Baltia Sues Oppenheimer Over Axed IPO * Sw
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Baltia Sues Oppenheimer Over Axed IPO
Start-up airline sues Oppenheimer over axed IPO
By Jack Reerink
NEW YORK, Feb 16, 1999 (Reuters) - Start-up airline Baltia Air Lines Inc. is suing CIBC Oppenheimer & Co. for derailing its planned stock offering in an unusual case that shows clearing firms are getting picky about whom they do business with.
Baltia, which plans to fly from New York to St. Petersburg in a Boeing 747-200 to be leased from Cathay Pacific, late last month saw its $5 million initial public offering (IPO) scuttled by Oppenheimer. Two weeks before the planned Feb. 12 offering date, the brokerage refused to clear -- or guarantee and process -- trades in Baltia's newly issued stock without giving a clear reason, according to court documents filed by Baltia.
A New York Supreme Court judge on Feb. 10 ruled Oppenheimer, which is a subsidiary of Canadian Imperial Bank of Commerce had the right to refuse new business without giving a reason under a contract with Baltia's underwriter, Hornblower & Weeks. Baltia is appealing that decision.
Oppenheimer's sudden refusal to clear the IPO came two days after the firm in a memo warned the small brokerages it does business with, including Hornblower, that it has the right to refuse to clear their clients' stock offerings.
The memo followed the legal troubles that leading clearing firm Bear Stearns faced after processing trades for two brokerages charged with defrauding investors. Investors have sued Bear Stearns, and regulators are investigating the firm for its role in the collapse of these brokers.
One of Oppenheimer's managing directors, John D'Agostino, told Baltia and Hornblower he worried about his firm's reputation and disliked the air line business, according to Baltia. D'Agostino faxed a news article about the Bear Stearns case to Hornblower, but did not detail why the firm pulled out, according to Baltia. D'Agostino did not return phone calls.
"Oppenheimer had the right to exercise business judgment, and this was the result," Oppenheimer's attorney, Frederick Schaffer, said. He declined further comment.
The case is unusual in that it pits the clearing agent against a company and its underwriter. More often fights occur between the latter two, over fees for example, and the clearing broker remains in the background.
Although Hornblower is not a party in the suit, the small broker's chief executive, Eric Ellenhorn, said he supported Baltia's demand that Oppenheimer make good on its promise to clear the IPO. Ellenhorn and Baltia's attorney, Steffanie Lewis, say that switching clearing firms takes too long and costs too much.
For lack of funding, Baltia now risks losing the St Petersburg route awarded by the U.S. Department of Transportation, which the firm says is worth around $60 million . Baltia also is unable to make a second payment of $375,000 to Cathay Pacific to secure the aircraft's delivery, Lewis, said.
Hornblower, whose clients already had invested $1 million in the offering, offered to deposit $5 million with Oppenheimer. This would neutralize any risk Oppenheimer would run in the one million share offering by Baltia, Ellenhorn said.
Baltia's Lewis has appealed the judge's ruling, saying Oppenheimer never disclosed the escape clauses in the clearing contract to Baltia. Lewis, who owns a 13 percent stake in Baltia, or 152,000 shares, also said New York contract law does not permit one party to back out on a whim, as she claims Oppenheimer did. The broker also cannot judging the offering on its merits, because that's the underwriter's responsibility, Lewis said.
Baltia has had false starts before. In 1991, it secured leases on two Scandinavian Airlines System aircraft, and repainted the wings. Baltia, however, had to leave the planes on the runway because a Japanese investor backed out at the last minute. In October last year, Hornblower postponed Baltia's IPO because of the plummeting stock market. ((--Jack Reerink/Wall Street Desk (212) 859-1725--))
https://groups.yahoo.com/neo/groups/airline/c...soc_trk=ma
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Quote:
* Switching clearing firms takes too long and costs too much.
* Baltia now risks losing the St Petersburg route awarded by the U.S. Department of Transportation, which the firm says is worth around $60 million. ($88 million in 2016 Dollars)
* Hornblower, whose clients already had invested $1 million in the offering, offered to deposit $5 million with Oppenheimer. This would neutralize any risk Oppenheimer would run in the one million share offering by Baltia, Ellenhorn said.
