Another independent broker-dealer is in play — this time, with its founder and largest stakeholder looking to sell his stake in the company.
Theodore E. “Ted” Charles, who controls a majority interest in Investors Capital Holdings Ltd, wants to sell his shares, as well as those held by his family, for about $5.28 per share, or close to $19 million.
Mr. Charles, who started up Investors Capital in 1995 and controls 54.6% of the company's stock, is looking to sell his entire stake in the company. In a shelf registration with the Securities and Exchange Commission on March 1, the company said Mr. Charles is proposing the sale of about 3.6 million shares of Investors Capital's stock. Mr. Charles, 67, directly owns 44.6% of the company's stock, with family members and foundations controlling another 10%. (View a company profile of
Investors Capital Corp. in the B-D Data Center.)
The company, located in Lynnfield, Mass., is publicly traded. Despite the success of LPL Investment Holdings' public offering in November, publicly listed independent broker-dealers remain a rarity in the business.
With the company's shares closing at $5.76 on Friday, Mr. Charles' sales price amounts to a 10% discount to the current market valuation. Industry executives, who asked not to be identified, said Mr. Charles had discussed selling the firm over the past couple of years , and even hired a leading investment bank to advise on the offer.
In the end, Mr. Charles hung onto the business — until now.
Investors Capital Corp., the independent broker-dealer subsidiary, had 566 reps and advisers at the end of last year, according to filings with the SEC. Out of roughly 100 of the largest independent broker-dealers, Investors Capital Corp.'s number of reps ranks it as the
49th largest, according to
InvestmentNews data.
On average, its reps generated $145,000 in fees and commissions in 2010, an increase of 12.5% over the prior 12 months.
For the past year, firms with 500 brokers and less have been under pressure for a variety of business and legal reasons. Historically low interest rates have cut deeply into profits on such lucrative businesses as lending on margins to clients. In addition, compliance costs and legal fees have been mounting.
Two independent broker-dealers that closed in the past year — GunnAllen Financial Inc. and QA3 Financial Corp. — were in discussions to be acquired before they were shuttered. Respectively, the pair of firms had about 500 and 400 reps.
Investors Capital Holdings, which includes investment advisory and insurance units along with its brokerage, had revenue of $21.4 million for the three-month period that ended in December, with net income of $345,674 in that quarter. For the nine months that ended in December, the company reported revenue of $62.8 million and a net loss of $309,000.
The firm had working capital of $6.7 million at the end of last year, up slightly from March 2010. Investors Capital Corp., the broker-dealer, had net capital of $2.99 million for excess net capital of $2.51 million.
In announcing the company's third quarter results, Timothy B. Murphy, president and CEO of Investors Capital Holding, stated: "Our net capital position remains strong; the markets and economy are improving; trading volume is increasing. We know where we want to go and how we want to get there. All we have to do is execute."
The firm's management is not commenting on Mr. Charles' sale of stock, said Robert Foney, a company spokesman.
