Random Ramblings
When normal people nod off behind the wheel, they hopefully wake up with a start and immediately course-correct. But when it’s the Securities and Exchange Commission driving, it just shrugs and goes back to sleep.
That’s the lesson of yesterday’s debacle for Avon Products (NYSE: AVP), the door-to-door cosmetics company that has been a regular subject of takeover talk. Just around the same time that Thursday’s Term Sheet was coming out, an investment firm calling itself PTG Capital filed a document with the SEC, saying that it had offered to acquire Avon for $18.75 per share. It did not also issue a press release or use any other third party for distribution. Just the SEC’s EDGAR platform.
For context, Avon shares had been trading at around $6.50 prior to the news. Once the filing hit, however, the shares began to surge – climbing nearly 15% before the NYSE halted trading. Pretty soon, media outlets (including us at Fortune) were raising alarm bells over the supposed offer. No one had ever heard of PTG Capital before, nor did the firm seem to exist via Google or LinkedIn searches. Moreover, boilerplate in the filing twice referred to the acquirer as “TPG Capital” – suggesting that it had cribbed the language. Also not seeming to exist was PTG’s Texas-based law firm. Neither the listed phone numbers nor addresses were legitimate. About an hour and a half after the filing first hit, Avon put out a press release saying that it had not received any takeover offer, and that it couldn’t verify PTG’s existence.
Most likely, this was a stock manipulation scam. Someone owned Avon stock, filed the bogus document and sold when shares spiked.
For Avon to make an actual filing via EDGAR, it needs private confirmation codes and a password. For someone else to file a document that appears under Avon’s ticker symbol, however, all they need is their own EDGAR username and password – neither of which are verified by the SEC. This is how a legitimate hedge fund manager, for example, would file a proxy or tender offer document for a publicly-traded company.
But here’s what’s most remarkable: The phony Avon “takeover” filing remains on the SEC’s website. In fact, it’s the first thing someone searching for Avon Products would see.
When Fortune reached out to an SEC spokesman, he initially said: “Under the federal securities laws, filers are responsible for the truthfulness of their filings, and they are subject to enforcement actions when they are false or misleading. The SEC receives about 4,000 EDGAR filings daily, which are automatically available to the public and involve more than 300,000 individual and 28,000 company and mutual fund filers.”
Okay, but the SEC’s primary mission is investor protection. Including investors who might not be reading the business press. It’s one thing to not have appropriate safeguards on the inbox, but what about after everyone realizes that the filing is fundamentally flawed? The spokesman’s follow-up reply: “We don't take down documents, or amend them, or pass judgment on them. It is a repository for what is filed, not what is accurate.”
Seriously. The SEC is nonplussed by the idea that its own database may be the primary source of information that defrauds investors. And, if you need further proof, yesterday’s Avon scam looks a lot like a 2012 con related to a company called Rocky Mountain Chocolate Factory – and that filing also remains available on the SEC’s site.
A source familiar with the situation says that Avon has been in talks with the SEC, but it may not actually have the power to have the filing removed. According to the SEC’s website, only a filer can submit a request (in writing) to have a document removed in “very rare and unusual circumstances.” In other words, only the con artist himself can request the removal of his fraudulent filing. Brilliant.
The SEC clearly needs to put greater controls on what enters its system. But, in the meantime, perhaps it could lift a finger and remove an obvious forgery that already walked through the open gates.
• Recommended reading: A remarkable piece in today’s NY Times, about a private equity fund manager who has been stuck in a Uruguayan prison for more than a year due to an airline privatization gone bad. But there have been no actual allegations of wrongdoing against the private equity firm, to the extent that the fund manager hasn’t actually been charged with a crime. Yet in prison he remains, with no apparent legal recourse. Horrible situation. Read it here.
• Personnel scoop: I guess we can cross Golub Capital off the list of firms bidding for GE Capital’s mid-market lending unit. Word is that Golub has hired Chip Cushman away from GE Antares, where he has been a managing director for the past two years. He’ll have the same title with Golub, and will cover the New York and Washington, D.C. metro areas.
You might recall that we recently reported on how bidders for GE Antares were required to sign NDA’s that prohibited them from hiring any “key” GE Antares employees until the sale is closed. No comment from Golub, natch.
• Have a great weekend...
THE BIG DEAL
• Denali Therapeutics Inc., a San Francisco–based biotech startup focused on neurodegenerative diseases led by former Genentech executives, has launched with an initial equity commitment of $217 million.
Investors include Fidelity Biosciences, ARCH Venture Partners, Flagship Ventures and the Alaska Permanent Fund (represented by Crestline Investors). www.denalitherapeutics.com
VENTURE CAPITAL DEALS
• Intact Vascular Inc., a Wayne, Penn.-based maker of medical devices for minimally invasive peripheral vascular procedures, has raised $38.9 million in Series B funding. New Enterprise Associates led the round, and was joined by return backers like Quaker Partners and H.I.G. BioVentures. www.intactvascular.com
• Face++, a Chinese maker of facial recognition technology, has raised $25 million in new Series B funding (bringing the round total to $47m). Return backers include Qiming Venture Partners and Innovation Works, according to TechCrunch. Read more.
