As filed with the Securities
and Exchange Commission on May 28, 2008
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THOMAS WEISEL PARTNERS GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
Delaware
|
|
20-3550472
|
(State or other jurisdiction
|
|
(I.R.S. Employer
|
of incorporation or organization)
|
|
Identification No.)
|
One Montgomery Street
San Francisco, California 94104
(415) 364-2500
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
Mark P. Fisher
Thomas Weisel Partners Group, Inc.
One Montgomery Street
San Francisco, California 94104
(415) 364-2500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Scott D. Miller
Sullivan & Cromwell LLP
1870 Embarcadero Road
Palo Alto, California 94303
(650) 461-5600
Approximate date of commencement of proposed sale to the public:
From time to time after the
effective date of this registration statement, as determined by market and other conditions.
If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box.
o
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment plans, check the following box.
þ
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
o
If this Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the following box.
o
If this Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following box.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
|
Accelerated filer
þ
|
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
o
|
CALCULATION OF REGISTRATION FEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed Maximum
|
|
|
Proposed Maximum
|
|
|
|
|
|
Title of each class of
|
|
|
Amount To Be
|
|
|
Offering Price Per
|
|
|
Aggregate Offering
|
|
|
Amount of
|
|
|
securities to be registered
|
|
|
Registered(1)
|
|
|
Unit (2)
|
|
|
Price(2)
|
|
|
Registration Fee(3)
|
|
|
Common Stock, par value
$0.01 per share
|
|
|
6,639,478 shares
|
|
|
$
|
5.98
|
|
|
|
$
|
39,704,078
|
|
|
|
$
|
1,561
|
|
|
|
|
|
|
(1)
|
|
Represents up to 6,639,478 shares of common stock that may be issued upon exchange,
retraction or redemption of 6,639,478 exchangeable shares that have been issued by a
subsidiary of the registrant, TWP Acquisition Company (Canada), Inc. (Canadian Sub) or upon
the liquidation, dissolution or winding up of Canadian Sub. Also includes, pursuant to Rule
416(a) under the Securities Act of 1933, as amended, any additional securities that may be
offered or issued to prevent dilution resulting from stock splits, stock dividends,
recapitalizations or similar transactions.
|
|
(2)
|
|
Estimated solely for the purpose of calculating the amount of the registration fee.
|
|
(3)
|
|
Calculated pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the
average of the high and low trading prices for the common stock on The Nasdaq Global Market on
May 20, 2008.
|
The
registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on such date as the
Commission acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an
offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated
May 28, 2008
Thomas Weisel Partners Group, Inc.
6,639,478 Shares
Common Stock
This prospectus relates to shares of common stock of Thomas Weisel Partners Group, Inc. that we may
issue, from time to time, upon exchange, retraction or redemption of outstanding exchangeable
shares (which we refer to as the exchangeable shares) of TWP Acquisition Company (Canada), Inc.,
an indirect Canadian subsidiary that we refer to in this prospectus as Canadian Sub, as well as
certain liquidation or similar events involving Canadian Sub.
Because the shares of our common stock offered by this prospectus will be issued only in exchange
for or upon retraction or redemption of the exchangeable shares or upon the liquidation,
dissolution or winding up of Canadian Sub or any other distribution of Canadian Subs assets for
the purpose of winding up its affairs, we will not receive any cash proceeds from this offering. We
are paying all expenses of registration incurred in connection with this offering.
Our common stock is listed on The Nasdaq Global Market under the symbol TWPG. The last reported
sale price of the common stock on The Nasdaq Global Market on May 27, 2008 was $6.35 per share.
Our common stock also is listed on the Toronto Stock Exchange under the symbol TWP.
Investing
in our common stock involves risks. See Risk Factors
beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this
prospectus is
,2008.
TABLE OF CONTENTS
We have not authorized any dealer, salesperson or other person to give any information or to
make any representations to you other than the information contained in this prospectus. You must
not rely on any information or representations not contained in this prospectus as if we had
authorized it. The information contained in this prospectus is current only as of the date on the
cover page of this prospectus and may change after that date. We do not imply that there has been
no change in the information contained in this prospectus or in our affairs since that date by
delivering this prospectus. We are not making an offer of these securities in any state where the
offer is not permitted.
Explanatory Note
Unless otherwise stated or the context otherwise requires, references in this prospectus to
Thomas Weisel Partners, we, our or us refer to Thomas Weisel Partners Group, Inc. and its
direct and indirect subsidiaries. We entered into an arrangement agreement, dated as of September
30, 2007 with Canadian Sub, Westwind Capital Corporation, or Westwind, and Lionel Conacher, as
shareholders representative, pursuant to which we indirectly acquired all of Westwinds
outstanding shares, with Westwind thereby becoming an indirect subsidiary of Thomas Weisel
Partners. The transaction was carried out pursuant to the arrangement agreement and the plan of
arrangement under Section 182 of the Ontario Business Corporations Act, or the OBCA, referred to in
the arrangement agreement. Under the plan of arrangement, Canadian Sub acquired all of the
outstanding Westwind common shares and Class A common shares in exchange for an aggregate of
$45,000,000 in cash and 7,009,112 shares of Thomas Weisel Partners common stock (including
exchangeable shares described below).
