England has been a world leader in commerce for centuries. To illustrate the Englishman’s propensity to capitalize on technology or industrial developments worldwide, one needs look no further than rubber. While rubber has been known to the Western World since Columbus, it took Scotsman Charles Macintosh to bring its first important use to Great Britain. By putting a layer of rubber between two layers of cloth, the rain coat, a necessity in England’s climate, was born. While rubber had some drawbacks (e.g. it smelled, became brittle at cold and melted at hot temperatures…), Charles Goodyear, the renown American inventor, fixed the problem as a result of a kitchen accident. An Englishman Thomas Hancock reverse-engineered the samples he received from Goodyear and filed a patent in England in 1844 before his American friend, As England has a strict “First-to-File” rule for granting patents, the British market-the most important in the world in the mid 19th century, was secured. The annuls of English historical business achievement are simply too long to list, this was just one illustration.
The recognized Man of the Century was the renown Prime Minister of England. Winston Churchill. A recently released book, Churchill at War 1940-45 by Lord Moran, Churchill’s personal physician for the last 25 years of his life, contains amazing anecdotes of the Churchill’s life. He was irascible, ill mannered, bad tempered and had a massive ego; likewise, despite 16-hour days, a voracious appetite and indulgence for food, drink and cigars coronary trouble, three bouts of pneumonia, two strokes, an abdominal operation, a hernia, slight deafness, intractable skin disease and numerous other ailments, saved his country, Europe and perhaps the entire world from the monstrosity that was Hitler’s Nazi Germany. Lord Moran’s diary begins Christmas 1941 immediately after Pearl Harbor. On his first visit to the White House, the night before he was to address Congress, Churchill probably suffered a mild heart attack. Undaunted, Churchill brilliantly addressed Congress, caught a train to frigid Ohawa, made a speech to Canada’s Parliament, held policy meetings with members of his staff and caught a train back to Washington and plane to Florida all within the next 24 hours. Truly he was a “Man for all seasons.”
2002 was certainly an eventful, if not notorious year in business. Many lessons were painfully learned, most of which caused enormous suffering, greater financial loss and hardship than could ever been predicted and certainly the likes we have not seen since the Great Depression. Some of the more meaningful lessons include: First, being a CEO is more than just reaping enormous compensation and being a quasi celebrity. It involves making painful decisions, being a watchdog for the Board of Directors, setting a proper example, and when you finally retire, just go and leave the comp package behind (i.e. Jack Welsh). Second, when you pay an employee to do a job, it’s called “compensation” and ought to be expensed in the period earned; Third, a corporate director is not a member of a fancy country club. It requires diligence, loyalty and responsibility to the shareholders. Many failed miserably in the past decade and we have Enron, Global Crossing, Tyco and numerous others as a result of it. Forth, accounting firms that receive enormous “consulting” fees from their clients are generally biased and incapable of doing the job fairly. We said goodbye to one of the oldest and most prestigious accounting firms, Arthur Anderson in 2002; and Fifth, likewise, investment banks that reap enormous banking fees from their clients rarely write unbiased research. for them as well For all the above examples, and there are many more,
The issue of Wall Street Stock Research was certainly “ in the news” this past year. An entire financial services industry is at its crossroads and names like Eliot Spitzer and former telecommunications analyst Jack Grubman fill the news periodicals frequently. While investment banks like Citigroup’s Salmon Smith Barney and Merrill Lynch have been, and continue to be vilified, independent research boutiques like Argus, Vista, Sidot & Co. and Multex are extremely optimistic about the changing environment. On December 20th , 2002, Regulators announced it will require many of Wall Street’s big Brokerage Firms to overhaul their research practices and pay fines to totaling $1 Billion and an additional $450 million to finance the distribution of independent research from companies that do not offer investment banking activities. As examples of such firms, Argus, for 68 years has provided independently research for money managers, banks and hedge funds. It has a mere 11 analysts and only follow or cover 300 companies across a wide range of industries. Sidot is similarly intending to expand the number of stocks it follows from a current 250 to 600!
|
“You have to be in Siberia not to be looking at opportunities from any Wall Street (research) settlement”
- Joe Marino
General Manager
The Street.Com Research Group
|
|
There are approximately 16,000 companies on NASDAQ alone that are currently not covered by ANY research, so what is a young, emerging growth company ($100 million in revenues or less) to do? Large firms are loathe to add coverage to small companies they are currently working with on the investment banking side. To compound matters, research department head counts are being cut across the board. Over the next 6-12 months, many more companies will lose their research coverage because of the environment post-settlement. While we wait for Congress or even our Judicial system to clarify the grey areas, what we know will remain: Many companies deserve coverage yet are being orphaned.
