THE FIGHT FOR FLIGHT- Chapter Two
The Case Continued & 2001-2006
January 13, 2017
Please enjoy the second installment of The Fight for Flight. I welcome all positive and constructive feedback at thefightforflight@gmail.com:
At the turn of the century, things would relatively remain the same… or would they get worse?
Back in 1999, CIBC Oppenheimer Corp’s refusal to honor the pre-sold IPO by the broker, Hornblower and Weeks, had a devastating effect on Baltia Air Lines, Inc. The timing and sequence of events following this maneuver perfectly encapsulate the cutthroat nature of corporate politics in its essence.
It is important to note, a special meeting had been held by the NASDAQ and Baltia was approved for NASDAQ small cap listing. Concurrently, the Boston Stock Exchange had also approved Baltia for listing. As a result, Baltia was entered into the certification process, which was subsequently registered effective by the SEC.
It is at this point in time, on the Friday evening prior to the SEC closing deadline the following week, that Hornblower and Weeks began to encounter problems with it’s clearing agency, CIBC Oppenheimer Corp. This, unbeknownst to Hornblower and Baltia at the time, was most likely due to Oppenheimer’s alleged conflict of interest with Air Canada .
Due to Oppenheimer’s refusal to process Hornblower and Week’s transactions, the investment funds that Hornblower had raised intently for Baltia were in effect, useless, and could not be administered. Baltia and Hornblower counsel went on the defensive immediately and vigorously attempted to get in contact with Oppenheimer…
No answer.
Desperate, Baltia then contacted the SEC directly, inquiring if they could extend the closing deadline. The SEC explained that by regulation, funds for Firm Commitment Offerings must be transferred within three days. They gave Baltia five.*
After many efforts, Baltia counsel was finally able to get in contact with CIBC Oppenheimer. Oppenheimer relayed that Hornblower and Weeks was their client, not Baltia, and refused to engage in any dialogue.
Baltia’s counsel filed an Emergency Injunction, with underlying action for damages, in the Supreme Court of New York ( Matter of Baltia Air Lines, Inc. v. CIBC Oppenheimer Corp. ) requesting the court compel Oppenheimer to process Baltia’s transactions with Hornblower due to the IPO deadline. By the time the courts even viewed the filing it was too late. The IPO deadline had passed.*
After the case was dismissed, Baltia appealed to the New York Supreme Court of Appeals. All appeals were denied. Hornblower and Weeks then filed a separate action against CIBC Oppenheimer Corp. Oppenheimer strategically managed to prolong the case by postponing the hearing for years.* In 2003, Hornblower and Weeks was ordered to cease and desist and go out of business by the NASD and the SEC.** CIBC Oppenheimer Corp. escaped unscathed.
After the failed appeals attempts in New York, in 2001 Baltia appealed to the US Supreme Court, however the court did not accept the case.
Due to the fact that the Hornblower IPO did not close, Baltia was under the impression that it was not a public company. However, since the SEC had declared Baltia’s registration statement effective , even though the main IPO offering did not complete, the bridge registration that was attached to it was completed with shares in the public’s hands.* This effectively made Baltia Air Lines, Inc. a public company, without them even knowing.
In 2002, the NASDAQ and Boston listings had been lost and the firm at the time, BNJ Divine Securities, then sponsored Baltia’s listing on the Pink Sheets.*
Essentially, from 2000-2005 the airline sat idle. No capital was raised and there was absolutely no progress made. This is contrary to many public criticisms that Baltia has been trying to fly since 1989, only to fail thus far based solely on their own incompetency.
The incompetency was plenty there, however. With regard to its common stock inevitably made public, “The Company currently has no equity compensation plans, no written purchase, savings, option, bonus, appreciation, profit sharing, thrift, incentive, pension or similar plan or written compensation contracts.”***
As of December 31, 2006, Baltia had four full-time and five part-time employees. Per Baltia’s Application, “No compensation has been paid to our executive officers during the fiscal years ended December 31, 2006, 2005, and 2004”. ***
2007 would mark a significant point in the company’s history. Several new members came on board and things ultimately began happening. This is when the story starts to get interesting…
To Be Continued…
Message from the Author:
The above is a prime example of corporate politics and maneuvering. What transpired was not fair, nor was it easily preventable. Baltia simply got the short end of the stick. Could different actions have taken place subsequent to the failed IPO? Certainly. In hindsight, the company should have reevaluated the proper course of action after the case was finally dismissed. There were many obstacles, yet it seems as though Baltia was acting, many times, on a reactionary basis. There were several opportunities to step back, reflect on what had transpired and to strategize how to reposition the company for success, taking into consideration the new geopolitical environment. This example stresses the importance of having an adaptable plan in place, as you must be ready for anything at all times.
Special thanks to Speckulator for his invaluable archive of Baltia documents.
** The Hornblower History
*** Application of Baltia Air Lines, Inc.
The Case Continued & 2001-2006
January 13, 2017
Please enjoy the second installment of The Fight for Flight. I welcome all positive and constructive feedback at thefightforflight@gmail.com:
At the turn of the century, things would relatively remain the same… or would they get worse?
