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.