The curse of nanotech strikes again, and this is a story it would be hard to make up.
Alan Shalleck has been doing a bit of poking around into the latest nanotech IPO debacle (quite a lot actually) and points the finger of blame at Global Crown Capital who appear to have been rather under capitalised. The allegations are quite serious, calling into account the integrity of Global Crown Capital, so if the article suddenly disappears we will understand why. Just in case, i have reproduced the relevant part of Alan’s article below.
More than one source has told me that GCC could not, or would not, produce its share, $50 million, of the IPO proceeds. It was short by some significant amount. Here is where GCC, as an underwriter, violated the rules of underwriting. As I also have been told, GCC reneged in using its own capital to make up the shortage difference … and was arrogant with the Governors of the exchange about that deficiency not being a deciding condition for delisting, in the process antagonizing every DIFX official involved in the listing decision.
Given the funding deficiency, and no immediate willingness to make up the deficiency by the lead manager, the exchange then gave NanoDynamics’ management a choice of two delisting options: withdraw voluntarily or be asked to delist by the exchange. NDMX did the honorable thing … it “voluntarily” requested delisting and returned whatever funds it had received to the investors.
Most egregiously, GCC violated the underwriter’s credibility rule. An underwriter has to be ready to commit its very last dollar of capital to protect the success of an IPO that is not a “best efforts” offering. An underwriter’s only “outs” are “material adverse changes in the issuing company” or “materially adverse changes in the marketplace”. Neither occurred. I think GCC has a great deal of explaining to do to the entire nanotechnology or green industries if it ever wants to be considered again as an underwriter of any kind of stock offering by a needy Nanotechnology company.
As I mentioned yesterday they really need some better advisors.