Monthly Archives: December 2013

Net Element Retains Merriman Capital as Capital Markets Advisor

SAN FRANCISCO – December 31, 2013 – Merriman Capital, Inc. (“Merriman”), a wholly owned subsidiary of Merriman Holdings, Inc. (MERR), announced today that it has been retained as Capital Markets Advisor to Net Element, Inc. (“the Company”) (NETE).

Merriman will provide Net Element with corporate brokerage services and advice on the effective engagement of a broader institutional shareholder base, financing solutions, and strategies for organizing their capital structure. Merriman`s Capital Markets Advisory Group clients also benefit from access to unique capital solutions and the implementation of various public markets initiatives.

Net Element is a U.S. based global technology company that specializes in mobile payments and value added transactional services in emerging countries and the U.S. The company owns and operates a global mobile payments and transactional processing holding company called TOT Group. TOT Group`s companies include Unified Payments, which focuses on payment processing, Aptito, which focuses on value-added services, and TOT Money, which focuses on mobile payments. Net Element is based in Miami, Florida, with international headquarters in Moscow, Russia and operations in Ukraine and Kazakhstan.

“We are excited to begin working with Merriman to diversify our shareholder base and to drive interest in our unique vision for Payments Innovation across the globe,” commented Oleg Firer, CEO of Net Element.  “We selected Merriman after an exhaustive search due to their track record in the payments space and their understanding of emerging markets.”

“Net Element is an exciting addition to the Capital Markets Advisory Group,” commented Douglas Rogers, Managing Director and Head of the Capital Markets Advisory Group at Merriman.  Doug continued, “We believe the Company could be positioned for strong growth with its payment technologies, geographical reach in emerging markets and pipeline of strategic acquisitions. The Capital Markets Advisory Group will offer Net Element`s management team with a range of services including market insight, corporate brokerage services as well as strategic advice and access to capital solutions.”

About Merriman Capital, Inc.

Merriman Capital, Inc. is a full service investment bank and Broker-Dealer that facilitates efficient capital formation through a proprietary digital network, as well as Capital Markets Advisory and comprehensive Corporate Brokerage services for public and private companies. The firm also provides equity and options execution services for sophisticated investors and differentiated research for high growth companies. Merriman Capital, Inc. is a wholly owned brokerage subsidiary of Merriman Holdings, Inc. (MERR) and is the leading advisory firm for publicly traded, high-growth companies.

Digital Capital Network, powered by Merriman Capital, is a capital marketplace that enables highly targeted and more efficient execution of transactions. Please visit our website for more information on how you can be a part of our Digital Capital Network: http://www.digitalcapitalnetwork.com

Merriman Capital, Inc. is a registered broker-dealer and member of The Financial Industry Regulatory Authority (FINRA) http://www.finra.org/ and the Securities Investor Protection Corporation (SIPC) http://www.sipc.org/.

About Net Element

Net Element (NETE) is a global technology-driven group specializing in mobile payments and value-added transactional services. The company owns and operates a global mobile payments and transaction processing provider, TOT Group. TOT Group companies include Unified Payments, recognized by Inc. Magazine as the #1 Fastest Growing Private Company in America in 2012, Aptito, a next generation cloud-based point of sale payments platform, and TOT Money, which has a leading position in Russia and has been ranked as the #1 SMS content provider by Beeline, Russia`s second largest telecommunications operator. Together with its subsidiaries, Net Element enables ecommerce and adds value to mobile commerce environments. Its global development centers and high-level business relationships in the United States, Russia and Commonwealth of Independent States strategically position the company for continued growth. The company has U.S. headquarters in Miami and international headquarters in Moscow. More information is available at http://www.netelement.com.

