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Corporate and Securities
Securities Law and Capital Markets
U.S. 2011 Rankings (based on number of transactions):
#1 in SPAC IPOs and SPAC Acquisitions
# 1 in Registered Directs/PIPEs
#4 in IPOs
Overview and Philosophy
The Firm’s Corporate and Securities Practice Group is comprised of more than 30 professionals and is one of the leading practices in the U.S. focusing on smaller public and private companies and the investment banks and capital sources that focus on this segment of the market. The Firm routinely represents public companies and their officers, directors and employees in matters related to ongoing compliance with SEC regulatory requirements (i.e. Form 10-Ks, 10-Qs and 8-Ks). We are proud to represent capital market participants driven by the entrepreneurs who are intent to grow and finance their businesses. The Firm provides legal services for companies in a variety of industries, including consumer products, social networking, information processing, telecommunications, biotechnology, Internet and software. Gi Gven the Firm's level of transactional sophistication and our commitment to efficiency, the Firm can often offer "flat fee" arrangements.
The Firm distinguishes itself from many other transactional law firms on the basis of its ability to be part of the establishment of new securities programs; such as, crowdfunding, registered blind pool offerings (commonly referred to as SPACs), registered directs ("Registered Directs"), private investments in public entities (commonly referred to as " PIPEs") and reverse mergers and alternative public offerings ("Reverse Merger"), where the Firm's professionals have played leadership roles within each of those industries - assisting in the creation, formation and strategies relating to those financings, as well as, working closely with the regulatory agencies, including the SEC and FINRA; and listing exchanges such as NYSE AMEX and NASDAQ. The Firm also has many clients whose securities trade over-the-counter on the Pink Sheets. Having cooperated and advised the Pink Sheets on its OTCQX marketplace, the Firm is also proud to be the first law firm ever to be approved as a Designated Advisor for Disclosure ("DAD") and Principal American Liason ("PAL"). Click here to view the presentation on the OTCQX.
Public Company Transactions
In our Securities Practice, we act as counsel to nearly 50 public companies (including 15 Chinese issuers), as well as, numerous FINRA (formerly NASD) licensed underwriters and placement agents in connection with their financing activities, including private placements and public offerings of equity and debt securities. Over the last several years the Firm has participated in over $2 billion of financings. In 2011, EG&S ranked #1 in the representation of placement agents in private and registered equity transactions. At the same time, Ellenoff Grossman & Schole was the #4 most active law firm in the U.S. for issuer-side IPOs. The Firm was 1st in the U.S. for our SPAC practice (representing both issuers and underwriters). In 2010, we innovated a new SPAC structure for 57th Street General Acquisition Corp. that is now the accepted convention. In 2011, 57th Street acquired Crumbs Holdings LLC. In 2008, 2009 and 2010 the Firm was one of the leading U.S. law firms involved in each of the SPAC, PIPEs and Reverse Merger industries. Additionally, the Firm is quite active in representing Chinese operating companies interested in Going Public in the United States, or, have already done so previously. Over the course of the last 10 years, the Firm's lawyers have participated in excess of:
- 125 registered offerings; including,
- 80 SPAC registrations;
- 20 SPACquisitions;
- 600 Registered Directs/PIPEs; and
- 32 Reverse Mergers
We advise issuers on complying with the complex securities laws, rules and regulations that these companies must comply with, including proxy rules, other periodic reporting requirements under the Securities Exchange Act of 1934 (such Forms 10-Q, 10-K and 8-K) and other compliance matters such as Sarbanes-Oxley and other corporate governance matters, insider trading and conflicts of interest.
