The PIPEs Report - February 15, 2006

Southern District Provides PIPE Investors with Meaningful Section 16 Ruling

The U.S. District Court in the Southern District of New York has provided PIPE investors and their attorneys with some long-awaited guidance as to whether investors do or do not constitute a group when pursuing a common negotiated transaction, an issue that has confused and worried PIPE players for the last several years. In late January, Judge Alvin Hellerstein granted summary judgment to Citadel in Litzler v. CC Investments, declaring that three investment managers who had completed a PIPE with software company Data Race in 1997 were not a group for the purposes of forfeiting short swing profits under Section 16 of the Securities Exchange Act. Full Story

The Securities and Exchange Commission (SEC) and the Depository Trust and Clearing Corporation (DTCC) seem to have joined forces in an attempt to quiet critics who claim that naked short selling is rampant in the securities system and causing harm to investors. The two agencies have ratcheted up their rhetoric on the issue in recent weeks. Full Story

Eagletech CEO Argues Against Deregistration at SEC Hearing

Sounding more like a plot from a spy thriller at the local Cineplex than an argument in front of the commissioners of the SEC, Eagletech Communications CEO Rodney Young used his allotted 15 minutes for oral argument in a Feb. 13 hearing to appeal the agency’s decision to deregister Eagletech shares to weave a tale of naked short sellers targeting the company and ultimately taking it and its investors down, while they made off safely into the night. All the while, Young argued, the SEC stood by while the naked shorters executed their schemes. He argued the SEC is still complicit in naked shorting. Full Story

• New Pennsylvania Law Could Clear Path for Biggest PIPE
• Hedge Fund Sues Icahn to Stop XO Asset Sale
• Lehman, FBR Arrange $188.5M for Petrohawk
• Constitutionality of Accounting Board Challenged
• SEC OKs Short Selling Rule Change
• MPM Taking 30% Stake in NeoRx as Lead PIPE Investor
• Touradji Launches New Energy Funds
• SEC Bans Durus Founder
• Knight Capital Proposes Settlement with SEC
• Events
• Hirings & Firings

Hedge funds started out 2006 on the right foot, posting solid gains in January. Emerging markets, which buoyed returns in late 2005, continued to be the frontrunners of the new year. Full Story