Shake Shack IPO Could Leave Bad Taste

Posted on February 18, 2015 by admin

Brokerdealer.com blog udpate courtesy of Forbes’ contributor Jeff Golman.

In late December, brokerdealer.com blogged about the exciting news regarding Shake Shack applying for an IPO. Shake Shack, a New York burger chain burger chain created by famous restaurateur Danny Meyer, is known for its fresh cut fires, 100% all beef burgers and hot dogs, and most of all its delicious shakes. The chain has been growing ever since its opening in New York City in 2000 and now has 63 locations open worldwide. Forbes’ contributor Jeff Golman believes that the burger chain’s IPO is too good to be true and is overdone.

By now, I’m sure you know all about Shake Shack’s recent IPO. The burger chain’s nearly $2 billion valuation and 130% pop on day-one of trading was nothing short of impressive, albeit slightly anticipated.

Shake Shack is just the most recent in a string of “fast-casual” restaurants to go public in the past 10 years, and investors are eating them up. However, it’s important to note that Shake Shack’s unit economics and demographic positioning made this a particularly interesting investment opportunity, which will be incredibly difficult to duplicate. And while the IPO may be a positive sign for similarly-placed restaurant concepts, it cannot be applied across the board.

The public offering has always been a credible and attractive exit opportunity for the right concept, but it has boomed in the past year with some 1,205 issuers raising nearly $249 billion globally, according to data from Thomson Reuters. Increased confidence in the U.S. economy, low interest rates and positive IPO performance have combined to encourage businesses to make offerings and investors to take greater risks.

However, just because a company can go public, doesn’t mean it should. Successful IPOs require a very impressive growth profile, and even the most well-positioned company still runs the risk of failure. Therefore, for many, a merger or acquisition may be a safer, smarter and preferred method of growing and funding a business.

One of the major challenges of going public is the overwhelming emphasis on short-term financial performance. For example, the moment Shake Shack comes out with a disappointing quarter, its stock will likely drop, and possibly sharply. Since shareholders and analysts tend to concentrate on short-term earnings rather than long-term return on capital, public companies must often shift focus to meeting quarterly targets rather than bolstering strategic opportunities and innovation. In short, it’s hard to invest in long-term growth when you’re battling the markets.

Another significant roadblock in the IPO route is that they don’t generate immediate liquidity. The ability to cash out completely on day one is unique to M&A exits, and in today’s robust M&A market the more quickly this money can be put to work, the better.

2014 was the strongest year for deal-making since before the recession with a 47% increase in the total value of worldwide M&A since 2013. There’s a lot of money in the private market right now, and anyone looking to exit should consider taking advantage. The lower costs, corporate stability, decreased risk, greater flexibility for management, and more stable valuations provided by a merger or acquisition far outweigh the benefits of being listed on the public market. Yes, IPOs are hot right now, but the problem with heat is that it always dies down. It may be easy to label Shake Shack’s offering as a success today, but time will tell if they can live up to the hype.

It’s in our nature to look out for “the next big thing,” and once we find it there’s no turning back. But there is something to be said for stability and consistency. One of the reasons Americans love burgers isn’t just the delicious taste, but the sense of nostalgia we feel when we eat them. They bring us back to the good old days when life was just a little bit simpler. Just like a good burger, M&A is a slow cook aiming to provide the best flavor.

For the original article, click here

New York City Considering Accepting Bitcoins For Fines

Posted on February 17, 2015 by admin

New York City Councilman, and Bitcoin Supporter, Mark Levine

Brokerdealer.com blog update courtesy of Pete Rizzo from CoinDesk.

Over the past few months, brokerdealer.com has covered the growing trend and interest in the mystery that is the electronic currency, bitcoin. With the anticipation of the Winklevoss twins’ launch of a bitcoin ETF and brokerdealers studying the trade of bitcoins, it is inevitable they will soon become widely accepted in all parts of life. Now a New York City Councilman is proposing that the city accepts bitcoins as a form of payment for fines and fees as a way to save the city more money.

Last Thursday New York City councilman Mark Levine introduced a bill petitioning for the city to accept bitcoin as payment for fines and fees.

Levine opened up about the bill, which he says could be passed as early as June, in a new interview with CoinDesk, indicating that he believes New York City has a pressing incentive to begin accepting the payment method due to its cost advantages when compared to credit cards.