Canadian Sub is an indirect subsidiary of Thomas Weisel Partners, and has outstanding a class
of non-voting exchangeable shares, which we refer to as the exchangeable shares in this
registration statement. Each exchangeable share is exchangeable for one share of our common stock
and one share of our common stock will become issuable upon a redemption, retraction or exchange of
each exchangeable share, or upon the liquidation, dissolution or winding-up of Canadian Sub or any
other distribution of Canadian Subs assets to its shareholders for the purpose of winding-up its
affairs, in each case in accordance with the terms of the provisions governing the exchangeable
shares. The registration statement of which this prospectus forms a part
relates to shares of our common stock issuable upon redemption, retraction or exchange of
-ii-
exchangeable shares of Canadian Sub or upon the liquidation, dissolution or winding-up of Canadian
Sub or any other distribution of Canadian Subs assets to its shareholders for the purpose of
winding up its affairs.
Reporting Currencies and Accounting Principles
The financial information regarding Westwind, including Westwinds audited consolidated
financial statements and the summaries of those consolidated financial statements, contained in
this prospectus are reported in Canadian dollars, unless otherwise indicated, and have been
prepared in accordance with Canadian generally accepted accounting principles, or Canadian GAAP,
which (in the case of the consolidated financial statements of Westwind) conform in all material
respects to U.S. generally accepted accounting principles, or U.S. GAAP. See Note 10 of the
Westwind consolidated financial statements included in this prospectus.
The financial information regarding Thomas Weisel Partners, including Thomas Weisel Partners
audited consolidated financial statements, the summaries of those financial statements and Thomas
Weisel Partners pro forma financial statements, contained or incorporated by reference in this
prospectus are reported in U.S. dollars and have been prepared in accordance with U.S. GAAP.
Exchange Rate Information
The following table sets forth exchange rate information expressed in terms of U.S. dollars
per Canadian dollar at the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New York.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
At Period End
|
|
Average Rate(1)
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 (through May 27)
|
|
|
1.0118
|
|
|
|
0.9958
|
|
|
|
1.0291
|
|
|
|
0.9714
|
|
2007
|
|
|
1.0120
|
|
|
|
0.9419
|
|
|
|
1.0908
|
|
|
|
0.8437
|
|
2006
|
|
|
0.8582
|
|
|
|
0.8847
|
|
|
|
0.9100
|
|
|
|
0.8528
|
|
2005
|
|
|
0.8579
|
|
|
|
0.8282
|
|
|
|
0.8690
|
|
|
|
0.7872
|
|
2004
|
|
|
0.8310
|
|
|
|
0.7719
|
|
|
|
0.8493
|
|
|
|
0.7158
|
|
2003
|
|
|
0.7738
|
|
|
|
0.7205
|
|
|
|
0.7738
|
|
|
|
0.6349
|
|
|
|
|
(1)
|
|
The average of the noon buying rates on the last day of each month during the period.
|
All dollar figures herein, other than financial information of Westwind, are in U.S. dollars unless
otherwise indicated.
-iii-
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere or incorporated by reference in this
prospectus. Before making an investment decision, you should read the entire prospectus carefully,
including the section entitled Risk Factors, and the information incorporated by reference in
this prospectus.
Thomas Weisel Partners Group, Inc.
We are an investment bank focused principally on growth companies and growth investors. We
were founded in 1998 and initially capitalized through investments from our founding partners and
more than 20 venture capital and private equity firms. On February 7, 2006, Thomas Weisel Partners
Group, Inc., a Delaware corporation, succeeded to the business of Thomas Weisel Partners Group LLC
and completed an initial public offering of its common stock.
On January 2, 2008, we completed our acquisition of Westwind Capital Corporation, an
independent, institutional investment bank focused on growth companies and growth investors,
particularly in the energy and mining sectors. Subsequent to the acquisition of Westwind, we have
15 office locations and a global reach that spans five countries.
We generate revenues by providing financial services that include investment banking,
brokerage, research and asset management. We take a comprehensive approach in providing these
services to growth companies. We are exposed to volatility and trends in the general securities
market and the economy. Notwithstanding this exposure to volatility and trends, in order to provide
value to our clients, we have made a long-term commitment to maintaining a substantial,
full-service integrated business platform. As a result of this commitment, if business conditions
result in decreases to our revenues, we may not experience corresponding decreases in the expense
of operating our business.
Our headquarters are located at One Montgomery Street, San Francisco, California 94104 and our
telephone number is (415) 364-2500.
