Chapman Spira and Carson LLC (Chapman) over the
years has become affiliated with numerous sources of
information and transactions. Our people are always
on the alert for the next world-class technology as
I would guess everyone else is
as well. However,
having the ability to analyze whether a
particular innovation
is going to eventually snatch the brass ring is not
nearly enough. It is merely the beginning of the
game and if the ball is dropped,
along the way, there are many
others on the Street waiting to run with it. In
comparison to the 50s, 60s and 70s, the dramatis
personae on Wall Street are flush and due to the fact
that we have gone through a substantial period of
easy money, vast sums have become available for risk
taking and investment. In order to endure,
the competition and our client's
demand that we
deliver a high percentage of successful ventures.
However, the road has become a
little harder, do to the fact that we have entered
an environment where too much money is chasing to
few good deals.
However, all
transactions are subject to interpretation and when
some people see the sky falling other believe that
it is a beautiful day. When analyzing whether
something will work or not it is always best to
check your referent. This was a disastrous mistake
made by Volvo in the 1990's.
Their inventory control people indicated that they
had too large an inventory of green cars and asked
the sales and marketing people to vary their deals
so as to cut down on this excessive stock. However,
nobody was talking to the manufacturing group about
the new promotions and they interpreted the rush to
green as a dramatic shifting of tastes and
dramatically ramped up production to meet the
coming deluge of orders. Naturally it never came and
this is certainly one of the classic instances of
the left hand being unaware of what the right hand
is doing.
In particular, the emergence of the “hedge fund” has
created a competition between well heeled financing
sources that have the bucks to
enter into almost any
transaction that can stand the scrutiny of
substantive due-diligence and
even some that can't. In particular, one of the
roles adapted by Chapman has been is delineate the
most well-informed player in the particular industry
and propose to partner in a
general sense on any transaction
with that organization. Not that
these folks really are at a loss for folks willing
to play banker for them, but having a superb
strategic partner is like predicting the score after
the game is over.
The bottom line would be an
attempt to give ourselves best
“bang for their buck”
in financial, marketing, public relations and bottom
line terms that is available. The Street has become an equal
opportunity funding machine and considering the
adage that you are known to be
only as good as your last
deal, the competition is fierce to stay on top while
the returns have tumbled as ever more funding has
found its way into the “hedge fund” coffers. In
earlier times when the environment was somewhat more
stilted, the process of approving a transaction for
funding was a terrifying process
more often than not outliving the technology's
lifespan. In other words, by the
time the technology was funded, the horse had
already escaped the barn and other
more viable concepts had
taken center stage.
While
excesses (easy money) have made the money raising process a tad
easier, it does mean that half-baked schemes
which would
not work then will be acceptable
now. Our
analysis is merciless
while maintaining its objectivity
but we are
hardly infallible nor are
our competitors. One only has to look at Enron and
WorldCom to see the clay feet that Wall Street
sometimes exhibits in a rush to
judgment, more often entered into to block
competition rather than make a solid investment.
No one is immune from
getting stung now and again and one of the more
intriguing stories along that line regards John B.
Connally, the 61st Secretary of the Treasury of the
United States government. He was also appointed by
Presdient Kennedy as Secretary of the Navy and used
his political background and law degree to
eventually become the Governor of Texas and sat next
to Kennedy in the tragic episode of Kennedy's
assassination in
Dallas. Latter he was appointed
by the President to be a member of the Foreign
Intelligence Advisory Board. Did this guy know what
he was doing and does he have the smarts and the
connections to look at deals and analyze them. He
certainly thought so
Today, with numerous extraordinarily focused players
challenging to get their hands on
potentially disruptive technologies that they may believe
will take hold of the public’s fancy in the ensuing
years, this mating process has become more one of
choosing the partner that you can live
a more sophisticated challenge.
Betting on the wrong horse in a race will lose your
money in spite of having handicapped the horse
thoroughly and reading the tout sheet. Making the matter slightly more complex is
the fact that each funding source that has been
particularly successful, usually specializes in some
well defined niche within the a narrow band within
the high-tech field and has draped covered
themselves with consultants who have consultants
that may have won the Noble Prize and more.