2011 Top IPO Issuer's Law Firms
We were ranked #4 for IPOs (issuer counsel) in 2011 and top 20 (issuer and underwriter counsel) in 2012.
|Law Firm||Number of IPOs|
|1. Latham & Watkins||14|
|2. Wilson Sonsini Goodrich & Rosati||10|
|3. Vinson & Elkins||9|
|4. Ellenoff Grossman & Schole LLP||7|
|4. Davis Polk & Wardwell||7|
|4. Skadden, Arps, Slate, Meagher & Flom LLP||7|
|5. DLA Piper||6|
|6. Simpson Thacher & Bartlett||5|
|6. Loeb & Loeb||5|
|7. Akin, Gump, Strauss, Hauer & Feld||4|
|7. Andrews Kurth||4|
|8. Wilmer Cutler Pickering Hale and Dorr||3|
|8. Ropes & Gray||3|
|9. Bass, Berry & Sims||2|
|9. Bracewell & Giuliani||2|
SPACs/Reverse Mergers and Alternative Public Offerings
Ranked Most Active SPAC Law Firm in the U.S. in 2011 for SPAC IPOs and SPAC Acquisitions
For over 20 years, members of the Firm have participated in alternative means of going public, including "SPACs" and " Reverse Mergers."
In 2010, we innovated a new SPAC structure for 57th Street General Acquisition Corp. that is now the accepted convention and which culminated in that company's acquisition of Crumb's Bakey in May 2011. In 2008, 2009 and 2010 the Firm was one of the leading U.S. law firms involved in each of the IPO, SPAC, Registered Directs/PIPEs and Reverse Merger industries.
A SPAC is a newly formed corporation by prominent and qualified sponsor/management team for the purpose of raising capital in an IPO in anticipation of identifying and consummating a business combination. A SPAC seeks to leverage the strength and recognition of the management team within an industry or geographic location to secure proprietary deal flow and identify attractive acquisition candidates. It provides public company transparency to investors with full disclosure and voting rights with respect to approving the proposed business combination.
A Reverse Merger is a transaction where by a private company becomes a public company by merging with a public shell company. A shell company is a company that has substantially no assets, except its corporate structure. A Company can become a shell company by agreeing to spin off its current assets and liabilities at the time of the merger. Upon the merger, the private company shareholders receive a substantial majority of the shares of the public company (normally 90% to 95% or perhaps more) and the control of the board of directors, resulting in the private company becoming an operating public company. Prior to the merger, the transaction does not go through a review process with state and federal regulators. The transaction involves the private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing, the public shell company issues a substantial majority of its shares and the board control to the shareholders of the private company.
In these transactions, private businesses merge with operationally inactive public entities, enabling the private business to become publicly-traded on its own, without the need to either identify an underwriter or go through the formal process of an IPO.
Venture and Social Impact Investing
Social Impact investments are investments into companies, organizations, and funds with the intention to generate more than mere financial returns but also demonstrable social, community and/or environmental impact. Social Impact investing occurs across asset classes, for example private equity/venture capital, debt and fixed income. EGS has a dedicated group of professional to assist the greater NYC Social Impact Investing community and broader Social Sector Finance industry; representing companies (for profit, not-for-profit, B corporations and hybrids) who are making investments intended to create positive impact beyond financial return, and as such, make a positive social and/or environmental impact through their activities. We advise on a wide range of transactions, including structured finance, fund formation, contracts, banking law, securities law, foreign exchange regulations, local laws and regulations, employment law, tax law and the structuring and governance of not-for-profit organizations. If a matter requires knowledge of a local jurisdiction in which we are not present, we draw on our large network of local counsel in countries around the world.
CrowdFunding describes the collective cooperation, attention and trust by people who network and pool their money via the Internet to support efforts initiated by other people or organizations. CrowdFunding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns, to funding a startup company, movie or small business or creating free software. Crowdfunding for the online sale of securities was signed into law on April 5, 2012 by President Obama, as part of the JOBS Act. Crowdfunding isn't currently legal and remains subject to the SEC approving applicable rules, which they are currently drafting.
Ellenoff Grossman & Schole has been heavily involved in the program since its inception. The Firm has sponsored conferences, webinars and has been invited to speak at different events on the topic. Douglas S. Ellenoff, a member of the Firm, has met with the SEC on many occasions to discuss many aspects of the proposed new law, how the industry currently operates and how both the SEC and FINRA will register and regulate funding portals and the crowdfunding activity to be conducted. Additionally, EG&S is working with other securities professionals internationally to assist them with their fashioning of appropriate legislation to permit crowdfunding for securities in their jurisdictions.