-1-
THE OFFERING
|
|
|
Issuer
|
|
Thomas Weisel Partners Group, Inc.
|
|
|
|
Securities Offered
|
|
Shares of our common stock
|
|
|
|
Nasdaq Global Market Symbol
|
|
Our common stock is listed on The Nasdaq
Global Market under the symbol TWPG. Our
common stock also is listed on the Toronto
Stock Exchange under the symbol TWP.
|
|
|
|
Use of Proceeds
|
|
Because the shares of our common stock will
be issued in exchange for or upon
retraction or redemption of the
exchangeable shares or upon the
liquidation, dissolution or winding up of
Canadian Sub or any other distribution of
Canadian Subs assets for the purpose of
winding up its affairs, we will not receive
any cash proceeds from this offering.
|
|
|
|
Income Tax Considerations
|
|
See Income Tax Considerations for a
summary of certain material Canadian and
U.S. federal income tax consequences
relating to the exchangeable shares.
|
|
|
|
Risk Factors
|
|
See Risk Factors and the other
information in this prospectus for a
discussion of the factors you should
carefully consider before deciding to
invest in the shares of our common stock
being offered by us in this prospectus.
|
-2-
RISK FACTORS
You should carefully consider the following risks and all of the other information set forth
in this prospectus before deciding to invest in shares of our common stock. If any of the events or
developments described below actually occurred, our business, financial condition or results of
operations would likely suffer. In that case, the trading price of our common stock would likely
decline, and you could lose all or part of your investment in our common stock.
Risks Related to Our Business
We focus principally on specific sectors of the economy, and a deterioration in the business
environment in these sectors generally or decline in the market for securities of companies
within these sectors could materially adversely affect our businesses.
We focus principally on the technology, healthcare, consumer, energy and mining sectors of the
economy. Therefore, volatility in the business environment in these sectors generally, or in the
market for securities of companies within these sectors particularly, could substantially affect
our financial results and the market value of our common stock. The business environment for
companies in these sectors can experience substantial volatility, and our financial results may
consequently be subject to significant variations from year to year. The market for securities in
each of our focus sectors may also be subject to industry-specific risks. For example, changes in
policies by the United States Food and Drug Administration may affect the market for securities of
biotechnology and healthcare companies and volatility in the commodities markets may affect the
market for securities of energy or mining companies that operate in the affected markets.
Underwriting transactions, strategic advisory engagements and related trading activities in our
focus sectors represent a significant portion of our businesses. This concentration exposes us to
the risk of substantial declines in revenues in the event of downturns in these sectors of the
economy.
Any future downturns in our focus sectors could materially adversely affect our business and
results of operations.
Our financial results may fluctuate substantially from period to period, which may impair our
stock price.
We have experienced, and expect to experience in the future, significant periodic variations
in our revenues and results of operations. These variations may be attributed in part to the fact
that our investment banking revenues are typically earned upon the successful completion of a
transaction, the timing of which is uncertain and beyond our control. In most cases we receive
little or no payment for investment banking engagements that do not result in the successful
completion of a transaction. As a result, our business is highly dependent on market conditions as
well as the decisions and actions of our clients and interested third parties. For example, a
clients acquisition transaction may be delayed or terminated because of a failure to agree upon
final terms with the counterparty, failure to obtain necessary regulatory consents or board or
shareholder approvals, failure to secure necessary financing, adverse market conditions or
unexpected financial or other problems in the clients or counterpartys business. If the parties
fail to complete a transaction on which we are advising or an offering in
-3-
which we are participating, we will earn little or no revenue from the transaction. This risk
may be intensified by our focus on growth companies in the technology, healthcare, consumer, energy
and mining sectors, as the market for securities of many of these companies has experienced
significant variations in the number and size of equity offerings. Recently, more companies
initiating the process of an initial public offering are simultaneously exploring merger and
acquisition opportunities. If we are not engaged as a strategic advisor in any such dual-tracked
process, our investment banking revenues would be adversely affected in the event that an initial
public offering is not consummated.
In addition, our investments and warrants we receive from time to time as compensation for
investment banking services are adjusted to fair value in accordance with U.S. generally accepted
accounting principles at the end of each quarter, which could increase the volatility of our
quarterly earnings.
As a result, we are unlikely to achieve steady and predictable earnings on a quarterly basis,
which could in turn adversely affect our stock price.
Our ability to retain our professionals and recruit additional professionals is critical to the
success of our business, and our failure to do so may materially adversely affect our
reputation, business and results of operations.
Our ability to obtain and successfully execute our business depends upon the personal
reputation, judgment, business generation capabilities and project execution skills of our senior
professionals, particularly Thomas W. Weisel, our founder, Chairman and Chief Executive Officer,
Lionel F. Conacher, our President and Chief Operating Officer, and the other members of our
Executive Committee. Our senior professionals personal reputations and relationships with our
clients are a critical element in obtaining and executing client engagements. We encounter intense
competition for qualified employees from other companies in the investment banking industry as well
as from businesses outside the investment banking industry, such as investment advisory firms,
hedge funds, private equity funds and venture capital funds. From time to time, we have experienced
losses of investment banking, brokerage, research and other professionals, and losses of our key
personnel may occur in the future. For example, during 2007 we experienced the departures of Blake
J. Jorgensen and Robert W. Kitts, who were our Co-Directors of Investment Banking and members of
our Executive Committee at the beginning of 2007. In addition, since January 1, 2008,
two other officers who were members of our Executive Committee at the
beginning of 2007, David A. Baylor, our former Chief Financial Officer,
and Stephen J. Buell,
our
former Director of Research, have also left Thomas Weisel Partners to pursue other
opportunities. The departure or other loss of Mr. Weisel, Mr. Conacher, any other member of our
Executive Committee or any other senior professional who manages substantial client relationships
and possesses substantial experience and expertise, could impair our ability to secure or
successfully complete engagements, protect our market share or retain assets under management, each
of which, in turn, could materially adversely affect our business and results of operations.