Note to Investors

This press release contains certain forward-looking statements based on our current expectations, forecasts and assumptions that involve risks and uncertainties. This release does not constitute an offer to sell or a solicitation of offers to buy any securities of any entity. Forward-looking statements in this release are based on information available to us as of the date hereof. Our actual results may differ materially from those stated or implied in such forward-looking statements, due to risks and uncertainties associated with our business, which include the risk factors disclosed in our Form 10-K-A filed on April 30, 2013 and the Form 10-Q filed on November 14, 2013. Forward-looking statements include statements regarding our expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” and “would” or similar words. We assume no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise. The Form 10-K-A filed on April 30, 2013 and the Form 10-Q filed on November 14, 2013, together with this press release and the financial information contained herein, are available on our website, http://www.merrimanco.com. Please click on “Investor Relations.”

# # #

At Merriman:

Douglas Rogers

Managing Director

Merriman Capital, Inc.

(415) 248-5612

Howard Bernstein

Chief Compliance Officer

Merriman Capital, Inc.

(415) 262-1377

1487349_439244106201841_2132384116_n

8 Tech Companies That May Go Public in 2014

This has been a busy year for IPOs. In total, 222 companies went public in the U.S. in 2013, raising nearly $55 billion, which represents the most IPO activity since 2000, according to data from Renaissance Capital.

Twitter was perhaps the most hyped IPO of the year and one of the best performing to date. The social network raised $1.8 billion from its IPO in November and its stock has nearly tripled in less than two months. Other tech companies like Zulily, FireEye and Rocket Fuel are trading well above their IPO prices as well, though these were comparatively smaller IPOs.

chart1

 

While we may not see another tech company go public in the coming year with as much hype as Twitter, there are plenty of notable tech companies still in the IPO pipeline.

CB Insights, a research firm, recently released a report noting that there are 590 venture-funded tech companies in the U.S. with valuations of at least $100 million and healthy trajectories, which would make them viable candidates to go public. Of these, just more than two dozen are said to have valuations of $1 billion or more.

Screen Shot 2013-12-24 at 4.58.43 PM

 

We’ve highlighted 8 businesses that are reportedly considering going public in the next year or so.

Box

Box, a cloud storage service, has repeatedly said that it plans to go public sometime in 2014. The company, which is valued at $2 billion, has reportedly selected bankers for its IPO.

As Mashable reported previously, Box has also been holding mock earnings calls to prepare for life as a public company. “We want to be acting like a public company before we go public,” Dylan Smith, co-founder and CFO of Box, told Mashable back in July.

Dropbox

Box isn’t the only cloud business expected to public in the near future. Dropbox, which had beenrumored to be considering an IPO for 2013, is now said to be raising a new $250 million round of funding at an $8 billion valuation. The funding, according to the New York Times, is intended to help the business stay private for a few more months and boost its valuation before going public sometime in 2014.

Square

Twitter hadn’t even started to trade on the stock market before rumors surfaced that co-founder Jack Dorsey was planning to take Square public. Square, a mobile payments company valued at $3.25 billion and cofounded by Dorsey after he left Twitter, has reportedly begun talking to banks about pursuing a public offering in 2014. Dorsey, for his part, has admitted that a Square IPO will happen “eventually.”

“Eventually we’ll get there,” Dorsey told Bloomberg in an interview. “Right now we’re building the practice within the company and building the discipline. I think Square is ahead of a lot of companies in that regard because I think we’re building a financial company.”

Shazam

Shazam, the popular music discovery tool, brought on a new CEO this year and raised a $40 million round of funding to accelerate growth before pursuing a public offering. Rich Riley, the company’s current CEO, told Mashable in August that an IPO was “at least” a year away, meaning it might take place in the second half of 2014 or else sometime in 2015.

Alibaba

Alibaba, the largest e-commerce site in China, is expected to go public in 2014 in what may be the largest public offering since Facebook. While Alibaba may not be a household name in the U.S., its IPO will likely help another company that is: Yahoo. The U.S. tech company is the second largest shareholder in Alibaba and Yahoo stock has already benefited from this. That said, the IPO may not happen until later in 2014 or 2015: Alibaba is reportedly looking to extend a loan through next year to buy more time before going public.