The Firm is actively engaged with clients (funding portals, broker-dealers, technology solution providers, software developers, investors and entrepreneurs). In cooperation with the industry trade association, the Firm is discussing what level of regulatory review and monitoring is appropriate by the SEC and FINRA in balancing the interests of the program with investor protection. We have several attorneys that have become key players in the program, including Douglas S. Ellenoff, Barry I. Grossman, Joan Adler, Adam Mimeles, David Selengut, Sarah Williams, Matthew Bernstein and George Georgiades. In particular, Joan Adler, a member of our Broker Dealer Regulatory Group, has shepherded many firms through the broker dealer membership process. She has participated on panels with the FINRA Membership Department to develop the New Membership Application Program and will be proactively working with regulators to establish guidelines for funding portals. And George Georgiades has been closely following the legal developments since inception and is actively advising industry members on the proposed regulations. Mr. Georgiades has written a CrowdFunding Alert that summarizes the key provisions and current status of the new reforms. Click here to read the alert.
Visit our CrowdFunding Resource Center
Registered Direct/PIPE Transactions
In 2011, the Firm was recognized as the most active law firm in the U.S. with experience in Registered Direct/PIPE transactions. With the addition of our new RD/PIPE Practice Group, the Firm has been involved in over 600 RD/PIPE Financings.
A Registered Direct offering is a negotiated sale by an issuer to one or more investors of securities that have been registered pursuant to an effective shelf registration statement on Form S-3 under Rule 415 of the Securities Act of 1933, as amended. Rule 415 permits an issuer to register a specific dollar or share amount of securities without specifying the amount of any particular class or type of security or the timing or method of the offering. The issuer may then sell any or all of the registered securities directly to investors at a later date or dates of its choosing. A Registered Direct is like a PIPE in that securities are typically sold through a placement agent on a "best efforts" basis. Unlike in a PIPE transaction, investors in Registered Direct offerings receive free trading shares, and thus the pricing terms are typically more beneficial to the issuer than in a PIPE. The Firm is nationally recognized as one of the leading firms representing investment banks and institutional investors in private equity transactions of all types. These include registered direct and CMPO transactions, PIPES and equity lines of credit, as well as more traditional underwritten public offerings. The members in our Corporate Practice group and their team have propelled the firm to be ranked at the top of all firms in the number of total completed PIPE and registered direct financings representing investors or investment banks according to the industry publications.
A PIPE or Private Investment in Public Equity is a private investment, either common stock or a convertible instrument, in a public company at a discount to the current market value per share. Within a short period following the investment in the public company, usually 30-60 days, the public company is required to file a registration statement and register the shares that were sold in the PIPE. The public company is usually required to have the registration statement declared effective within 90-150 days. A PIPE is a type of financing transaction undertaken by a public company, normally with a small number of sophisticated investors. In a typical PIPE, the company relies on an exemption from SEC registration requirements to issue investors common stock or securities convertible into common stock for cash. The company then registers with the SEC the resale of the common stock issued in the private placement, or issued upon conversion of the convertible securities issued in the private placement.