Certain of our investment funds may be subject to key man provisions which, upon the departure or
other loss of some or all of the investment professionals managing the
-4-
fund, may permit the investors in the fund to dissolve the fund or may result in a reduction
of the management fees paid with respect to the investment fund.
In connection with our initial public offering and our conversion to corporate form, many of
our professionals received substantial amounts of common stock in exchange for their membership
interests. Ownership of, and the ability to realize equity value from, our common stock, unlike
that of membership interests in Thomas Weisel Partners Group LLC (the predecessor to Thomas Weisel
Partners Group, Inc.), does not depend upon continued employment and our professionals are not
restricted from leaving us by the potential loss of the value of their ownership interests.
Similarly, in connection with our acquisition of Westwind, many of the Westwind professionals
received substantial amounts of common stock (or exchangeable shares) in consideration of their
ownership interests in Westwind. Ownership of, and the ability to realize equity value from our
common stock (or exchangeable shares), unlike that of ownership interests in Westwind, does not
depend on continued employment and these professionals are not restricted from leaving us by
potential loss of the value of their ownership interests. These shares of common stock (and
exchangeable shares) are subject to certain restrictions on transfer and a portion are pledged to
secure liquidated damages obligations to us as set forth in the Partners Equity Agreement and the
Westwind Capital Corporation Shareholders Equity Agreement, each of which has been filed as an
exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. However,
these agreements will survive for only a limited period and will permit any professional that is
party thereto to leave us without losing any of their shares of common stock (or exchangeable
shares) if they comply with these agreements, and, in some cases, compliance with these agreements
may also be waived. Consequently, the steps we have taken to encourage the continued service of
these individuals after our initial public offering may not be effective.
In connection with our acquisition of Westwind, any management disruption or difficulties in
integrating Thomas Weisel Partners and Westwinds professionals could result in a loss of clients
and customers or revenues from clients and customers and could significantly affect our business
and results of operations. The success of the Westwind transaction depends in part on our ability
to retain our personnel, including personnel formerly employed by Westwind. It is possible that
these employees might decide not to remain with us as we continue to integrate the companies. If
key employees terminate their employment, or insufficient numbers of employees are retained to
maintain effective operations, our business activities might be adversely affected, managements
attention might be diverted from successfully continuing to integrate Westwinds operations to
hiring suitable replacements, and our business might suffer.
If any of our professionals were to join an existing competitor or form a competing company,
some of our clients could choose to use the services of that competitor instead of our services.
The compensation arrangements, non-competition agreements and lock-up agreements we have entered
into with certain of our professionals may not prove effective in preventing them from resigning to
join our competitors and the non-competition agreements may not be upheld if we were to seek to
enforce our rights under these agreements.
-5-
If we are unable to retain our professionals or recruit additional professionals, our
reputation, business, results of operations and financial condition may be materially adversely
affected.
Our efforts to limit compensation and benefits expense may hinder our ability to retain our
professionals and recruit additional professionals.
In connection with our initial public offering, we announced that we intended to target
aggregate annual compensation and benefits expense (excluding expenses relating to equity awards
made in connection with our initial public offering) within the range of 55% to 58% of annual net
revenues (excluding investment gains and losses attributable to investments in partnerships and
other securities). Our compensation and benefits expense (excluding expenses relating to
share-based awards made in connection with our initial public offering and excluding the one-time
compensation expense in the fourth quarter of 2007 attributable to the acceleration of the payment
of 2008 mid-year retention bonuses and certain severance expenses, each of which were related to
the integration of Westwind), as a percentage of net revenues (excluding investment gains and
losses attributable to investments in partnerships and other securities) was 58% for the year ended
December 31, 2007. Including the one-time compensation expense in the fourth quarter discussed
above, our compensation and benefits expense (excluding expenses relating to equity awards made in
connection with our initial public offering), as a percentage of net revenues (excluding investment
gains and losses attributable to investments in partnerships and other securities) was 67% for the
year ended December 31, 2007. We do not intend to have a target ratio of aggregate annual
compensation and benefits expense to net revenues in 2008 and subsequent years.
Competitive pressures may require that our compensation and benefits expense as a percentage
of net revenues increase in order to retain our professionals and recruit additional professionals.
Further, new business initiatives and efforts to expand existing businesses generally require that
we incur compensation and benefits expense before realizing associated additional revenues.