King

You may not be familiar with Midasplayer (or King.com, as it’s more commonly referred to), but chances are you’re familiar with its hugely successful game Candy Crush. The company, which was founded a decade ago, has reportedly hired several banks for an IPO and was said to be considering one for 2013. A more recent report, however, suggested that the company would wait until 2014 in order to prove to potential investors that it has other popular games up its sleeve besides Candy Crush. To put that another way, King wants to prove that it can avoid some of the issues that have plagued Zynga as a public company.

Rovio, the company behind the popular Angry Birds games, has also been rumored to be considering going public, but the company’s execs have repeatedly said it has no plans to do so anytime soon.

Gilt Groupe

Each year, there seem to be reports that Gilt Groupe will go public in the year to come — usually fueled by the company’s execs — and this year is no different. Gilt Groupe went through multiple rounds of layoffs in recent years, brought on a new CEO from Citigroup at the end of 2012 andsold off one of its properties, Jetsetter, early this year. So once again, the company is rumored to be pursuing an IPO, this time in late 2014.

If and when Gilt does go public, it won’t be the first flash sales service to do so. Zulily, a flash sales site geared towards mothers and children, went public in November. Its stock is currently trading around $40 a share, nearly double its IPO price.

Seamless

Seamless merged with GrubHub earlier this year and recent reports suggest the food delivery giant is cooking up an IPO for sometime next year. According to one report, Seamless may either go public in late 2014 or early 2015 with a market cap of up to $5 billion.

Other popular Internet services like Pinterest and Spotify are believed to be candidates for public offerings sometime down the road, but no timetables have been reported for either yet.

Image: Bill Pugliano/Getty

1487349_439244106201841_2132384116_n

Glossary of Common IPO Terms

Appendix 1: “Talk the Talk”—

Glossary of Common IPO Terms

The initial public offering has a distinct lexicon. Here is a list of common IPO terms that can help you navigate discussions about the IPO process.

10b-5  Reference to Rule 10b-5 of the Exchange Act, which establishes liability for fraudulent ac- tivities in a securities offering and for material misstatements or omissions in the offering materials, such as the offering prospectus.

Blue line, digital blue (or similar terms)  References to the financial printer’s providing a final, type- set version of the preliminary or final prospectus for final approval before printing the prospectus in quantity.

Book runner  The managing or lead underwriter.

Building a book  The underwriters’ process of building interest in the initial public offering and ob- taining indications of interest, and specific price and quantity information, from potential investors.

Cheap stock  Securities, commonly stock options or other equity awards, granted with an exercise price less than fair market value.

Comfort letter (or cold comfort letter)  The letter from the company’s auditors to the underwriters regarding the financial data and financial statements in the registration statement, which is delivered at pricing.

Comment letter  A letter from the SEC commenting in detail on the registration statement filed with the SEC, after its review of the initial registration statement or amendments to the filing.

D&O questionnaire  A questionnaire that the company’s directors, officers and major stockholders will be required to complete concerning matters that may be required to be disclosed in the registra- tion statement.

Directed share (or friends and family) program  A program in which certain persons close to the company (so called “friends and family”) can purchase a certain amount of shares in the offering.

Drafting sessions  Meetings with the IPO working group in-person or by conference call to discuss in detail the drafting of the prospectus.

Due diligence defense  The defense the underwriters have to liability for material misstatements or omissions in the offering documents, which is established by the conduct of reasonable due diligence as prescribed in the securities laws.

Electronic road show  A road show presentation given over the Internet or other electronic means, where the participants listen to the oral presentation and remotely view the slide presentation.

Exchange Act (or ’34 Act)  The Securities Exchange Act of 1934, as amended, and associated rules and regulations of the SEC.

FINRA  The Financial Industry Regulatory Authority (formerly, the National Association of Secu- rities Dealers, or “NASD”), which is the self-regulatory organization governing the conduct of the underwriters and broker-dealers in the IPO.

Free-writing prospectus  Any written or graphic communication, other than a prospectus that meets the statutory requirements of the Securities Act, that constitutes an offer to sell, or a solicitation of an offer to buy, securities that are or will be the subject of a registration statement.

Gun-jumping  Any publicity or other activity that might be considered an illegal offer to sell the company’s securities prior to the filing of the registration statement.