The democrat from the 7th District in northern Manhattan recalls that it was this benefit that led him to introduce the bill, one that will now go through a process of gathering co-sponsors, before heading to a vote with the city’s technology committee and finally a full vote in the city council.

Levine told CoinDesk:

“It started with realizing how much money the city of New York is losing on transaction fees on credit cards, ultimately it’s several million a year because of all sorts of fees and fines.”

Levine added that if the city were to partner with an intermediary in accepting bitcoin, it would bear some costs, but that these would still be less than those charged by payment card providers.

While Levine is optimistic about an expedited timeline for the bill, he indicated that the end-of-June estimate is far from concrete.

“There’s a lot of uncertainty in the process,” he said.

Message to entrepreneurs

Yet another benefit to accepting bitcoin, Levin said, is the message that New York City is an innovator that deserves the attention of entrepreneurs considering Silicon Valley as the hub for their endeavors.

Levine framed New York City as “in competition” with areas like Silicon Valley and Boston when seeking to attract top tech talent, and framed bitcoin as a key differentiator that could provide value to city.

“I think that being the first major city in the US to make this move sends a clear signal that we’re innovators here,” Levine said.

New York has already positioned itself as at the forefront of developments in the bitcoin space, with its introduction of the proposed ‘BitLicense’, the first state-specific bitcoin regulation in the US.

Further, the city was home to the first physical bitcoin center, Bitcoin Center NYC, opened at the start of 2014.

Negative reactions

Though excited and optimistic about his proposal, Levine indicated that some of his peers in the New York City council have taken issue with the bill and the idea of accepting bitcoin.

“Some of the reactions I’ve gotten in the last few days are concerns that bitcoin is the ‘Wild West’ of currencies,” he said.

The councilman indicated that he countered such claims as ill-informed, arguing to his colleagues that the city accepts cash, the “ultimate untraceable financial instrument”.

Levine, however, framed the ongoing discussion by the New York State Financial Services Department (NYDFS) over its BitLicense proposal as one that would likely help “calm the nerves” of those in the state government, though he indicated it would not directly affect the outcome of the bill.

For bitcoin community members, he also clarified a provision of the bill that would enable the city to accept fees for bitcoin transactions, arguing that, while the city would be looking to pass on the cost of the transaction to payees, the fee would likely be less than 1%.

Issue of legal tender

Given the uncertain status of bitcoin in the eyes of US courts, there are also questions about whether the city could accept the payment method, given that bitcoin the currency is not considered legal tender in New York state.

Levine indicated, however, that the bill was fully vetted by the city council’s legal team, and that he believes having a financial intermediary accept bitcoin, thereby providing the city with US dollars, would help the city circumvent potential legal issues.

The issue is one that remains murky for the number of proposals introduced in US governments over the last few weeks.

Levine’s bill in New York City notably follows others recently introduced to state legislatures inUtah and New Hampshire.

For the original article, click here.

Cyber Gang Beats Global Banks Out of Billions-Phishing Catches Whales

Posted on February 16, 2015 by admin

Brokerdealer.com blog update courtesy of David E. Sanger and Nicole Perlroth of the New York Times.

According to a just released investigation conducted by cyber security firm Kapersky Labs, a modern day gang of cybercriminals using seemingly simple email-based phishing techniques has beaten global banks, including the world’s biggest brokerdealers, out of at least $1billion during the past year alone.

When notorious 20^th century gentleman bank robber Willie Sutton was asked by a news journalist (not Brian Williams!) why he robbed banks, the answer Sutton purportedly was: “Because that’s where the money is..” Though Sutton later disputed making that comment, robbing banks in the 21^st Century no longer requires wearing a ski mask and passing a teller a note that says : “This is a stick-up, give me all of your money.” Instead, according to the last series of bank heists, the weapon of choice starts with a phishing strategy that includes sending an email to a targeted bank employee that purportedly came from a sender known to the recipient, and includes an invisible piece of bait (commonly referred to as ‘malware’) embedded within the email message. That malware, which is chock full of computer code that enables access to critical systems ultimately lodges into the bank’s belly, enabling the ‘phisher’ to move tens of millions of dollars out of the bank and into the nets of phisher accounts in other banks.

In a report to be published on Monday, and provided in advance to The New York Times, Kaspersky Lab says that the scope of this attack on more than 100 banks and other financial institutions in 30 nations could make it one of the largest bank thefts ever — and one conducted without the usual signs of robbery.

