Local biotech finds funding in tax haven
Don Bauder
November 8, 2001
Great Ballsbridge of Fire?
Or Great Expectations?
It depends how it works out.
Yesterday, local biotech Hollis-Eden Pharmaceuticals, in a filing with the Securities and Exchange Commission, gave more details on an equity line it has established with a company named Ballsbridge Finance Ltd., based in the offshore, secrecy-shrouded tax haven of Nevis.
Ballsbridge is "an investment vehicle set up to do this" by "a reputable company that has been around for a long time," says Eric Loumeau, vice president and general counsel of Hollis-Eden.
He refuses to say who that reputable company is. Joseph Smith of Wall Street's Ladenburg, Thalmann, who brought the deal to Hollis-Eden, says he does not know who it is.
He says the use of offshore vehicles in such equity lines is common.
Over a period of 18 months, Ballsbridge has agreed to buy as much as $10 million worth of Hollis-Eden stock, as the biotech requires. Ballsbridge gets that stock at a discount of 4.5 percent to 8.5 percent from the prevailing price at the time.
It can sell that stock immediately, says Loumeau.
There also is a possibility that Ballsbridge can short the stock -- or bet on its decline -- with some restrictions.
The SEC filing admits that the deal with Ballsbridge could be dilutive by increasing the number of publicly traded shares. "Moreover, as all the shares we sell to Ballsbridge will be available for immediate resale, the mere prospect of our sales to it could depress the market price of our common stock," says the document.
"The perceived risk of dilution may cause our stockholders to sell their shares, which would contribute to a decline in the price of our common stock," says the filing. "Moreover, the perceived risk of dilution and the resulting downward pressure on our stock price resulting from our issuance of shares to Ballsbridge could encourage investors to engage in short sales of our common stock."
The Paris-based Financial Action Task Force on Money Laundering, set up to fight deleterious offshore tax haven fraud, last summer listed Nevis as one of the tax havens that refuses to cooperate. Loumeau says he is not in a position to comment.
"Foreign judgments are not recognized" in Nevis, according to the book, "The Offshore Money Book." To me, this suggests that if Hollis-Eden got a judgment against Ballsbridge in the United States, it wouldn't be recognized in Nevis. Loumeau's response is that the unnamed company that controls Ballsbridge is reputable.
This does not fall into the category of a financing of last resort, says Loumeau, who agrees with Smith that many companies are using such methods now.
Consumer confidence
The San Diego consumer confidence index dropped 4.5 percent from September to 95.4 in October, down 17 percent from last year and the lowest since April 2001, according to Erik J. Zboyan, research manager of the San Diego Union-Tribune, which does the polling.
People's feelings about the current economy were down 16.6 percent from September and 28.1 percent from a year ago, and were the lowest since April 1997.
The feelings about the situation six months from now were up 5.3 percent from September, but down 7.9 percent from last year.
The Conference Board's national consumer confidence index dropped 11.5 percent from September to October, to 85.5. The present situation index dropped from 125.4 to 107.6.
Don Bauder: (619) 293-1523; don.bauder@uniontrib.com |