Lockups  An agreement by the company, directors, officers and certain stockholders to not sell any company securities for a prescribed period of time after the IPO, typically 180 days.

Over-allotment option (or Green Shoe, “shoe”)  An option that gives the underwriters the option to purchase up to 15% additional shares, on the same terms that they purchased the original shares, for a period up to 30 days after the initial public offering.

Pre-filing period  The period after the company becomes “in registration” and before the company has filed its registration statement. There is no bright line as to when a company first becomes “in registration,” but, at the latest, a company is in registration once it reaches an understanding with a managing underwriter to lead its public offering. During the so-called “pre-filing period” of the IPO, the company and underwriters may not solicit offers to buy the company’s securities to be offered in the IPO.

Price range  The range of prices per share stated in the preliminary prospectus as the range in which the company expects it will ultimately price its stock for sale to the public.

Pricing  The determination by the company of the per share price at which the company will offer its stock to the public, after consultation with the underwriters following the road show and effec- tiveness of the registration statement.

Pricing committee  A board committee, usually comprised of the CEO, CFO and one or two inde- pendent directors, that will determine at pricing the final offering price and approve the underwriting agreement.

Prospectus  The “glossy” portion of the registration statement given to prospective investors.

Red herring or “reds”  The preliminary prospectus, printed with a red legend on the side of the cover stating that the prospectus is subject to completion.

Response letter  A letter from the company or counsel for the company, responding to the SEC’s comments on the registration statement.

Road show  Representatives from the company meet with prospective investors (generally, institu- tional investors such as mutual funds, pension funds and the like) in various cities and make presen- tations about the company.

Road show presentation  The slide show presentation (and related remarks) prepared for investor presentations on the road show.

Sarbanes-Oxley (or Sarbox, Sox)  The Sarbanes-Oxley Act of 2002, which was the source of a great number of securities reforms increasing the legal compliance requirements of public companies.

SEC  The U.S. Securities and Exchange Commission.

Securities Act (or ’33 Act)  The Securities Act of 1933, as amended, and associated rules and regula- tions of the SEC

Summary (or Box)  The summary of the company and offering contained in the front of the pro- spectus, usually surrounded by a box border.

S-1  The Form S-1 is the registration statement filed with the SEC to register securities for an offer- ing. It includes the prospectus.

S-K  Regulation S-K includes and describes items of disclosure required to be included in the nonfi- nancial portion of the registration statement on Form S-1.

S-X  Regulation S-X includes and describes items of disclosure required to be included in the finan- cial portion of the registration statement on Form S‑1.

Window  The theoretical period in which the company may optimally sell, or may only be able to sell, its stock in the IPO.

1487349_439244106201841_2132384116_n

Sale of Shares to the Public (Secondaries)

Sales of shares by the fund to the public in a portfolio company’s initial public offer- ing or through subsequent registered offerings is a fundamental liquidity strategy. When analyzing this strategy, a fund should consider how the following factors would affect its ability to achieve liquidity:

•An IPO is primarily a capital-raising event—current investors may be limited in the amount they can sell in the IPO.

•Market demand for secondary offerings will affect the amount and timing of sales by the fund. If the public market float and trading volume are small, the fund may not be able to sell sizable blocks of its shares to the public.

•While the public market may value the shares at a higher multiple, the market price may deteriorate over time and sales by officers, directors and other signifi- cant stockholders could further depress the trading price.

•Registration rights agreements almost always contain restrictions on forcing the company to register shares, including provisions allowing the underwriters and company to cut back the amount of shares sold by an investor in an offering.

•Significant investors are typically locked up, or restricted from selling shares, for 180 days following an IPO and may be locked up for various periods after later public offerings.

