SmallCap I-Banks: Worth a New Look

OK, so let’s say that as a person interested in the small-cap world, you are wondering how you might locate an interesting, solvent and competent investment bank to add to your portfolio.  Leaving aside the behemoths (Morgan Stanley, Goldman Sachs, Credit Suisse, UBS, et al) and the i-banks that are subsidiaries of other corporations (like Merrill Lynch and Wachovia), there are a large number of small “boutique” investment banks to look at, some of them quite interesting, some with industry-leading credentials in their niches.  Almost all of them are selling at or near their lows, most likely on the assumption that all investment banks are going to take it in the slats before this financial crunch is over.

All of the banks listed below have outstanding financial conferences — all of them worth attending.  If for no other reason, readers might want to visit the URLs to put the dates of the conferences on their calendars.  But there may also be stocks here that are worth putting on your screen to keep an eye on.  We have made no attempt to be definitive, nor to list all the banks that you might find interesting.

Two of the best-known small bank names are companies that were comparatively recently spun out of larger corporations — both considerably prior to the onset of the current recession.  Those are Minneapolis-based Piper Jaffray Companies (NYSE: PJC,, formerly a subsidiary of US Bancorp, with a quite substantial reputation in healthcare, cleantech and technology, and experience in a large number of other areas that are detailed on their website.  They announced a loss of $146 million for the year 2008, but to be fair, most of it was noncash, and income from continuing operations in the 4th quarter was positive.  PJC closed Friday at $32.51 vs a 52-week high of $45.99.  The largest of the banks we are going to mention today by market cap, PJC had a market cap of  $614 million on 2/06. 

The other spin-out also has an old name, Cowen & Company, AKA Cowen Group (Nasdaq:COWN,, headquartered in midtown Manhattan.  Cowen, a classic Wall Street partnership at one point, was bought by Societe Generale some years back, and then spun out as a free-standing company in July 2006.  Like Piper Jaffray, Cowen has a technology slant, with a strong emphasis on healthcare, cleantech and other technologies.  For its latest reported quarter (Sept 30, 2008), Cowen reported a loss of $57 million, including a $50 million write-down of “legacy goodwill.”  That was on slightly higher revenues compared to the previous year.  Cowen’s market cap is much smaller than Piper Jaffray’s, and its shares closed at $6.25 on 2/06 (vs a high in the year prior of $10.50), leading to a market cap of $89 million.

Cowen recently brushed off an offer to be acquired by MUCH smaller Rodman & Renshaw (Nasdaq:RODM) — a classic minnow-swallows-whale transaction had it gone through.  More about RODM below.

Two west-coast based companies would be on your list: San Francisco-based Merriman Curhan Ford Group Inc (Nasdaq: MERR, and Portland OR-based Paulson Capital Corp (Nasdaq: PLCC,

MERR, like many of the other banks in this list, is strong in healthcare and technology, but it has a particular expertise in greentech/cleantech, and apparently strong relationships with prominent greentech investors such as The Quercus Trust.  Unlike the other banks in this group, MERR also has a small but growing business as a PAL (advisor) to international companies whose ADRs are listed on the OTCQX (  It also has taken steps to shore up its balance sheet over the last few weeks, and announced a management restructuring that brings in some new blood, still under founder Jon Merriman.  MERR closed on 2/06 at $0.34, vs a year-high of $6.50, yielding a current market cap of just $4.4 million, which may make it more attractive  for diligence purposes than even some of its talented peers.

Paulson Capital is an older firm with a history under its veteran founder, Chet Paulson, of sponsoring quirky companies — some of them successful, others not.  But it has the distinction of having been a stable and independent i-bank for longer than any other firm on the list.  It also is the proprietor of the Westergaard Waldorf Conferences, probably the longest-running series of small-cap conferences in the industry.  PLCC closed on 2/06 at $1.60, down from $5.49, for a market capitalization of $9.5 million.

NY-based RODM (properly Rodman & Renshaw Capital Group Inc,, has been a leading investment bank in the PIPE world for a number of years.  In fact, most often it is #1 in terms of the number of deals it puts together; in 2008 it did 44 transactions totalling $588 million.  Rodman’s name harks back to a Chicago-based company that was purchased by a Latin American bank, and merged with a NY i-bank, Mabon Nugent.  The project did not work out, and the bank parent closed it down; the current Rodman emerged subsequently after purchasing the name, etc. Their position in the healthcare PIPE world, and also other technologies, and their research department, are without doubt one of the most active, and one of the most successful in completing deals.  RODM closed on 2/06, however, at $0.65, down from a 52-week high of $2.99, for a current market cap of a bit over $22 million.

NYC-based Broadpoint Securities Corp (Nasdaq:BPSG, is a successor to a company originally known as First Albany Corp, and later as FAC Equities Corp (still reflected in its website URL).  Its focus is technology (a legacy of the ultra-tech First Albany, no doubt), greentech, healthcare and energy, along with other areas that are listed on its website.  BPSG closed on 2/06 at $2.56, down from a 52-week high of $3.54, for a market cap of about $204 million, the second largest on our list. 

Finally, one would look at another grand old name that dates back to 1876, and has been reincarnated as a new firm, Miami-based Ladenburg Thalmann Financial Services Inc (Amex:LTS,, which now includes the operations of NY-based Punk Ziegel, a notable and respected life sciences/biotech bank.  LTS is a full-service i-bank, and has been particularly successful in the last few years in structuring and closing 33 SPACs (basically, blank-check pools raised to make acquisitions), raising $6.6 billion in the process.  LTS says it is the #1 SPAC bank in the country, and we would have no way to argue with that.   Their shares closed on 2/06 at $0.78, down from a year high of  $2.59, for a market cap of a tad under $134 million.

So there it is, not a complete list by any means, but something to chew on.  We do NOT recommend stocks — we just follow interesting companies on the theory that well-informed investors will do their own due diligence.


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