To that end, we are proud to announce the formation of Starobin Partners, Inc. (“Starobin”). Starobin, named after a small town n the Ukraine that over the past century has endured the agricultural collectivization of the Russians in WWII, the invasion and murder of its innocent civilians by the NAZIS in WWI and the nuclear disaster of Chernobyl in 1986, has been formed to provide totally independent research for small to emerging growth companies on NASDAQ and/or AMEX. While currently in the process of becoming a registered as a Registered Investment Advisor, Starobin takes only a modest due diligence or cash fee from the Target company. It has none, nor asks for, any equity positions or options in these companies. We intend to offer merely an unbiased fact sheet and general opinion, often more than the target company has. We are proud to have Spear & Jackson, a 270 year old English company with approximately $100 million in revenues as our first candidate for consideration (report shortly available upon request). In addition, we are proud to welcome Jeffery Goldberg as Starobin’s lead analyst and Neal Scott as the principal managing our independently-owned J.P. Turner & Company brokerage branch office at our corporate headquarters. Jeff has over 10 years of experience in the financial services industry and has written, or participated in the creation of over 25 research reports. Neal has over 25 years of experience in financial services and specializes in fixed income, mutual finds, corporate bonds and preferred stocks. Starobin is indeed lucky to have both on board. Finally, we are likewise quite pleased to announce that Ytzik Aranov has joined Wellfleet Partners as an investment banker. With close to twenty years of experience in financial services, his expertise is primarily in the areas of mergers & acquisitions and corporate restructuring. His bio and a short click function for Starobin will shortly be available on our website.
|
“You have to be in Siberia not to be looking at opportunities from any Wall Street (research) settlement”
- Joe Marino
General Manager
The Street.Com Research Group
|
|
This past quarter our firm and its affiliates remained quite busy with its core group of 62 portfolio companies. We are pleased to welcome new clients Cardio Comm and Red Cell Power Corp, both in Vancouver, Canada, MedEx-Pegasus Pharmacy in New Orleans, Louisiana, Real GM in San Francisco, California, Quick Med, and Voda Digitech, and Arcavista Corp. in New York City, NY, Excalibur Industries in Houston, Texas, Planet IRM in Isilin, New Jersey, Global Meds in Moscow, Russia, Counsel Financial in Buffalo, New York, and finally, Motoreasy and Opensoft in London, England. We have been actively developing our contacts in the UK and indeed we are the initial speaker at the KCSA Missing Link Seminar in February held at the British Consulate. Of the aforementioned new clientele, Cardio Comm, Red Cell, Voda Digitech, Excalibur, Arcavista Corp. and Planet are clients of Spider Financial, Inc., our wholly-owned bridge loan subsidiary.
Our economy remains soggy, the deflationary PPI and general market gloom permeates the financial news. With important new stimulative legislation in the works including major tax cuts, hope always springs eternal. We remain thus extremely cautious in the markets for the foreseeable future and continue to encourage our brokerage clientele to write covered calls against their positions, buy puts, and look at some interesting opportunities in the corporate bond and/or preferred markets (Abbey National and Cadbury Schwepps Preferred stocks are two recent purchases, please discuss any and all investment opportunities with your account representative).
|
“The important thing is to start lay a plan and then follow it step-by-step no matter how small or large each step by itself may seem.”
- Charles Lindbergh
|
|
As we end off the 2002, the markets, financial services and investment banking industries have been tenuous at best and mercurial to say the least. Yet, there is much to be thankful for. Family, friends, our good health…Let’s not lose sight of the important things in life. Have a happy, healthy, enjoyable and safe holiday season.
Sincerely,
WELLFLEET PARTNERS, Inc.
Spider Financial, Inc.
Starobin Partners, Inc.
NOTE: This report was produced by Wellfleet Partners, Inc. ("WPs") from various public research sources, for the sole purpose of general information. WPs makes no warranties to its factual content and is not a brokerage firm, registered Investment Advisor nor securities dealer; therefore, nothing contained in this report shall constitute an offer to sell, solicit or buy any securities or investment advice. Investment in these securities mentioned here involves risk and should not be considered without first reading the target Company’s most recent financial statements, 10Q and 10K, its Private Placement, Offering Memorandum or Business Plan, if applicable, and discussing the investment with your registered representative or professional financial advisor. Venture capital is inherently extremely risky. Mark I. Lev, Managing Director of WPs and the author of this newsletter, is a registered representative of KSH Investment Group, Inc. a NASD member broker-dealer.