Additionally, they have employees who are the top of
the line and can afford to pay them enough so that
they will never be compromised.
While nothing in
life is assured, these folks are each proficient
within the various disciplines of technology that
they specialize and are aware of their own strengths
and weaknesses as well as that of whatever product
they are looking at. Just as in a game such as
poker, the smart player doesn’t want to risk all
their chips on any one hand because as good as what
they are holding may look, they cannot see through
the cards of their opponent. Those is always
something else out there and it is not only a matter
of money, it deals with perception and marketing
which are far more important. Equally critical are
the protection of the intellectual property
underlying the technology. Those, while it may
appear that we have reincarnated the Wild West,
these sources are fairly conservative in that they
would rather bring in a series of other moneyed
experts who have the dollars to invest along side of
with them. A knowledgeable player unwilling to
contribute to the pot is someone that is not sure of
his hand. There is a need to have multiple
disciplines evaluating the potential avenues and
methodology of a new product.
Chapman, in other than first stage ventures always
brings several partners into a transaction with
them. While we may believe in our dreams that we are
experts in every field, this is obviously not the
case and there is always someone around the corner
that has better smarts in any particular field.
Egotism and paranoia are the anathema of the
investment banking fraternity. When you actually
come to believe that you have become infallible, you
are about to detonate. Thus, are firm has learned
through experience that have tried to interest the
most synergistic of investors into those
technologies that we believe are truly disruptive.
As we have noted elsewhere in our website, we have
frequently been wide of the mark in our decisions,
but those that are also not right a fair amount of
the time, are soon sent packing not to be seen in
these parts again. We have been on the Street in one
form or another for almost fifty years.
Our banking associates are J. P. Morgan – Chase,
Metropolitan Bank and Independence Bank. We work
with the United States Small Business Administration
and direct lenders as well. We are members of most
of the Analyst societies including both the
Financial Analysts and Money Managers Association
and the Harvard Group. We are members of the
ultra-private member’s only organization at the New
York Stock Exchange and participate as Arbitrators
for the Nation Association of Security Dealers. (NASD).
We have held numerous seats on the New York Stock
Exchange. However, association
with names only for the sake of saying you are
involved with them along with a transit token will
get you on any subway in New York and that's about
all. During the 1920's it was much easier to
identity the top dogs in each industry. Due to the
fact that were are dealing retrospectively we can
make a case in point and we will quote from "The
Shadow Side of Money, Stewardship Solutions.
"The place was Chicago,
Illinois, the year was 1923. Nine of the world's
wealthiest and most successful men gathered for a
meeting at the city's Edgewater Beach Hotel. Almost
anyone living in that day would have exchanged
places with any of these well-known executives. They
were powerful and rich. The world was their oyster.
They sipped champagne and enjoyed the culinary
delights while extolling of their wealth and
conquest. If you were a waiter or the maitre d" or
the dish washer, secretly, you would have wished to
be in the shoes of any of those men."
"But that was then. Now
for the rest of the story. Twenty-five years later,
their days at Edgewater were a dim memory and all
but two were dead. None had lived the easy life
their tremendous resources seemed to promise.
Charles Schwab, the president of the nation's
largest independent steel company, lived on borrowed
money the last five years of his life and died
bankrupt. Samuel Insul, the president of a giant
utility company, died a penniless fugitive from
justice in a foreign country. Gas company executive
Howard Hopson suffered from insanity. Wheat
speculator Arthur Cotton died destitute. Richard
Whitney, president of the New York Stock Exchange,
was released from Sing Sing prison. Albert Fall, a
member of the presidents cabinet, was pardoned from
prison so that he could die at home. Wall Street's
greatest bear, Jesse Livermore, committed suicide as
did Ivan Krueger, the head of a great monopoly. Bank
president Leon Fraser took his own life."
While we are not certain
that these folks were ever in the same room together
it makes for a wonderful tale. I do believe that the
people in the story had the prestige and envy of the
populous at that time and they all died exactly the
way the story is told. The bottom line though
doesn't change, people don't committee suicide or go
to prison if they are having a great time. Time
marches on and global and national economics
dramatically change; today even more-so than almost
a century ago. Our communications can insure that we
are aware of every monetary disaster taking place
the moment it happens. In the 17th Century, merchant
ships would be out calling on the world's ports for
up to two years at a time. As the story goes, one of
these ships had left Holland for parts unknown and
during the two-years that it was under sail, the
country became involved in a tulip craze. It seems
that everyone had gone Tulip crazy at the same time.
