Dealflow Report the NEWS, INFORMATION, and ANALYSIS of SMALL CAP EQUITY FINANCE Volume I, No

dealflow report THE NEWS, INFORMATION, AND ANALYSIS OF SMALL CAP EQUITY FINANCE Volume I, No. 38 report.dealflowmedia.comreport.dealflow.com October 8, 2012 SMALL CAP MARKETS SMALL CAP FINANCING PICKED • The small cap financing market picked up in the third quarter. UP IN THIRD QUARTER AS • China’s agreement with the PCAOB may not VOLATILITY DECLINED boost investment. by Dan Lonkevich • An SEC commissioner called for a Small cap and microcap financing activ- markets at Roth Capital Partners in New- comprehensive review of regulatory structure ...2 ity picked up in the third quarter as a less port Beach, Calif. “There’s a slight uplift • Sun River reached a settlement with three volatile stock market helped companies to from issuer stock prices. When they feel investors who accused it of fraud ........................3 feel better about their valuations. better about their stock price, they’re more Publicly traded companies made at least willing to do deals.” DATES & DEADLINES 246 private placements of equity in the Roth Capital helped arrange six PIPEs • A listing of important events coming up in the quarter, raising $11.2 billion. It was the worth $68.8 million in the third quarter. small cap financing market ...............................4 most active third quarter for the PIPE mar- Concerns about the upcoming presi- ket since 2008. dential election and uncertainty about how PIPEs In 2011’s third quarter, there were only the results might affect their businesses is • BioFuel Energy may need to raise capital ...........6 227 PIPEs that raised $11 billion. causing many companies to take advantage • Antares Pharma raised $50M for an arthritis The data excludes PIPEs that raised less of the recent uptick in their stock prices to drug ........................................................................6 than $1 million and transactions by for- raise capital now rather than waiting, Gure- • Cantor is providing a $45M ATM for Unilife .......7 eign companies that weren’t listed on U.S. witz said. exchanges. “The third quarter was unexpectedly • Mercator Minerals raised $25.85M .....................7 Meanwhile, there were 25 initial pub- more active than typical,” said Richard • Insmed raised $25.7M for a cystic fibrosis lic offerings on U.S. markets in the recent Gormley, the head of alternative invest- drug .......................................................................7 quarter, making it the most active third ments at Lazard in New York. “Usually, • EMCORE raised $8.7M and avoided drawing quarter for the IPO market since 2007, the volume falls way off in the summer down an equity line ..............................................8 according to research firm Dealogic. months as it did last year.” “We’re seeing a surge in deals from guys But not this year. July and August were • Feinberg’s Oracle Investment led a $7.5M PIPE we’ve been talking with for a long time,” more active than usual, although September for Mazor Robotics. ...............................................8 said Aaron Gurewitz, head of equity capital showed a bit of a slowdown, he said. EMERGING GROWTH COMPANIES Third Quarter continued on page 15 • Cazador completed its $81M merger with Net Element ..................................................................9 • Canaccord named Evershed head of PCAOB-CHINA AGREEMENT investment banking ..............................................9 NOT LIKELY TO BOOST ALTERNATIVE PUBLIC OFFERINGS • Roth Capital dropped coverage of a dozen FLAGGING INVESTMENT companies as its head of China research by Bill Meagher apparently left .....................................................10 The Public Company Accounting Oversight Board may have negotiated a tenta- • A group of shell company hijackers were tive agreement with Chinese officials to observe audits of U.S.-registered companies in China, but the effort is unlikely to prompt more investment in the country, ordered to pay $13M..........................................10 investors and market observers say. • China Hydroelectric replaced its CEO and The PCAOB-China agreement “doesn’t make any difference. Investors have board in a settlement with investors .................11 no confidence right now in China,” said Mark Elenowitz, chief executive officer of New York investment bank TriPoint Global Equities. “We need to see radical SMALL CAP EQUITY FINANCE ACTIVITY ...15 change in morality and ethics by China companies.” ISSUER INDEX ....................................29 China continued on page 13 For use by original recipient only. It is illegal to forward or otherwise distribute without permission. SMALL CAP MARKETS Editor-in-Chief SEC COMMISSIONER GALLAGHER CALLS Adam Steinhauer Assistant Managing Editor FOR COMPREHENSIVE