* Oppenheimer never disclosed the escape clauses in the clearing contract to Baltia.
* New York contract law does not permit one party to back out on a whim, as she claims Oppenheimer did.
* The broker also cannot judging the offering on its merits, because that's the underwriter's responsibility, Lewis said.
Start-up airline sues Oppenheimer over axed IPO
By Jack Reerink
NEW YORK, Feb 16, 1999 (Reuters) - Start-up airline Baltia Air Lines Inc. is suing CIBC Oppenheimer & Co. for derailing its planned stock offering in an unusual case that shows clearing firms are getting picky about whom they do business with.
Baltia, which plans to fly from New York to St. Petersburg in a Boeing 747-200 to be leased from Cathay Pacific, late last month saw its $5 million initial public offering (IPO) scuttled by Oppenheimer. Two weeks before the planned Feb. 12 offering date, the brokerage refused to clear -- or guarantee and process -- trades in Baltia's newly issued stock without giving a clear reason, according to court documents filed by Baltia.
A New York Supreme Court judge on Feb. 10 ruled Oppenheimer, which is a subsidiary of Canadian Imperial Bank of Commerce had the right to refuse new business without giving a reason under a contract with Baltia's underwriter, Hornblower & Weeks. Baltia is appealing that decision.
Oppenheimer's sudden refusal to clear the IPO came two days after the firm in a memo warned the small brokerages it does business with, including Hornblower, that it has the right to refuse to clear their clients' stock offerings.
The memo followed the legal troubles that leading clearing firm Bear Stearns faced after processing trades for two brokerages charged with defrauding investors. Investors have sued Bear Stearns, and regulators are investigating the firm for its role in the collapse of these brokers.
One of Oppenheimer's managing directors, John D'Agostino, told Baltia and Hornblower he worried about his firm's reputation and disliked the air line business, according to Baltia. D'Agostino faxed a news article about the Bear Stearns case to Hornblower, but did not detail why the firm pulled out, according to Baltia. D'Agostino did not return phone calls.
"Oppenheimer had the right to exercise business judgment, and this was the result," Oppenheimer's attorney, Frederick Schaffer, said. He declined further comment.
The case is unusual in that it pits the clearing agent against a company and its underwriter. More often fights occur between the latter two, over fees for example, and the clearing broker remains in the background.
Although Hornblower is not a party in the suit, the small broker's chief executive, Eric Ellenhorn, said he supported Baltia's demand that Oppenheimer make good on its promise to clear the IPO. Ellenhorn and Baltia's attorney, Steffanie Lewis, say that switching clearing firms takes too long and costs too much.
For lack of funding, Baltia now risks losing the St Petersburg route awarded by the U.S. Department of Transportation, which the firm says is worth around $60 million . Baltia also is unable to make a second payment of $375,000 to Cathay Pacific to secure the aircraft's delivery, Lewis, said.
Hornblower, whose clients already had invested $1 million in the offering, offered to deposit $5 million with Oppenheimer. This would neutralize any risk Oppenheimer would run in the one million share offering by Baltia, Ellenhorn said.
Baltia's Lewis has appealed the judge's ruling, saying Oppenheimer never disclosed the escape clauses in the clearing contract to Baltia. Lewis, who owns a 13 percent stake in Baltia, or 152,000 shares, also said New York contract law does not permit one party to back out on a whim, as she claims Oppenheimer did. The broker also cannot judging the offering on its merits, because that's the underwriter's responsibility, Lewis said.
Baltia has had false starts before. In 1991, it secured leases on two Scandinavian Airlines System aircraft, and repainted the wings. Baltia, however, had to leave the planes on the runway because a Japanese investor backed out at the last minute. In October last year, Hornblower postponed Baltia's IPO because of the plummeting stock market. ((--Jack Reerink/Wall Street Desk (212) 859-1725--))
https://groups.yahoo.com/neo/groups/airline/c...soc_trk=ma
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