In an SEC filing on Tuesday, Ladenburg revealed it is reaching out to employees and advisors seeking interest in limited partnership investment in the parent company of both Ladenburg and Advisor Group, AG Artemis Holdings LP.
The firm considers this a “preliminary non-binding solicitation of indications of interest” to qualifying employees and advisors, and not an offer for equity purchase, which would be made later.
Who qualifies for equity offering?
Certain Ladenburg employees based on their income and advisors based on their gross dealer concession (GDC) “qualify as an accredited investor,” according to the filing.
According to current SEC rules, individuals qualify as accredited investors if their income exceeds $200,000 in each of the two most recent years (or $300,000 in joint income with a person’s spouse) and they reasonably expect to reach the same income level in the current year or their net worth exceeds $1 million (individually or jointly with a spouse), excluding the value of their primary residence.
The SEC is also proposing to broaden the accredited investor definition to include criteria such as individuals who possess the Series 7 (General Securities Representative Qualification Examination), Series 65 (Uniform Investment Adviser Law Examination) and Series 82 (Private Securities Offerings Representative Examination) securities licenses administered by Finra.
When and how much?
Employees and advisors would need to respond to this communication from Ladenburg by January 14, 2020, with details such as “(i) the dollar amount you may wish to invest subject to receiving and reviewing the Offering Memorandum and executing the applicable subscription documents, (ii) the expected source of funding for your investment, (iii) if you own shares of common stock in Ladenburg Thalmann, the number of shares that you currently own and (iv) that you are an “accredited investor” (as defined in Rule 501 of Regulation under the Securities Act of 1933, as amended),” per the filing.
Employees and advisors would be able to use cash and/or proceeds they receive related to the transaction. The minimum investment amount for employees would be $25,000, whereas for advisors it would be $75,000, as per the filing.
Ladenburg did not respond to questions about how many employees and advisors would qualify for the equity offering at the time of this writing.
Road to equity offering
In an initial filing with the SEC dated December 6, Ladenburg announced it would not be offering any transaction-related retention bonuses.
But in subsequent filings just 20 days later the firm said it was considering offering equity.
“We were recently informed by Advisor Group that they intend to provide certain employees (which could potentially include our named executive officers) and financial advisors with an opportunity to acquire equity interests in Advisor Group or an affiliate of Advisor Group, including by potentially using their cash proceeds of the merger consideration to acquire, or exchanging shares of common stock they own for, equity interests in Advisor Group or an affiliate of Advisor Group. No offers have been made to employees or financial advisors as of the date of this proxy statement,” states the December 26 filing.
Recruiters have expressed opinions that competitors would try to lure potentially unhappy advisors away from Ladenburg after the deal was announced.
Though integration is key, there may be some factors other than equity or incentives that could help keep advisors at Ladenburg, according to recruiters.
“They’re not going to be having to repaper and they’re leaving things alone and embracing each of the cultures and not merging firms together, they’re not doing back office consolidation,” St. Croix, Minn.-based recruiter Jon Henschen of Henschen & Associates told FA-IQ in a prior interview.
Ladenburg is also looking at a shareholder vote on the deal scheduled for January 30 but has come under fire with multiple shareholder lawsuits, including one by its former chair Phillip Frost, looking to stall the deal.