REVIEW OF Meghan Leerskov Senior Editors MARKET AND REGULATORY STRUCTURE Donna Horowitz, Dan Lonkevich The Securities and Exchange “These and other projects, releases, Associate Editors Commission should review the self- studies, and rulemakings in recent years Maria Brosnan Liebel, Bill Meagher, regulatory structure of U.S. securi- undoubtedly enhanced our understand- Kirk O’Neil, Joshua Sisco ties markets to assure it’s functioning ing of market structure issues at the time, Contributing Editor optimally after two decades of revo- but as in the case of Reg NMS, they have Paul Springer lutionary change, according to SEC sometimes been part of undertakings that Research Commissioner Daniel Gallagher. themselves further altered market struc- Thomas Park, In a speech Oct. 4 before the Secu- ture,” he said. James Summitt, Eric Vermilya rities Industry and Financial Markets Many of the recent attempts to fix IT Services Association’s 15th Annual Market market structure issues such as the Dodd- Bruno Lopes, Pash Rajendran Structure Conference, Gallagher, one of Frank amendments to the 19(b) SRO rule Marketing two Republican-appointed commission- filing requirements, “have essentially Todd Anderson, Effie Knesich, ers who could take over the stewardship been grafted onto the existing framework Eric Salvarezza, Amy Terenzi of the SEC in a Mitt Romney adminis- without a re-examination of the validity of Business Development tration, outlined his views on the need that framework,” he said. Steve Lord, James McKenna, Mike Michalakis, Tassanee Sukramule for regulatory structural reforms. “In that particular case, I fear that by “It is time to undertake a compre- tweaking the 1975 Act-based requirements hensive market and regulatory structure without studying whether those require- DEALFLOW REPORT review, including a review of the self- ments make sense at all given the changed THE regulation paradigm as a whole,” Gal- market structure, we’ve merely replaced one DealFlow Media, Inc. P.O. Box 122 lagher said. problematic regime with another.” Syosset, NY 11791 Gallagher called for the review Gallagher said if an issue is serious T (516) 876-8006 because he said he is troubled by the enough to merit legislative action, it is F (516) 876-8010 increase in new rules being written by serious enough to deserve a re-examina- [email protected] the SEC to carry out its obligations tion from first principles. www.dealflowmedia.com under the Dodd-Frank Wall Street Such a review means revisiting the The DealFlow Report® is published on Monday of every week, except the Mondays following New Years, Inde- Reform and Consumer Protection Act. 1975 Act amendments and will likely pendence Day, the first week of August, Thanksgiving, “It’s troubling to me that we have been result in recommendations to Congress to and Christmas (47 issues). Subscription rate: $2,450 per year for online access and delivery of issues in PDF for- creating and amending so many rules, and amend existing legislation to reflect the mat. Issues may be digitally encrypted to monitor and protect from unauthorized use. in many cases such fundamentally impor- realities of today’s markets, he said. All rights reserved. © 2012 DealFlow Media, Inc. Pho- tant rules, while operating within a frame- The last such review conducted by tocopy permission is available solely through DealFlow Media. Copying, distributing electronically by email, work that we have not analyzed in depth the SEC was “The Market 2000” report or duplicating this publication in any manner other for almost 20 years and that no longer in 1994, whose basic finding Gallagher than one permitted by agreement with DealFlow Media is prohibited. Such actions may constitute copy- accurately reflects the state of today’s said was the equity markets “are operat- right infringement and leave perpetrators subject to lia- bility of up to $150,000 per infringement (Title 17, U.S. markets,” Gallagher said. ing efficiently within the existing regu- code). The DealFlow Report and The DealFlow Confer- He noted that the SEC has taken sev- latory structure.” ence® are trademarks of DealFlow Media. Data is pro- vided by PrivateRaise, a service of DealFlow Media, eral looks at some of these issues over To underscore how outdated the report unless otherwise noted. the years, most notably through the issu- might be, he noted that in January 1994, The DealFlow Report is a general-circulation publication. No data herein should be construed to be recommen- ance of the “Reg SRO” proposals and the conventional thinking on Apple dations to purchase, retain, or sell securities, or to provide investment advice of the companies mentioned or adver- the concept release on self-regulatory Computer “was that it was a struggling tised. No fees are accepted for

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