The price of valuable and rare bulbs shot up to
stratospheric prices.
It was during this time that our
ship returned and the sailors had not had any
vegetables to eat for weeks and many were suffering
from the dreaded disease, scurvy. As the sailors
walked through the dock's warehouse, another ship
was unloading a precious cargo of tulip bulbs that
had been imported from the far east at great cost.
As one of the sailors passed the table where they
were inventorying their precious cargo a crewman
mistook the tulip bulb for an onion, picked it up
and devoured it before he could be stop. Sadly the
sailor was convicted of stealing valuable
merchandise and confiscating it. He served over two
years at hard labor for this mistake. The moral of
this story is that today, if tulips went up in price
in Holland at 3:00PM, we would be aware of it at
3:01PM or earlier. Big economic bets turn bad faster
and there is very little time to salvage mistaken
wager. Usually the walls fall in before you can turn
around. Today in this country, bankruptcy filings
are rising at an exponential rate in spite of a
booming stock market. People are losing their homes
to lenders and heading for cover because they bet on
living like kings, on the appreciation of their
assets. Sadly interest rates follow inflationary
tendencies and many loans have already gone into
default with more to come. When they turn off the
spigot, it is already to late to try to get out of
the water.
We are currently affiliated with Laconia Capital, a
diversified broker dealer, headed by one of the
foremost debt security experts on Wall Street. We
are an approved vendor for the Port Authority of New
York and New Jersey which operates and owns Newark,
Kennedy and LaGuardia Airports along with a majority
of the area’s bridges and tunnels along with
considerable real estate in the tri-state area such
as the former World Trade Center. They are a quasi
government agency equally owned by the states of New
York and New Jersey. Our managing
director is on the advisory board of on private
equity fund, a consultant to another and the
president of the third potentially giving the firm
direct access to sources of money that would would
be unavailable to other. In addition the firm is a
charter member of the Financial Analysts and Money
Managers Society. This exclusive Wall Street group
is composed of many of the people that are the
decision makers on the Street. We are able to use
these forums to our advantage by arranging
for client firms to speak at these forums. We
are also members of the Silicon Value Venture
Capital Organization which is somewhat similar but
located on the west coast that specializing in
high-tech products.
Of course you can droop
one affiliation and chose another, but you have to
be very fleet afoot to accomplish this fandango
dance without losing your footing. Superior Court
Judge Ray Warren of North Carolina in September of
2001 saw an opportunity to run for the Senate Seat
given up by Jesse Helms. In order to have a chance,
Warren determined that his best bet was to switch
political parties. Naturally this sneaky move was
not thought of very highly by numerous people in the
state and he was called to task for it by an
opponent. His answer was quite interesting, "We're
all entitled to grow up," he declared, "George W.
Bush had his problems with alcohol, I was a
Republican. We both got over it." Switching
affiliations is not for the faint of heart and can
often come back to bite you in the foot. However, an
example of a successful switch recently was that of
New York's Mayor Blumberg who was a "died in the
wool democrat" forsook his party and won the mayor's
race handily.
Chapman utilizes numerous integrators and investors, among
those that we deal with on fairly regular basis are
such entities as General Electric, Siemens and IBM.
Our associates have done extensive international
transactional analysis and among our clients for a
substantial period was the United Nations from both
a technical and economical point of view. We
also have represented the Venture Capital Organization of
The European Economic Community in Brussels.
Moreover, in our attempts to guarantee our clients
product liability insurance along with other surety
programs, we utilize the good offices of both Chubb
and AON. Our own securities matters are handled by
Salomon Smith Barney and our real estate department
regularly deals with Citigroup, UBS,
BancoPopular, CIT among others.
Having been dealing with these
folks for many years saves valuable time when it is
time to finance a transaction. Neither we nor our
clients would like to be greeted by someone saying;
"Chapman Who."
