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Exclusive: TriPoint Global Equities And BANQ® CEO On The JOBS Act, Bringing Small-Cap IPOs And Capital Formation Back To Individual Investors

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Exclusive: TriPoint Global Equities And BANQ® CEO On The JOBS Act, Bringing Small-Cap IPOs And Capital Formation Back To Individual Investors
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Last Monday, Benzinga had the chance to visit the offices of TriPoint Global Equities and its online division, BANQ®, in New York City, and sit down with the CEO and founder, Mark Elenowitz, who walked us through the business.

Meet Tripoint & BANQ

TriPoint is an investment bank focused on “creative financing strategies and structure for emerging growth companies [...] on an area of the market related to the JOBS [Jumpstart Our Business Startups] Act,” Elenowitz began. “We’ve always been entrepreneurs of change, looking for new opportunities that set our issuers and our concept and methodology apart from other traditional investment banks.”

In 2012, the U.S. Congress started talking about bringing back capital formation to the small-cap market. One of the most interesting areas was called Title II, which allowed an issuer to publicly talk about the private placement investment opportunity and even put ads on a mass-media outlets like Time Inc (NYSE: TIME)’s Fortune Magazine or News Corp (NASDAQ: NWSA)’s Wall Street Journal – for the first time since 1934. This allowed the issuers to bring private placements to retail investors, and not just to people they had preexisting relationships with. Having said this, readers should note investors still need to be accredited, meaning they have to have at least $200,000 of annual income or a net worth of $1 million.

“The end of what a lot of people called ‘the country club circuit’ was a major change in the marketplace. And, this was the impetus for what we created to be something called BANQ,” the CEO commented.

“We could now go out to everybody and show an investment opportunity. But, unlike a traditional private placement, investors now had to prove accreditation,” he went on to explain. “So, when we embarked on that new type of concept, we built a website to create a visual experience because we wanted to have a community where investors could come see these opportunities and basically be able to come in and experience a virtual roadshow, because a lot of investors are around the world and they don’t have an opportunity to go visit a factory down in Texas. Now using the web they’re able to come in and see an interactive experience. They can see everything that was usually reserved for the Wall Street elite.”

So, BANQ was focused on “leveling the playing field and allowing individual investors access to that same high-quality institutional placements [that hedge funds could get to].”

Crowdfunding IPOs

But, that was not all. The people at BANQ wanted to bring back small-cap IPOs to the market as well, to provide these retail investors with access not only to private placements but also to actual public offerings.

That’s where Title IV of the JOBS Act kicked in.

Elenowitz: What Title IV is Reg A+. This, to us, was the most exciting aspect of JOBS Act, because what it enabled us to do is be able to go out and take an issuer and market the offering across all 50 states to non-accredited investors without violating state blue sky [law].

This was revolutionary because, in the past, you couldn’t go out and be able to market a deal, because it was very expensive and very time consuming to go state by state to get local approval without violating that state blue sky [law].

Then, when we took our site, we said, “How do we make it so we catch Wall Street up with Main Street?”

Investors like to make their own decisions. They don’t want a broker calling them; they don’t want to be bothered. They want to review the information on their own time, and they want to use the crowd to verify and identify those opportunities because, where we might think something is good, this new product the crowd might hate; and on the other side, the crowd might love, and it is something that not only do they want to be an owner of that business, but they want to be a customer of it. All of this does not mean we don’t have fiduciary responsibility; we are still responsible for customers knowing what they are investing in and ensuring the investment is suitable for them.

So, we built this visual experience where investors could come in; we built a digital investment bank. It is very much like Charles Schwab Corp (NYSE: SCHW) or TD Ameritrade Holding Corp. (NASDAQ: AMTD) or E*TRADE Financial Corp (NASDAQ: ETFC), where investors can come in, open a bank account that’s FDIC-insured for their cash, SIPC-insured for their investments, and they can go in and buy and sell Apple Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), and all the other issuers that they want.

$0.99 Trading

Benzinga: So, how does BANQ work?

Elenowitz: We offer 99-cent trading, and $3.95 trading, for certain types of orders. That enables investors to come in and see what we’re offering, and be able to come in and open an account in a safe environment, because one of the differences between TriPoint and some of our competitors is that our competitors don’t have the licenses to do this, so they’re more marketing firms; they’re front ends, but they’re not a full-service solution.

So, what we’re able to build now is investors can come in, subscribe to these offerings, and then — what’s most important — have the ability to trade the securities when they come public, and be able to have the liquidity of that.

Now, the problem with JOBS Act is that you have opportunities investors can invest in, but there is not an exit strategy.

Then came Title III of the JOBS Act, which is crowdfunding – but not the Kickstarter type where you get a product, but the type where you get ownership of a portion of the company. At that time, we raised our hand and said, “We see this as an issue because individual investors, who are unsophisticated, are now going to invest in unsophisticated structures with unsophisticated issuers where the chance of liquidity or return of capital is slim to none.” So, it’s setting up for failure.

Getting To The NYSE

The final piece here was Title IV, which finally offered an exit for retail investors.

So now, an issuer could go out and raise up to $50 million without broker or dealer mediation – and without accredited investors. However, they were then condemned to trade Over-The-Counter, rather than list in large stock exchanges like the NYSE or the Nasdaq.

Elenowitz: What we did is, we went down to the New York Stock Exchange and met with them, and we educated them and tried to make them think of this the way we look at it.

This is a small cap IPO; this is no different than any other IPO. You have a form of registration, or in this circumstance, a qualification called a Form 1A. So, how do we make this look, act, and feel [and most importantly, settle] like a traditional IPO?  - We asked ourselves. How do we have it trade on the New York Stock Exchange or Nasdaq?

That’s the methodology that we developed [...] The shares show up are my customers’ accounts and they can buy them, sell them — and there is no restriction period. So, everybody started getting it.

So, the New York Stock Exchange got behind our idea and said, “We’re open for business; we want to bring back capital formation to small cap issuers; we want to give entrepreneurs now a chance to raise money, which they never had a chance before.”

Upcoming IPOs

Now that it’s up and running, TriPoint has started using its methodology for several clients. The first will be Myomo, a medical robotics company that developed an impressive device that restores function in paralyzed or weakened arms and hands — basically returning patients the ability to move their upper limbs.

Elenowitz: Myomo will be the first Reg A+ hopefully to listed on the New York Stock Exchange. We’re working with a company called LoveSac, a company with over 60 stores, doing over $77 million a year and growing rapidly, as well as Yuengling Ice Cream Company, which is run by relatives of the oldest operating brewing company in the United States.

What’s interesting is that BANQ enables that marriage or the convergence between Main Street and Wall Street. We’re seeing Wall Street start to embrace this slowly. Some of the bigger firms like Stifel Financial Corp (NYSE: SF) and FBR & Co (NASDAQ: FBRC) are now coming into the marketplace. They’re all starting to get involved in this space.

Final Thoughts

As a sort of conclusion, the CEO shared his vision of entrepreneurship.

Elenowitz: When I wake up in the morning and life gives me lemons, I don’t look at it saying, “Oh boy.” I say, “You know what, now I’m going to have lemonade, lemon crush, lemon pops; I’m going to make a whole new line of lemon products.”

I don’t look at adversity in a negative manner; I look at it in a positive. When people say the glass is half empty, I say it’s half full and keep pouring. That’s how we, as entrepreneurs, think. That’s what Reg A+ is all about. That’s what we build at BANQ, because that entrepreneurial spirit can flow where the next great idea can now get capital, and that investor can get an investment into that next great idea.

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