Funds can take a number of steps to assess whether an IPO of a portfolio company will achieve satisfactory liquidity for its equity in the company through secondary offer- ings. First, a fund should evaluate the company’s business prospects and ability to deliver operating results after the IPO that will maintain or increase public stockholder value. This would include consideration of how the company will report results under SEC guidelines and which results public investors and analysts would find important. Second, a fund should analyze its rights under the portfolio company’s organizational agreements and any registration rights and other agreements relating to the fund’s rights to participate in public offerings. Third, the fund should talk with investment banks specializing in the company’s particular industry about the probable strength and depth of the market for secondary of- ferings after the IPO. The market for secondary offerings will depend, in part, on the size of the company and offering; the level of public interest in the company; the strength of the company’s industry or sector; the company’s growth plan and strategies; and the outlook for the stock market generally. All of these matters can affect whether the fund may be able to liquidate its position quickly through a small number of large sales or more slowly through a large number of small sales.

1487349_439244106201841_2132384116_n

 

Comparison of Private Equity and Venture-Backed IPOs to Private Sales

 

The Statistics

“Choosing the Exit Door”: Comparison of Private Equity and Venture-Backed IPOs to Private Sales

Venture-Backed IPOs. Traditionally, IPOs have been viewed as a preferred exit strat- egy for venture capital funds. Among other reasons, public offerings frequently result in the highest valuation and showcase successful investments. The table below summarizes the number of IPOs of venture-backed companies from 1992 to 2007.

However, exit by private sale (in both number and dollars) has outpaced exit by IPO in the United States. Since 2001, the number of private exits with disclosed values exceeded the number of IPO exits by approximately 9 to 1. Only at the 1999-2000 height of the public market bubble did the number of IPO exits begin to approach the number of private sale exits. During 2000, there were approximately 201 IPOs of venture-backed companies, compared with 462 private sale exits.

Year Number of Venture-Backed IPOs
   
2007 75
2006 56
2005 43
2004 67
2003 23
2002 18
2001 22
2000 201
1999 250
1992-1998 141 average per year

Source: http://www.IPOVitalSigns.com, © 2008 CCH, a Wolters Kluwer Company. Used by permission.

Private Equity-Backed IPOs.  Even with the increased popularity of “secondarybuyouts”—one private equity fund selling to another private equity fund—private equity- backed IPO exits have seen a dramatic increase since 2004. In 2006, 27% of U.S. IPOs (34% by proceeds) involved companies purportedly backed by private equity funds, ac- cording to Global IPO Trends Report 2007 by Ernst & Young. Nevertheless, private sales still dominate IPOs as an exit strategy for private-equity-backed companies. For instance, for 2006 it has been reported that there were 120 sales of private equity-backed compa- nies to other private equity funds alone, compared to 65 IPOs of private equity-backed companies. Note that statistics vary significantly with respect to the number of IPOs of companies that were backed by private equity sponsors.

1487349_439244106201841_2132384116_n

Chapter 9—Price, Close and Trade

Conclusion of the Road Show and Effectiveness of the

Registration Statement

The initial public offering process culminates in the company’s stock trading on the stock exchange on which the stock is listed. Before the company and the underwriters can agree on the price at which the stock will be offered to the public, the offering participants must work in coordination to complete the SEC review process, FINRA’s review of the underwriting arrangements and the stock exchange’s review of the company’s listing ap- plication. The goal is to make sure that these processes conclude before or during the wind- down of the road show. The company and the underwriters work hard to build interest during the road show and hope to price the offering as soon as the road show is completed in order to take advantage of the interest generated.

Events Leading to Pricing

The SEC must declare the company’s registration statement effective in order for pric- ing and trading to occur. Generally, on the day the road show concludes, the company and the managing underwriters ask the SEC to declare the registration statement effective and, once effective, the company sets the price for the IPO.

The SEC’s rules require the company and managing underwriters to request in writing, at least 48 hours in advance of the desired effective time, that the SEC declare the registra- tion statement effective. In addition, FINRA must confirm that it has no objection to the underwriting arrangements before the SEC will declare the registration statement effective. If acceleration is requested at least 48 hours in advance, and the company has addressed the SEC’s comments on the registration statement to the SEC’s satisfaction, the SEC is gen- erally willing to accommodate the requested effective time. Effectiveness orders, the official SEC document declaring the registration statement effective, are now posted on the SEC’s EDGAR website. The company’s registration statement under the Exchange Act—typically a short-form registration statement Form8-A in the case of an IPO—will become effective at the same time as the Securities Act registration statement.