Back in 1999, CIBC Oppenheimer Corp’s refusal to honor the pre-sold IPO by the broker, Hornblower and Weeks, had a devastating effect on Baltia Air Lines, Inc. The timing and sequence of events following this maneuver perfectly encapsulate the cutthroat nature of corporate politics in its essence.
It is important to note, a special meeting had been held by the NASDAQ and Baltia was approved for NASDAQ small cap listing. Concurrently, the Boston Stock Exchange had also approved Baltia for listing. As a result, Baltia was entered into the certification process, which was subsequently registered effective by the SEC.
It is at this point in time, on the Friday evening prior to the SEC closing deadline the following week, that Hornblower and Weeks began to encounter problems with it’s clearing agency, CIBC Oppenheimer Corp. This, unbeknownst to Hornblower and Baltia at the time, was most likely due to Oppenheimer’s alleged conflict of interest with Air Canada .
Due to Oppenheimer’s refusal to process Hornblower and Week’s transactions, the investment funds that Hornblower had raised intently for Baltia were in effect, useless, and could not be administered. Baltia and Hornblower counsel went on the defensive immediately and vigorously attempted to get in contact with Oppenheimer…
No answer.
Desperate, Baltia then contacted the SEC directly, inquiring if they could extend the closing deadline. The SEC explained that by regulation, funds for Firm Commitment Offerings must be transferred within three days. They gave Baltia five.*
After many efforts, Baltia counsel was finally able to get in contact with CIBC Oppenheimer. Oppenheimer relayed that Hornblower and Weeks was their client, not Baltia, and refused to engage in any dialogue.
Baltia’s counsel filed an Emergency Injunction, with underlying action for damages, in the Supreme Court of New York ( Matter of Baltia Air Lines, Inc. v. CIBC Oppenheimer Corp. ) requesting the court compel Oppenheimer to process Baltia’s transactions with Hornblower due to the IPO deadline. By the time the courts even viewed the filing it was too late. The IPO deadline had passed.*
Quote:“NOTE: As Baltia management was assessing the situation, we were impressed by how far the mere $700,000 had gotten us in preparations for flight operations. We realized that had we started with one B747 on a light schedule, we would have been able to raise the nominal additional capital needed to complete the certification and launch revenue service. At the time, we prepared the initial budget for the one aircraft launch, based on our first-hand knowledge of every cost involved with contingency reserves, which was accepted by the DOT. Unfortunately, Baltia was not able to raise the money under short notice.”*
After the case was dismissed, Baltia appealed to the New York Supreme Court of Appeals. All appeals were denied. Hornblower and Weeks then filed a separate action against CIBC Oppenheimer Corp. Oppenheimer strategically managed to prolong the case by postponing the hearing for years.* In 2003, Hornblower and Weeks was ordered to cease and desist and go out of business by the NASD and the SEC.** CIBC Oppenheimer Corp. escaped unscathed.
After the failed appeals attempts in New York, in 2001 Baltia appealed to the US Supreme Court, however the court did not accept the case.
Due to the fact that the Hornblower IPO did not close, Baltia was under the impression that it was not a public company. However, since the SEC had declared Baltia’s registration statement effective , even though the main IPO offering did not complete, the bridge registration that was attached to it was completed with shares in the public’s hands.* This effectively made Baltia Air Lines, Inc. a public company, without them even knowing.
In 2002, the NASDAQ and Boston listings had been lost and the firm at the time, BNJ Divine Securities, then sponsored Baltia’s listing on the Pink Sheets.*
Essentially, from 2000-2005 the airline sat idle. No capital was raised and there was absolutely no progress made. This is contrary to many public criticisms that Baltia has been trying to fly since 1989, only to fail thus far based solely on their own incompetency.
The incompetency was plenty there, however. With regard to its common stock inevitably made public, “The Company currently has no equity compensation plans, no written purchase, savings, option, bonus, appreciation, profit sharing, thrift, incentive, pension or similar plan or written compensation contracts.”***
As of December 31, 2006, Baltia had four full-time and five part-time employees. Per Baltia’s Application, “No compensation has been paid to our executive officers during the fiscal years ended December 31, 2006, 2005, and 2004”. ***
2007 would mark a significant point in the company’s history. Several new members came on board and things ultimately began happening. This is when the story starts to get interesting…
To Be Continued…
Message from the Author:
The above is a prime example of corporate politics and maneuvering. What transpired was not fair, nor was it easily preventable. Baltia simply got the short end of the stick. Could different actions have taken place subsequent to the failed IPO? Certainly. In hindsight, the company should have reevaluated the proper course of action after the case was finally dismissed. There were many obstacles, yet it seems as though Baltia was acting, many times, on a reactionary basis. There were several opportunities to step back, reflect on what had transpired and to strategize how to reposition the company for success, taking into consideration the new geopolitical environment. This example stresses the importance of having an adaptable plan in place, as you must be ready for anything at all times.
Special thanks to Speckulator for his invaluable archive of Baltia documents.
** The Hornblower History
*** Application of Baltia Air Lines, Inc.
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