Additionally, we have granted equity awards in connection with our IPO and as part of our
compensation and hiring process, the full expense of which is recognized pro rata over a three- or
four-year vesting period. The future expense associated with these grants and grants in 2008 and
thereafter could result in an increase to our ratio of compensation and benefits expense to net
revenues in 2008 and subsequent years.
The following table represents the amount of compensation expense we have recorded during the
years ended December 31, 2007 and 2006, as well as compensation expense we expect to record in
future years for share-based awards granted through March 31, 2008 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Expense is
|
|
Year of Grant
|
|
|
|
|
Recorded
|
|
2006
|
|
|
2007
|
|
|
2008(1)
|
|
|
Total
|
|
2006
|
|
$
|
7,250
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,250
|
|
2007
|
|
|
6,827
|
|
|
|
4,073
|
|
|
|
|
|
|
|
10,900
|
|
2008
|
|
|
7,458
|
|
|
|
5,019
|
|
|
|
3,461
|
|
|
|
15,938
|
|
2009
|
|
|
1,425
|
|
|
|
5,019
|
|
|
|
3,876
|
|
|
|
10,320
|
|
Thereafter
|
|
|
568
|
|
|
|
5,974
|
|
|
|
8,169
|
|
|
|
14,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,528
|
|
|
$
|
20,085
|
|
|
$
|
15,506
|
|
|
$
|
59,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes share-based awards granted through March 31, 2008.
|
-6-
Pricing and other competitive pressures may impair the revenues and profitability of our
brokerage business.
We derive a significant portion of our revenues from our brokerage business. Along with other
brokerage firms, we have experienced intense price competition in this business in recent years. In
particular, the ability to execute trades electronically and through other alternative trading
systems has increased the pressure on trading commissions, volume and spreads and has required us
to make investments in our brokerage business in order to compete. We expect this trend toward
alternative trading systems to continue. We believe we may experience competitive pressures in
these and other areas as some of our competitors seek to obtain market share by competing on the
basis of price. In addition, we face pressure from our larger competitors, which may be better able
to offer a broader range of complementary products and services to brokerage clients in order to
win their trading business. As we are committed to maintaining our comprehensive research coverage
to support our brokerage business, we may be required to make substantial investments in our
research capabilities. If we are unable to compete effectively with our competitors in these areas,
brokerage revenues may decline and our business, financial condition and results of operations may
be adversely affected.
Difficult market conditions could adversely affect our business in many ways.
Difficult market and economic conditions and geopolitical uncertainties have in the past
adversely affected and may in the future adversely affect our business and profitability in many
ways. Weakness in equity markets and diminished trading volume of securities could adversely impact
our brokerage business. Industry-wide declines in the size and number of underwritings and mergers
and acquisitions transactions also would likely have an adverse effect on our revenues. In
addition, reductions in the trading prices for equity securities also tend to reduce the deal value
of investment banking transactions, such as underwritings and mergers and acquisitions
transactions, which in turn may reduce the fees we earn from these transactions. Also, difficult
market conditions would likely decrease the value of assets under management in our asset
management and private client business, which would decrease the amount of asset-based fees we
receive, and may also affect our ability to attract additional, or retain existing, assets under
management within these businesses. As we may be unable to reduce expenses correspondingly, our
profits and profit margins may decline.
As an investment bank focused principally on the growth sectors of the economy, we depend
significantly on transactions by venture capital-backed companies for sources of revenues and
potential business opportunities. To the extent venture capital investment activities slow down due
to difficult market conditions or otherwise, our business, financial condition and results of
operations may be adversely affected. In addition, as we are headquartered in California and a
substantial percentage of our growth company clients are located in California, a natural disaster
or a regional economic downturn in California could harm our business even when the market
conditions elsewhere are not affected. With respect to the energy and mining sectors, any
prolonged, substantial reduction in commodity prices may
-7-
affect the activity levels of companies in those sectors and the consequent demand for our
products and services from those companies.
Adverse market or economic conditions or a slowdown of activity in the sectors in which the
portfolio companies of our investment funds operate could have an adverse effect on the earnings of
those portfolio companies, and therefore, our earnings.
We face strong competition from larger firms.
The brokerage, investment banking and asset management industries are intensely competitive,
and we expect them to remain so. We compete on the basis of a number of factors, including client
relationships, reputation, the abilities and past performance of our professionals, market focus
and the relative quality and price of our services and products. We have experienced intense price
competition with respect to our brokerage business, including large block trades, spreads and
trading commissions, as well as competition due to the increased use of commission sharing
arrangements. Pricing and other competitive pressures in investment banking, including the trends
toward multiple book runners, co-managers and multiple financial advisors handling transactions,
have continued and could adversely affect our revenues, even during periods where the volume and
number of investment banking transactions are increasing. Competitive factors with respect to our
asset management activities include the amount of firm capital we can invest in new products and
our ability to increase assets under management, including our ability to attract capital for new
investment funds. We believe we may experience competitive pressures in these and other areas in
the future as some of our competitors seek to obtain market share by competing on the basis of
price.