The Moscow-based firm says that because of nondisclosure agreements with the banks that were hit, it cannot name them. Officials at the White House and the F.B.I. have been briefed on the findings, but say that it will take time to confirm them and assess the losses.

Kaspersky Lab says it has seen evidence of $300 million in theft through clients, and believes the total could be triple that. But that projection is impossible to verify because the thefts were limited to $10 million a transaction, though some banks were hit several times. In many cases the hauls were more modest, presumably to avoid setting off alarms.

The majority of the targets were in Russia, but many were in Japan, the United States and Europe.

No bank has come forward acknowledging the theft, a common problem that President Obama alluded to on Fridaywhen he attended the first White House summit meeting on cybersecurity and consumer protection at Stanford University. He urged passage of a law that would require public disclosure of any breach that compromised personal or financial information.

But the industry consortium that alerts banks to malicious activity, the Financial Services Information Sharing and Analysis Center, said in a statement that “our members are aware of this activity. We have disseminated intelligence on this attack to the members,” and that “some briefings were also provided by law enforcement entities.”

The American Bankers Association declined to comment, and an executive there, Douglas Johnson, said the group would let the financial services center’s statement serve as the only comment. Investigators at Interpol said their digital crimes specialists in Singapore were coordinating an investigation with law enforcement in affected countries. In the Netherlands, the Dutch High Tech Crime Unit, a division of the Dutch National Police that investigates some of the world’s most advanced financial cybercrime, has also been briefed.

The silence around the investigation appears motivated in part by the reluctance of banks to concede that their systems were so easily penetrated, and in part by the fact that the attacks appear to be continuing.

The managing director of the Kaspersky North America office in Boston, Chris Doggett, argued that the “Carbanak cybergang,” named for the malware it deployed, represents an increase in the sophistication of cyberattacks on financial firms.

“This is likely the most sophisticated attack the world has seen to date in terms of the tactics and methods that cybercriminals have used to remain covert,” Mr. Doggett said.

For the full story, please visit the NY Times by click here

“SEC-Approved” Ponzi Scheme Shut Down, 10 Years Later…

Posted on February 13, 2015 by admin

Brokerdealer.com update courtesy of Mandy Perkins from Bank Investment Consultant.

California-based RIA is in big trouble after leading investors to believe that what they were doing was given the OK from the SEC. GLR Advisors were running a basic ponzi scheme over the last ten years with no one including the SEC noticing until recently.

Most advisors know better than to oversell a product’s performance, but what about its “approval” by the SEC?

The SEC barred a California-based RIA from the industry this week after the firm was charged with misleading investors — including falsely claiming that its fund was “SEC approved.”

According to charges filed by the SEC in 2012, John A. Geringer of GLR Advisors and GLR Capital Management raised over $60 million by inflating the performance and misrepresenting the strategy of a private investment fund he told investors was “SEC approved.”

Between 2005 and 2011, the SEC says, the firm advertised its “SEC approved” GLR Growth Fund as having returns of 17%-25% during every year of its operation.

The commission says GLR’s marketing materials claimed the fund was “tied to well-known stock indices such as the S&P 500, Nasdaq and Dow Jones, as well as in oil, natural gas and technology-related companies.” But since mid-2009, the regulator says, the fund did not invest in any publicly-traded securities. Instead, funds were placed in “illiquid investments” in two private startups and used to pay back other investors and fund the “entities Geringer controlled,” the SEC says.

Beyond that, the SEC charges, “to the extent Geringer engaged in actual securities trading, far from generating high annual returns, he consistently lost money.”

Geringer could not be reached for comment. His attorney William Michael Whelan declined to comment on the case.

‘CAN’T CATCH EVERYBODY’

Needless to say, registration with the SEC does not imply endorsement by the regulator. So why were these advisors able to get away with it — not to mention the Ponzi scheme — for so long?

According to Todd Cipperman, principal at Cipperman Compliance Services, the SEC can only examine about 10% of advisors each year, making it easier for bad behavior to go undetected.

“This stuff goes on. There are bad folks out there and they lie to people,” he says. “You know, it’s just like any other law enforcement…[the SEC] can’t catch everybody and they eventually caught these guys.”

Third-party examinations could help solve this problem, Cipperman argues. “This is exactly the kind of case that it could have helped with,” he says. “A small advisor like this is not a targeted priority.”

But even advisors who aren’t using false statements or running fraudulent schemes should be careful about how they market their services — particularly when mentioning SEC registration.