1487349_439244106201841_2132384116_n

 

Selling Stockholders

Existing stockholders may wish, and in fact may have contractual registration rights, to sell shares of company common stock they own in the IPO. The company and the un- derwriters should address this issue, which can be quite sensitive, early in the registration process. Some founders and officers may have a substantial portion of their net worth in company stockholdings. Often they have sacrificed for years to build a successful company and understandably may wish to “take some chips off the table” by selling some stock to raise cash. Underwriters may be concerned that allowing stockholders, especially officers or founders, to sell in the IPO may be perceived as insiders “bailing out” because of doubts about the company’s prospects. However, if the company is willing to permit existing stockholders to sell and the underwriters are eager to please both the company and the selling stockholders, and particularly if the market for the issue is “hot,” selling stockhold- ers may be included in the offering, in some cases as the seller of the shares subject to the underwriters’ over-allotment option.

Participation of selling stockholders in the IPO requires additional offering arrange- ments. To ensure a smooth process, the selling stockholders will be asked to sign a power of attorney assigning to at least one attorney-in-fact the authority to negotiate and sign the underwriting agreement on behalf of the selling stockholders. Selling stockholders will also be asked to surrender their stock certificates to a custodian, who will deliver the certificates for transfer at the closing of the offering.

Lockups

Underwriters use “lockup” agreements as a means to help stabilize trading in the com- pany’s common stock following the IPO. Typically, the underwriters will require the com- pany and its directors, officers and stockholders to enter lockup agreements in which they agree not to sell, transfer or otherwise dispose of any common stock they own for a period of time, typically ending 180 days after the closing, without the underwriters’ consent. If the company and underwriters agree to offer a directed share or “friends and family” pro- gram (discussed below), participants in the program also will be required to sign a lockup agreement. The underwriters will require that most, if not all, of the lockup agreements be

 

1487349_439244106201841_2132384116_n

Distribution of the Shares

Underwriters have different account bases that constitute the primary sources of po- tential resales of the company’s stock in the IPO. Most investment banks that serve as managing underwriters focus primarily on selling to institutional accounts. Other, often

regional, underwriters focus primarily on selling to retail customers. Companies often opt to include both types of underwriters in the underwriting syndicate for the offering, so that both institutions and individual investors participate.

The optimal mix of institutional and retail investors is a subject of much debate. In- stitutional investors typically will hold large blocks of common stock. They are gener- ally considered more sophisticated stockholders than retail investors and better able to comprehend a company’s financial and operational complexities. On the other hand, an institutional investor can more easily influence the market for a company’s common stock through its purchase and sale decisions. Institutional investors also typically take a more activist approach to corporate governance matters. Conversely, retail investors can provide liquidity and stability for a company’s common stock, and sales or purchases by a single retail investor rarely cause market movement in the company’s common stock.

1487349_439244106201841_2132384116_n

 

Offering Schedule

If nothing else, the organizational meeting attendees will be keenly interested in dis- cussing the offering schedule and responsibility checklist. The underwriters will present at least ahigh-level offering timeline, with important targets for registration statement filing, road show commencement and offering conclusion. A sample offering schedule and time and responsibility checklist can be found in Appendix 2. This schedule allows for multiple drafting sessions; the underwriters’ completion of their due diligence review; the filing of the registration statement with the SEC; the waiting period for the company to receive its first round of comments from the SEC (approximately 30 days); the revision of the registration statement in response to the SEC’s comments (which may require one

or several amendments); the road show presentations; and the pricing and closing of the offering. In some circumstances, the company may want to compress this time period to take advantage of market opportunities, such as favorable news regarding the company’s industry or confidence in the public markets. While the working group may work furiously to accelerate the offering schedule to meet the company’s and underwriters’ optimal offer- ing schedule, SEC review time and resolution of open issues, especially accounting issues, may significantly delay the offering. Companies that are thoroughly prepared will be in the best position to accelerate the process. Chapter 5 also provides an overview of an offering roadmap.

1487349_439244106201841_2132384116_n