We are a relatively small investment bank with approximately 630 employees as of May 23,
2008 and net revenues of $289.0 million in 2007. Many of our competitors in the brokerage,
investment banking and asset management industries have a broader range of products and services,
greater financial and marketing resources, larger customer bases, greater name recognition, more
senior professionals to serve their clients needs, greater global reach and more established
relationships with clients than we have. These larger and better capitalized competitors may be
better able to respond to changes in the brokerage, investment banking and asset management
industries, to compete for skilled professionals, to finance acquisitions, to fund internal growth
and to compete for market share generally.
The scale of our competitors has increased over time as a result of substantial consolidation
among companies in the brokerage and investment banking industries. In addition, a number of large
commercial banks, insurance companies and other broad-based financial services firms have
established or acquired underwriting or financial advisory practices and broker-dealers or have
merged with other financial institutions. These firms have the ability to offer a wider range of
products than we do, which may enhance their competitive position. They also have the ability to
support investment banking with commercial banking, insurance and other financial services in an
effort to gain market share, which has resulted, and could further result, in pricing pressure in
our businesses. In particular, the ability to provide financing has become an important advantage
for some of our larger competitors and, because we do not provide such financing, we may be unable
to compete as effectively for clients in a significant part of the brokerage and investment banking
market.
-8-
If we are unable to compete effectively with our competitors, our business, financial
condition and results of operations will be adversely affected.
We have incurred losses and may incur losses in the future.
We have incurred losses in the recent past. We recorded net losses of $57.9 million for the
year ended December 31, 2002 and $7.1 million for the year ended December 31, 2005. We also
recorded net losses in the first quarter of 2008 and in certain quarters within 2007 (including the
third and fourth quarters of 2007) and other past fiscal years. We may incur losses in any of our
future periods. If we are unable to finance future losses, those losses may have a significant
effect on our liquidity as well as our ability to operate.
In addition, we may incur significant expenses in connection with initiating new business
activities or in connection with any expansion of our underwriting, brokerage or asset management
businesses. We may also engage in strategic acquisitions and investments for which we may incur
significant expenses. Accordingly, we will need to increase our revenues at a rate greater than our
expenses to achieve and maintain profitability. If our revenues do not increase sufficiently, or
even if our revenues increase but we are unable to manage our expenses, we will not achieve and
maintain profitability in future periods.
Our capital markets and strategic advisory engagements are singular in nature and do not
generally provide for subsequent engagements.
Our strategy is to take a lifecycle approach in providing investment banking services to our
clients, however, our investment banking clients generally retain us on a short-term,
engagement-by-engagement basis in connection with specific capital markets or mergers and
acquisitions transactions, rather than on a recurring basis under long-term contracts. As these
transactions are typically singular in nature and our engagements with these clients may not recur,
we must seek out new engagements when our current engagements are successfully completed or are
terminated. As a result, high activity levels in any period are not necessarily indicative of
continued high levels of activity in any subsequent period. If we are unable to generate a
substantial number of new engagements and generate fees from the successful completion of these
transactions, our business and results of operations would likely be adversely affected.
A significant portion of our brokerage revenues are generated from a relatively small number of
institutional clients.
A significant portion of our brokerage revenues are generated from a relatively small number
of institutional clients. For example, in 2007 we generated 22% of our brokerage revenues, or
approximately 9% of our net revenues, from our ten largest brokerage clients. Similarly, in 2006 we
generated 26% of our brokerage revenues, or approximately 12% of our net revenues, from our ten
largest brokerage clients. If any of our key clients departs or reduces its business with us and we
fail to attract new clients that are capable of generating significant trading volumes, our
business and results of operations will be adversely affected.
-9-
Poor investment performance, pricing pressure and other competitive factors may reduce our asset
management revenues or result in losses.
As part of our strategy, we are investing in the expansion of our asset management business.
Our revenues from this business are primarily derived from management fees which are based on
committed capital and/or assets under management and incentive fees, which are earned if the return
of our investment funds exceeds certain threshold returns. Our ability to maintain or increase
assets under management is subject to a number of factors, including investors perception of our
past performance, market or economic conditions, competition from other fund managers and our
ability to negotiate terms with major investors.
Investment performance is one of the most important factors in retaining existing clients and
competing for new asset management and private equity business and our historical performance may
not be indicative of future results. Poor investment performance and other competitive factors
could reduce our revenues and impair our growth in many ways:
|
|
|
existing clients may withdraw funds from our asset management business in favor of
better performing products;
|
|
|
|
|
our incentive fees could decline or be eliminated entirely;
|
|
|
|
|
firms with which we have business relationships may terminate these relationships with
us;
|
|
|
|
|
our capital investments in our investment funds or the seed capital we have committed to
new asset management products may diminish in value or may be lost; and
|
|
|
|
|
our key employees in the business may depart, whether to join a competitor or otherwise.
|
Our investment funds include gains and losses that have not yet been realized through sales or
other transactions. The ultimate realization of these gains and losses will depend on whether these
funds achieve satisfactory investment performance. These unrealized gains and losses are recognized
in our results of operations because these investments are accounted for in accordance with GAAP
using the fair value method based on the percentage interest in the underlying partnerships. The
underlying investments held by such partnerships are valued based on quoted market prices, or
estimated fair value if there is no public market. Due to the inherent uncertainty of valuation,
fair values of these non-marketable investments may differ from the values that would have been
used had a ready market existed for these investments, which differences could be material, and
these differences may result in increased volatility in our asset management revenues.