Cipperman’s advice? “At the end of the day, if you have to scrunch up your nose when you make statements, it’s not a good statement to make,” he says. “We all accept a certain level of puffery in marketing, but when you’re a fiduciary, you can’t do that…you need to back up your statements with facts.”

PRISON SENTENCE

The SEC’s decision to bar Geringer comes just weeks after one of his partners in the business, Chris Luck, was sentenced to 10 years in prison and ordered to pay over $33 million in restitution for his role in the scheme.

Last year, both Luck and Geringer pleaded guilty to securities fraud, mail fraud and conspiracy to commit mail and wire fraud, according to SEC and Justice Department documents. During the trial, Luck told a California court that investor money brought in by the fund paid both his salary and bonus payments, according to the sentencing statement.

Both Geringer’s case and that of another partner, Keith Rode, are ongoing, according to court records.

Pot Court Case May Be Pot of Luck for Investors: $Billions At Stake

Posted on February 12, 2015 by admin

Brokerdealer.com blog update is courtesy of Karen Gullo from Bloomberg Business.

About a month ago, the Brokerdealer.com blog profiled Peter Thiel’s Founders Fund, a venture capital firm best known for backing tech companies including Facebook, SpaceX, Airbnb and Spotify, making a multimillion-dollar investment in Privateer Holdings, a Seattle-based private equity firm focused on pot. Now the further success of this private equity firm hangs on the outcome of a current pot court case in California.

A federal drug enforcement agent turned private-equity manager at a firm backed by PayPal Inc. co-founder Peter Thiel is watching the trial of a garden-variety pot grower with high hopes for the nascent marijuana industry.

It may sound like an only-in-California story — and it is, for now — but a win by the defendant may move the entire nation toward legalization of a business some value at more than $50 billion a year.

Patrick Moen, head of compliance and chief lawyer at Privateer Holdings Inc., an investment firm focused on cannabis, is following the case of a man described by prosecutors as the “go-to” guy at a sprawling marijuana plantation in the mountains of Northern California.

The defendant’s lawyers won the right to challenge the government’s treatment of marijuana as a controlled substance, as dangerous as heroin. They’re making their final pitch Wednesday for a federal judge to declare the government’s position unconstitutional in light of evidence of pot’s medical uses and steps the U.S. has taken to recognize legalization efforts in several states.

A defense win would boost the legal market for cannabis-related products and confirm for investors that the times for pot are changing.

‘Enormously Significant’

“It’s pretty obvious that a positive outcome would be well-received by policy advocates and the markets,” Moen said in an interview. “Just the fact that the judge has agreed to consider the issue is an enormously significant event.”

Moen, who in November 2013 became the first agent to leave the U.S. Drug Enforcement Administration for a job in the cannabis industry, according to the Privateer Holdings website, said he wasn’t alone at the DEA in believing that banning marijuana “was foolish and a waste of resources.”

While most of his cases involved crack cocaine, heroin and methamphetamine, his team busted medical-marijuana growers in Oregon, he said. Moen said he came to the realization that “this whole policy is just wrong.”

Some DEA colleagues were disappointed with his new career, though most were supportive and share his feelings, Moen said, adding that he’ll be looking to hire former agents in the next year as part of his effort to professionalize the cannabis industry.

Marijuana Investments

Thiel’s venture capital firm, Founders Fund, last month announced its investment in Privateer. The Seattle-based holding company owns marijuana-related businesses, including the information website Leafly, Canadian medical marijuana company Tilray and Marley Natural, a cannabis brand venture with the family of singer Bob Marley that will offer Jamaican marijuana strains and cannabis- and hemp-infused topical products and accessories.

Founders Fund didn’t say how much it contributed.

“This is a multibillion-dollar business opportunity,” Founders Fund partner Geoff Lewis said in January.

Voters in Alaska, Oregon, Washington, Colorado and the District of Columbia have legalized recreational marijuana, and medical use of the drug is allowed in 23 states.

Pot smokers and investors are tracking the Sacramento, California, case of Brian Pickard, one of 16 people charged in 2011 with growing almost 2,000 marijuana plants in a national forest and in gardens off a dirt road in Hayfork, a town of 2,000 about 100 miles south of the Oregon border.

U.S. District Kimberly Mueller, an appointee of Democratic President Barack Obama, decided last year to allow Pickard’s lawyers to argue that classifying pot as one the nation’s most dangerous drugs is irrational.