• Geekie, a Brazilian adaptive learning platform, has raised $7 million in new VC funding. Matsui & Co. and Omidyar Network co-led the round, and were joined by return backers Gera Venture and Virtuose. www.omidyar.com
• NuSirt Biopharma, a Nashville, Tenn.-based developer of therapies to treat chronic metabolic diseases, has raised $6 million in Series C funding ($2m of which has been called down). Hatteras Venture Partners was joined by return backers Mountain Group Partners and TriStar Technology Ventures. www.nusirt.com
• Vouch, a San Francisco-based social network for credit, has raised $6 million in Series A funding. Core Innovation Capital, Data Collective, Stanford StartX Fund and Cooley LLP were joined by seed backers First Round Capital, Greylock, IDG Ventures and AngelList. www.vouch.com
• Paidy, a Tokyo-based e-commerce payment and instant credit service built by parent company Exchange Corporation, has raised $5 million in new Series A funding (bringing the round total to $8.3m). Return backer Arbor Ventures was joined by new investors SIG Asia and MS Capital. www.paidy.com
• XAPPmedia, a Washington, D.C.-based provider of interactive audio content and advertising services, has raised $3.8 million in new VC funding from unidentified investors. www.xappmedia.com
• Incrediblue, a Cyprus-based online marketplace for yachting holidays, $1.8 million in new VC funding. Connect Ventures led the round, and was joined by Seedcamp, Howzat Ventures, Firestartr and return backer Openfund. www.incrediblue.com
PRIVATE EQUITY DEALS
Confie Seguros, a personal insurance company focused on Hispanic consumers, has acquired acquired three insurance brokerages in Buffalo, N.Y. They are: Able Insurance Agency, Becker-Able Agency and Linda’s Able Insurance. No financial terms were disclosed. Confie Seguros is a portfolio company of ABRY Partners. www.confieseguros.com
• InMotion Entertainment Group, a Jacksonville, Fla.-based airport retail and entertainment company, has acquired Airport Wireless Holdings, an airport retailer of consumer electronics and accessories. No financial terms were disclosed. InMotion is a portfolio company of Bruckmann, Rosser, Sherrill & Co. and Palladin Consumer Retail Partners. www.inmotionstores.com
• J.F. Lehman & Co. has acquired a majority stake in Sprint Energy Services LP, a Houston–based provider of technical environmental services to the upstream energy industry. No financial terms were disclosed. www.sprintenergyservices.com
• KKR has provided an undisclosed amount of equity funding to a new joint venture with Monterra Energy, which will pursue investments in the midstream energy sector in Mexico. www.kkr.comk
• Macquarie Infrastructure and Real Assets has agreed to acquire CCAL, the Australian subsidiary of tower operator Crown Castle International Corp. (NYSE: CCI), for approximately A$2 billion. www.crowncastle.com
• TPG Capital has agreed to acquire a majority stake in Poundworld Retail Ltd., a UK-based discount retailer. No financial terms were disclosed. www.poundworld.net
IPOs
• Arcadia Biosciences Inc., a Davis, Calif.-based agricultural biotech trait company, raised $66 million in its IPO. The company priced 8.2 million shares at $8 per share, compared to earlier plans to offer 7.15 million at between $13 and $15 per share. Its initial market cap is around $345 million, and it will trade on the Nasdaq under ticker symbol RKDA. Credit Suisse, J.P. Morgan and Piper Jaffray served as lead underwriters. Shareholders include Mandala Capital (11.5% pre-IPO stake). www.arcadiabio.com
• Fortress Transportation and Infrastructure Investors, a New York-based owner and acquirer of transportation and transportation-related infrastructure assets, raised $340 million in its IPO. The company priced 20 million shares at $17 per share (below $19-$21 offering range), and will trade on the NYSE. Barclays and Deutsche Bank Securities served as lead underwriters. The company is owned by Fortress Investment Group. www.fortress.com
EXITS
• Apax Partners and Permira have agreed to sell UK-based clothing retailer New Look to Brait SE (Johannesburg: BATJ) for approximately $1.2 billion. Read more.
• Pexco LLC, an Alpharetta, Ga.-based maker of plastic extrusion products, has sold its aerospace business to TransDigm Group Inc. (NYSE: TDG) for approximately $496 million in cash (including $160m of tax benefits to be realized by TransDigm over 15 years). Pexco is a portfolio company of Odyssey Investment Partners. www.pexco.com
OTHER DEALS
• Avago Technologies (Nasdaq: AVGO) has hired investment banks to advise on a possible takeover of a large rival chipmaker, according to Reuters. Avago could be willing to spend upwards of $10 billion, and already has reached out to “potential targets” like Xilinx Inc. (Nasdaq: XLNX), Renesas Electronics (Tokmyo: 6723) and Maxim Integrated Products Inc. (Nasdaq: MXIM). Read more.
• Shutterfly Inc. (Nasdaq: SFLY), an online photography company currently valued at around $1.7 billion, said that it will keep considering “strategic transactions that provide compelling value,” following last year’s unsuccessful sale process. The company remains locked in a proxy fight with Marathon Partners Equity Management. Read more.
FIRMS & FUNDS
• The Blackstone Group has acquired a minority stake in $13.6 billion hedge fund Magnetar Capital, for an undisclosed amount. Read more.
• China Renaissance Partners is raising upwards of $150 million for its second venture capital fund, known as Huaxing Capital Partners, according to a regulatory filing. www.chinarenaissance.com
• Collaborative Fund, a New York-based seed investment firm led by Craig Shapiro, has raised $65 million for its third fund, according to a regulatory filing. hwww.collaborativefund.com
• Harrison Metal, a seed-stage fund led by Michael Dearing, has closed its fourth fund with $68 million in capital commitments. www.harrisonmetal.com
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