To the extent our future investment performance is perceived to be poor in either relative or
absolute terms, our asset management revenues will likely be reduced and our ability to raise new
funds will likely be impaired. Even when market conditions are generally favorable, our investment
performance may be adversely affected by our investment style and the particular investments that
we make.
-10-
In addition, over the past several years, the size and number of investment funds, including
exchange-traded funds, hedge funds and private equity funds, has continued to increase. If this
trend continues, it is possible that it will become increasingly difficult for us to raise capital
for new investment funds or price competition may mean that we are unable to maintain our current
fee structure. We have historically competed primarily on the performance of our investment funds
and other asset management products and services, and not on the level of our fees relative to
those of our competitors. However, there is a risk that fees in the asset management industry will
decline, without regard to the historical performance of a manager, including our historical
performance. Fee reductions on our existing or future investment funds and other asset management
products and services, without corresponding decreases in our cost structure, would adversely
affect our revenues and results of operations.
Increases in capital commitments in our trading, underwriting and other businesses increase the
potential for significant losses.
The trend in capital markets is toward larger and more frequent commitments of capital by
financial services firms in many of their activities. For example, in order to attract clients,
investment banks are increasingly committing capital to purchase large blocks of stock from
publicly-traded issuers or their significant shareholders, instead of the more traditional marketed
underwriting process, in which marketing is typically completed before an investment bank commits
capital to purchase securities for resale. We have participated in this trend and expect to
continue to do so. As a result, we will be subject to increased risk as we commit greater amounts
of capital to facilitate primarily client-driven business. Furthermore, we may suffer losses even
when economic and market conditions are generally favorable for others in the industry.
We may enter into large transactions in which we commit our own capital as part of our trading
business. The number and size of these large transactions may materially affect our results of
operations in a given period. We may also incur significant losses from our trading activities due
to market fluctuations and volatility from quarter to quarter. We maintain trading positions in the
fixed income and equity markets to facilitate client trading activities, and, at times, these
positions can be large and concentrated in a single issuer. In addition, our convertible debt
trading group maintains proprietary trading positions. To the extent that we own assets, i.e., have
long positions, a downturn in the value of those assets or in those markets could result in losses.
Conversely, to the extent that we have sold assets we do not own, i.e., have short positions, an
upturn in those markets could expose us to potentially unlimited losses as we attempt to cover our
short positions by acquiring assets in a rising market.
We also commit capital to investment funds we sponsor and utilize our own funds as seed
capital for new products and services in our asset management business. These investments may
diminish in value or may be lost entirely if market conditions are not favorable.
-11-
Limitations on our access to capital could impair our liquidity and our ability to conduct our
businesses.
Liquidity, or ready access to funds, is essential to financial services firms. Failures of
financial institutions have often been attributable in large part to insufficient liquidity.
Liquidity is of particular importance to our trading business and perceived liquidity issues may
affect our clients and counterparties willingness to engage in brokerage transactions with us.
Our liquidity could be impaired due to circumstances that we may be unable to control, such as a
general market disruption or an operational problem that affects our trading clients, third parties
or us. Further, our ability to sell assets may be impaired if other market participants are seeking
to sell similar assets at the same time.
Our asset management business is also subject to liquidity risk due to investments in
high-risk, illiquid assets. We have made substantial principal investments in our investment funds
and may make additional investments in future funds, which often invest in securities that are not
publicly traded. There is a significant risk that we may be unable to realize our investment
objectives by sale or other disposition at attractive prices or may otherwise be unable to complete
any exit strategy. In particular, these risks could arise from changes in the financial condition
or prospects of the portfolio companies in which investments are made, changes in national or
international economic conditions or changes in laws, regulations, fiscal policies or political
conditions of countries in which investments are made. It takes a substantial period of time to
identify attractive investment opportunities and then to realize the cash value of our investments
through resale. Even if an investment proves to be profitable, it may be several years or longer
before any profits can be realized in cash.
We have several broker-dealer subsidiaries in several different jurisdictions which are each
subject to the capital requirements of the relevant governmental and self-regulatory authorities in
those jurisdictions. For example, Thomas Weisel Partners LLC, our largest broker-dealer subsidiary,
is subject to the net capital requirements of the Securities and
Exchange Commission (SEC) and various self-regulatory organizations of
which it is a member. These requirements typically specify the minimum level of net capital a
broker-dealer must maintain and also mandate that a significant part of its assets be kept in
relatively liquid form. Any failure to comply with these net capital requirements could impair our
ability to conduct our core business as a brokerage firm. Furthermore, Thomas Weisel Partners LLC
and our other broker-dealer subsidiaries are subject to laws and regulations that authorize
regulatory bodies to block or reduce the flow of funds from them to Thomas Weisel Partners Group,
Inc. As a holding company, Thomas Weisel Partners Group, Inc. depends on distributions and other
payments from its subsidiaries to fund all payments on its obligations, including debt obligations.