2011 Top RD/PIPE Placement Agent Law Firms
|Law Firm||Number of Transactions|
|1. Ellenoff Grossman & Schole LLP*||59|
|2. Goodwin Procter LLP||34|
|4. Proskauer Rose LLP||22|
|5. Lowenstein Sandler PC||19|
|6. Latham & Watkins LLP||11|
|7. Dewey & LeBoeuf LLP||5|
|7. Pillsbury Winthrop Shaw Pittman LLP||5|
|7. Morrison & Foerster LLP||5|
|10. Davis Polk & Wardwell||4|
|10. Ropes & Gray LLP||4|
|10. K & L Gates||4|
|13. DLA Piper||3|
|13. Faegre & Benson LLP||3|
|13. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.||3|
|13. Schulte Roth & Zabel LLP||3|
|13. Kramer Levin Naftalis & Frankel LLP||3|
|13. Manatt, Phelps & Phillips, LLP||3|
|13. Blake, Cassels & Graydon LLP||3|
*Some of the deals were closed while members of the Firm were with Weinstein Smith LLP
China is a significant part of EG&S's international practice. The Firm's China Practice Group represents U.S. companies with operations and activities in China, as well as Chinese enterprises that are listed or do business in the U.S. Our China Practice has experience in a wide range of China-related matters, and we assist these businesses with strategic growth options, such as private equity financing, mergers and acquisitions, and public offerings. We have frequent and regular involvement in China-related transactions, including Reverse Mergers, Alternative Public Offerings, Private Placements, PIPEs, SPACs, IPOs, and Going Private Transactions. We also have extensive connections to the investment banks, hedge funds, private equity, and venture capital that are actively engaged in transactions related to China. Five of our eight attorneys that practice in this group are fluent in Mandarin, Cantonese, Shanghainese dialects and English, and we are able to prepare documentation in these languages and liaise with local PRC counsels to address related issues and concerns.
Going Private Transactions
Given the significant disruptions to the public markets and corresponding adjustments to the valuations of public companies and their securities in recent years, managers and investors are increasingly exploring the possibility of taking these entities private, in "going private" transactions. In 2009, we worked on various aspects of several such transactions. We have experience representing management teams, independent 13D investors, public companies and independent/special committees. In general terms, a going private transaction is the exchange of cash for the shares of a company's existing public shareholders so that, at the end of the transaction, the company is permitted to terminate its public company status. Forms of going private transactions, include: (i) mergers of the company with a newly-formed company owned by the manager/control group; (ii) tender offers by the newly-formed company; or (iii) a self-tender by the company for its own shares. A going private transaction typically is initiated by a controlling shareholder or by a group of shareholders that either constitutes a majority or at least a control position in a company. Senior management of the company often comprises such a buyout group, often making going private transactions appear to be management buyouts.
Mergers & Acquisitions
The Firm acts as special counsel to corporations and other entities, independent and special board committees, controlling stockholders and employee groups in acquisition transactions, including strategic acquisitions and divestitures, mergers of public companies, privately negotiated sales and alliances. Transactions typically involve a wide variety of industries and range in size, with a focus on small to middle market companies. In 2009, we were engaged to act as special SPAC counsel on nearly 10 SPACquisitions. Additionally, we regularly are engaged by our existing public and private company clients, as well as, investor groups, to represent them in their purchase or sale of business.
General Corportate and Commercial
The Firm regularly advises domestic and offshore clients in connection with contractual matters, including, partnerships, strategic alliances, joint ventures, licenses, executive compensation, employment and consulting agreements, stock option plans and other routine business matters.
Dual and Cross Listings
As the inter-relationship of the global financial markets becomes more complex, the Firm has participated in several initiatives involving both foreign public issuers also seeking listing on U.S. exchanges and markets, as well as U.S. issuers exploring foreign listings, including on the AIM Market of the London Stock Exchange, the Toronto Stock Exchange and Euronext Amsterdam .
The Firm routinely represents public companies and their officers, directors and employees in investigations and enforcement proceedings before the SEC, FINRA and other securities regulators. The Firm's securities litigators have represented companies before the SEC on a range of issues including insider trading, accounting misstatements, Regulation FD and valuation. The Firm also works with its clients to develop compliance programs in such areas as information barriers, insider trading and the purchase and sale of securities.
Investment Funds, Hedge Funds and Real Estate Opportunity Funds
The Firm represents both sponsors of, and investors in, hedge funds and other private equity vehicles. The Firm's practice includes: (i) formation of domestic and offshore investment vehicles of all types, including venture capital funds, and a sub-specialty in real estate opportunity funds, (ii) taxation of investment partnerships and other investment vehicles, and (iii) securities and corporate governance matters relating to portfolio companies (private and public) or real estate assets of the funds. Several of the Firm's partners have extensive non-legal backgrounds as general partners or managers of such vehicles.