However, there are often
superficial methods of creating relationships which
we have assiduously avoided. However, everything
seems to go in love and war and of all the
interesting devices that we have heard of the most
interesting was the secret weapon that the Pentagon
was working on in 1994 which was in reality an
aphrodisiac that would make enemy soldiers
irresistible to one another, thereby delivering a
"distasteful but completely non-lethal" blow to
their morale. The Pentagon called this experimental
weapon, the "Sex Bomb."
However, if you have
counted among your associates folks like M. le Comte
de Sade or the Marques de Sade as he is better
known, it is probably time to run for the hills. The
Memories Secrets of de Bachaumont, written on July
25, 1772 tells of one of his parties. "The news from
Marseilles is the M. le Comte de Sade, who caused
such a stir in 1768 by the lunatic horrors which he
inflicted on a girl...has just provided in this town
a spectacle, pleasant at first, but appalling in its
consequences. He gave a ball, to which a large
number of guests were invited. Into the pudding
course he inserted some chocolates so delicious that
several people ate them. There were plenty of these,
an nobody went short, but in them he inserted
"Spanish Fly". The virtue of the preparation is well
known; and as it turned out, all those who had eaten
it, burning with unchaste desire, gave themselves up
to all the excesses to which the lascivious frenzy
can carry one. The ball degenerated into one of
those licentious parties renowned among the Romans.
The most modest women could not do enough to give
expression to the itch which had seized them. Thus,
M. De Sade enjoyed the sister-in-law with whom he
has fled to preserve himself from the penalty which
he deserves. Several persons are dead from the
excesses to which they gave themselves up in their
Priapic fury and others are still severely
indisposed."
We have had substantive interrelationship with the
United States Commerce Department and through their
auspices; one of our affiliates was able to receive
a commitment of $250 million dollars. We have done
extensive work in the area of sophisticated
financial structures and have been involved with
various entities of the State of Oklahoma relative
to these esoteric products which required the
approval of both the State’s legislature and the
Kansas City Federal Reserve. Over the years, our
associates have dealt with the debt securities of
virtually every state in the union along those of
various foreign government. We are also involved
with numerous governmental authorities and employees
and the firm is capable of arranging federal and
local support when a project is eligible. While time
consuming, non-repayable grants are potentially
available in certain strategic arenas are our
internal data basis are sophisticated enough to
point us in the right direction. Should you desire
additional information we would suggest your
perusing other articles in this section.
However, dealing with
any government is never a walk in the park. A
particularly difficult person to deal with was our
former Vice President of the United States, Spiro
Agnew. It was later discovered that Agnew was on the
take and not only didn't report his nifty deals but
forgot to pay his taxes on them. During his
shortened term in office, Agnew arranged a deal to
headquarter a federal agency in an office building
at Waterside Mall in Washington, D.C. Almost as soon
as the employees started to move in they started to
suffer from unknown debilitating disease. In 1997,
nineteen of these employees filed suit against the
building managers for $40 million claiming that they
had received permanent brain damage from breathing
the air. If that wasn't enough of a story, the
agency was the "The Environmental Protection Agency"
that is entrusted with protecting the public from
environmentally transmitted illnesses. It was
pointed out by the plaintiff that the EPA had used
outdoor paint indoors, tarred the roof during office
hours, routed rainwater into the ventilation system
where it sprouted fungus which was then circulated
throughout the building and installed miles of
resin-filled carpeting which never completely cured
- samples of which in independent laboratory tests,
killed mice after three hours of exposure.
In summation, we are adherents to the theory that it
isn’t who you are in the financial world, it is who
you know and your skill in getting from here to
there. However, be very agile in
knowing when to jump off the trolley. Many have hankered for the big bucks
supposedly lining the streets down here, but only a
special few have walked away the trophy. Potentially
colossal projects have languished because of a lack
of the simple methodology of creating a logical path
to its conclusion while keeping your eye on the road. Chapman primarily
operates on a success oriented basis and therefore
is careful in attempting to only become concerned
with transactions that the firm believes can result
in a more than successful conclusion. We certainly
hope that you and your product belong in this narrow
circle. We welcome your inquires.
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