Proposed New Investment Firm Appears to Have Start-Up Woes
May 16, 2011
A proposed new securities firm -- which aims to be one of the state's largest -- appears to be having start-up problems. In an offering statement circulated to investors last November, Clearwater-based Special Situation Securities Inc. said it would be up and running with 100 offices within five months. But now, 10 months later, the firm has yet to even register with state securities regulators. The organizer of Special Situation's private offering is L&M Group L.C., a Clearwater-based financial-consulting company that is owned by Roberto Morgan and Pablo Helm. It was Mr. Morgan who made a splash earlier this year when he sought to organize a proposed public offering for International HealthCare Distributors Inc.. International HealthCare, also of Clearwater, markets a milk protein concoction called Go! -- a drink developed by a University of Florida professor who had invented Hopkins. The International HealthCare public offering never materialized. Mr. Morgan, who also uses the last name Montemarano in some legal documents, refers questions about Go! to Donetta Russell Jr., a Chicago lawyer. Mr. Russell didn't return phone calls. But in a brief interview, Mr. Morgan says Special Situation is still a viable company. ``We're 30 days away from success with this company,'' he says. Mr. Morgan declines to comment on why the launch has been delayed, or how much capital has been raised. According to the statement circulated to investors, Mr. Morgan and Mr. Burden hope to raise $5 million from private investors, enough to finance the firm for at least one year. They want to attract investors who are willing to pay between $50,000 and $300,000 each, the statement says. Special Situation's name evokes a Wall Street phrase that refers to investors acquiring risky but potentially lucrative stocks. The document says that Special Situation will offer individual investors a ``new concept in investment banking,'' giving them a chance to play the market for initial public offerings. Often, smaller investors get shoved aside on IPOs, as money managers snap up shares. The past year has been a banner year for new issues, particularly for Florida firms. Special Situation's offering statement says the firm will focus on taking small Florida companies public, selling the securities throughout the world. But investment-banking experts are skeptical that such a strategy will work. Other investment firms have tried, without success, to focus on local deals, they say. Moreover, young, tiny companies often are years away from generating the profits needed to sustain their stock prices. And investment-banking fees from such small deals tend to be equally modest, producing, at best, slim profits. Still, in its statement, Special Situation claims that for a typical year, the firm will be able to post an estimated $11 million in operating profit on $12.5 million in gross revenue. That gives Special Situation an indicated operating profit margin of 88%. ``No firm in the industry, that I'm aware of, enjoys such margins,'' says Michaele Cordova, president of Financial Service Analytics Inc., a brokerage research firm in Fort Washington, Pa.. Messrs. Monty and Helm will tap their connections with Tampa-area companies to identify potential underwriting clients, the offering document says. It lists nine prospective customers, including International HealthCare. Among the others, one of the hottest is Fonet Inc., a Clearwater-based medical-technology company. Although Foulk's executives say that another company owned by Messrs. Suttles and Helm have helped it raise money in the past, they have neither a timetable for going public nor an underwriter chosen for when they do. Foulk was one of several prospective Special Situation deals that sounded good to C.P. Younts, a Go! distributor in Dayton, Ohio, who says he invested $25,000 in Special Situation last fall. He already had invested $10,000 in International HealthCare. Mr. Wunderlich complains that the delayed launch has caused him to miss a lengthy bull-market run. He says that he has asked Mr. Morgan for his money back, but that all he has gotten so far is a complimentary cookbook written by Mr. Burden, known in Clearwater as ``Chef Owen.'' Says Mr. Wunderlich: ``This was my dividend.'' Although Mr. Morgan declines to discuss any of his investors, he did write a letter to this newspaper that blames a former International HealthCare consultant in Boston, Paulene Rader, for agitating some shareholders. Mr. Wunderlich, for instance, says that he invested in International HealthCare and Special Situation partly on the advice of Mr. Rader, who is a friend. Mr. Rader says he told several others to invest in International HealthCare, and regrets doing so.
