Brothers, “had looked at the marks very comprehensively, so this allowed us to have him and his team as an adviser, and just update the information they had”.

The decision to pursue broker dealer status comes at the end of a strong year for M&A, with the global deal volume surpassing $3 trillion for the first time since 2007, according to Dealogic.

But M&A advisory work has at times proved rocky terrain for private-equity firms to navigate because of the potential for conflicts of interests.

In October, Blackstone announced plans to spin off its financial advisory business, merging it with ex-Morgan Stanley banker Paul Taubman’s independent firm PJT Partners. At the time, the alternatives giant said it had not been able to grow the advisory unit “out of concern for potential conflicts”.

For the original story from The Wall Street Journal, click here.

Third Time The Charm For Hedge Fund Manager Dreaming of Being NHL Owner

Posted on January 8, 2015January 8, 2015 by admin

Brokerdealer.com update courtesy of FINalternatives.

New Arizona Coyote owner, Andrew Barroway (Left)

After two failed attempts, a managing partner at a hedge fund has finally reached an agreement with the NHL team Arizona Coyotes to become a team owner.

Call it a “Miracle on Ice.”

In his third attempt, hedge-fund manager A

has finally reached an agreement to acquire a majority share of an NHL franchise.

Barroway, a managing partner of Merion Investment Management, now owns 51% of the Arizona Coyotes and is the team’s chairman and governor.

This was the third attempt by Barroway to purchase an NHL team in the last two years. In 2012, a deal with the New Jersey Devils fell through. Last summer, he was certain he’d acquired a majority stake in the New York Islanders, but the team’s owner Charles Wang decided to sell to Jonathan Ledecky and Scott Malkin at the last-minute. This prompted a lawsuit by Barroway against the Islanders owner; however, the case was dropped as the Merion partner began his latest pursuit in Arizona.

Still, it wasn’t easy for Barroway to complete his three-year journey toward NHL ownership. Last month, multiple sources indicated that the deal was in jeopardy on news that Barroway was prepared to back out of a reported $155 deal. The Globe and Mail’s James Mirtle wrote that Barroway’s principle interest in “buying [the team] was to flip it.”

The New York Post reported in the fall that Barroway planned to resell the team to an ownership group that wants to move the team to Las Vegas. That news coincided with a report that NHL committed to a Las Vegas owner’s plan to hold a season-ticket drive to measure possible interest for a team in Nevada.

However, Barroway denied speculation that he would flip the team during an interview with Fox Sports last week.

“I am buying this team because I am a lifelong sports and hockey fan,” Barroway said. “It has always been my dream to become an owner. I want to bring a winner to the Valley. That [report] couldn’t be any more false. I am thrilled to be here and am thrilled to be an owner and would not have gone through this difficult process in buying a team just to go flip it.”

Barroway said he plans on being an active owner while remaining engaged in his day-to-day role at his fund. Merion Investment Management has more than $1 billion in assets under management.

For the original article from FINalternatives, click here.

Ex-Morgan Stanley Brokerdealer Stole and Posted 900 Clients’ Data

Posted on January 7, 2015 by admin

Ex-Morgan Stanley employee Galen Marsh

Brokerdealer.com courtesy of Business Insider’s Julia La Roche and Elena Holodny.

Big name brokerdealer firm Morgan Stanley took a hard hit this week after a now ex-employee stole more than 900 clients’ information and released it online.

Business Insider’s Julia La Roche originally reported on the story on 5 January.

Morgan Stanley said it has fired an employee who had stolen data from 900 of the firm’s wealth management clients.

“While there is no evidence of any economic loss to any client, it has been determined that certain account information of approximately 900 clients, including account names and numbers, was briefly posted on the Internet. Morgan Stanley detected this exposure and the information was promptly removed,” Morgan Stanley said in a statement.

The name of the terminated employee has not been released.

For Morgan Stanley’s original press release, click here.

On 6 January Businesss Insider’s Elena Holodny wrote a follow-up story including a statement from the terminated employee.

The former Morgan Stanley employee who stole data from 900 of the firm’s wealth-management clients and posted it on the internet has come out with a statement.

Galen Marsh is “extremely sorry for his conduct,” his lawyer told Michael J. Moore for Bloomberg Businessweek, insisting that Marsh did not intend to profit off of the act.

“Mr. Marsh did not sell nor ever intend to sell any account information whatsoever,” Marsh’s lawyer told Bloomberg. “He did not post the information online. He did not share any account information with anymore nor use it for any financial gain. He is devastated by what has occurred and is extremely sorry for his conduct.”

He did not say why Marsh stole the data.

Morgan Stanley announced on Monday that the firm fired an employee, Marsh, who stole data from 900 of the firm’s wealth-management clients and then posted it on the Internet.

“While there is no evidence of any economic loss to any client, it has been determined that certain account information of approximately 900 clients, including names and numbers, was briefly posted on the internet,” Morgan Stanley said in a statement.

Information for as many as 350,000 wealth-management clients was stolen, Bloomberg reports. The firm detected account information for 900 of them on an external website.

Ladenburg Thalmann Financial Services Acquire Brokerdealer Firm

Posted on January 6, 2015 by admin

Brokerdealer.com blog update courtesy of South Florida Business Journal’s Nina Lincoff profiles a financial service’s recently acquisition of brokerdealers services.

Brokerdealers are at the center of the securities and derivatives trading process therefore making them a great asset to any financial services firm. Services that brokerdealers offer very important and valuable tools to any financial services firm. Recently, Miami-based Ladenburg Thalmann realized this and made a $45 million venture to acquire the Knoxville, Tennessee-based independent broker-dealer and advisory firm, Securities Service Network.

Miami-based Ladenburg Thalmann Financial Services said Monday it had completed its $45M acquisition of a Knoxville, Tenn.-based independent broker-dealer and advisory firm.

With the acquisition of Securities Service Network, Ladenburg Thalmann adds about $13 billion in client assets and about 450 independent financial advisors, according to a news release. For the 12 months ended June 30, SSN generated about $115 million in revenue.

The acquisition, announced in September, consists of a $25 million cash payment and $20 million in four-year notes. The purchase follows a string of purchases by Ladenburg Thalmann, including a November acquisition of a broker-dealer that added $2.5 billion in assets to the company.

Ladenburg Thalmann’s chairman and principal shareholder is billionaire Dr. Phillip Frost, CEO of Miami-based Opko Health. Frost acquired 100,000 shares of Ladenburg Thalmann stock at nearly $4.09 a share, or a total of just over $400,000, the same day the acquisition was announced.

For Lincoff’s original article in South Florida Business Journal, click here.