As a result, regulatory actions could impede access to funds that Thomas Weisel Partners Group,
Inc. needs to make payments on obligations, including debt obligations.
Our risk management policies and procedures may leave us exposed to unidentified or
unanticipated risk.
Our risk management strategies and techniques may not be fully effective in mitigating our
risk exposure in all market environments or against all types of risk.
-12-
Among other risks, we are exposed to the risk that third parties that owe us money, securities
or other assets will not perform their obligations. These parties may default on their obligations
to us due to bankruptcy, lack of liquidity, operational failure, breach of contract or other
reasons. We are also subject to the risk that our rights against third parties may not be
enforceable in all circumstances. As a clearing member firm, we finance our customer positions and
could be held responsible for the defaults or misconduct of our customers. Although we regularly
review credit exposures to specific clients and counterparties and to specific industries and
regions that we believe may present credit concerns, default risk may arise from events or
circumstances that are difficult to detect or foresee. In addition, concerns about, or a default
by, one institution could lead to significant liquidity problems, losses or defaults by other
institutions, which in turn could adversely affect us. Also, risk management policies and
procedures that we utilize with respect to investing our own funds or committing our capital with
respect to investment banking, trading activities or asset management activities may not protect us
or mitigate our risks from those activities. If any of the variety of instruments, processes and
strategies we utilize to manage our exposure to various types of risk are not effective, we may
incur losses.
Our operations and infrastructure may malfunction or fail.
Our businesses are highly dependent on our ability to process, on a daily basis, a large
number of increasingly complex transactions across diverse markets. Our financial, accounting or
other data processing systems may fail to operate properly or become disabled as a result of events
that are wholly or partially beyond our control, including a disruption of electrical or
communications services or our inability to occupy one or more of our offices. The inability of our
systems to accommodate an increasing volume of transactions could also constrain our ability to
expand our businesses. If any of these systems do not operate properly or are disabled, if we
experience difficulties in conforming these systems to changes in law or regulation or changes in
our business activities or if there are other shortcomings or failures in our internal processes,
people or systems, we could suffer an impairment to our liquidity, financial loss, disruption of
our businesses, liability to clients, regulatory intervention or reputational damage.
We also face the risk of operational failure of any of our clearing agents, the exchanges,
clearing houses or other financial intermediaries we use to facilitate our securities transactions.
Any such failure could adversely affect our ability to effect transactions and to manage our
exposure to risk. In addition, our continuing integration of Westwind will require operational and
systems changes. If the implementation of these changes results in operational failures or
disruptions, it could adversely affect our ability to effect transactions and impact our results of
operations.
In addition, our ability to conduct business may be adversely impacted by a disruption in the
infrastructure that supports our businesses and the communities in which we are located. This may
include a disruption due to transitioning from one third-party service provider to another or due
to a disruption involving electrical, communications, transportation or other services used by us
or third parties with which we conduct business, whether due to fire, other natural disaster, power
or communications failure, act of terrorism or war or otherwise. Nearly all of our employees in our
primary locations, including San Francisco, New York, Toronto, London and Boston, work in close
proximity to each other. If a disruption occurs in one
-13-
location and our employees in that location are unable to communicate with or travel to other
locations, our ability to service and interact with our clients may suffer and we may not be able
to implement successfully contingency plans that depend on communication or travel. Insurance
policies to mitigate these risks may not be available or may be more expensive than the perceived
benefit. Further, any insurance that we may purchase to mitigate certain of these risks may not
cover our loss.
Our operations also rely on the secure processing, storage and transmission of confidential
and other information in our computer systems and networks. Our computer systems, software and
networks may be vulnerable to unauthorized access, computer viruses or other malicious code and
other events that could have a security impact. If one or more of such events occur, this
potentially could jeopardize our or our clients or counterparties confidential and other
information processed and stored in, and transmitted through, our computer systems and networks, or
otherwise cause interruptions or malfunctions in our, our clients, our counterparties or third
parties operations. We may be required to expend significant additional resources to modify our
protective measures or to investigate and remediate vulnerabilities or other exposures, and we may
be subject to litigation and financial losses that are either not insured against or not fully
covered through any insurance maintained by us.
Strategic investments or acquisitions and joint ventures may result in additional risks and
uncertainties in our business.
We intend to grow our business through both internal expansion and through strategic
investments, acquisitions or joint ventures. To the extent we make strategic investments or
acquisitions or enter into joint ventures, we face numerous risks and uncertainties combining or
integrating businesses, including integrating relationships with customers, business partners and
internal data processing systems. In the case of joint ventures, we are subject to additional risks
and uncertainties in that we may be dependent upon, and subject to liability, losses or
reputational damage relating to, systems, controls and personnel that are not under our control. In
addition, conflicts or disagreements between us and our joint venture partners may negatively
impact our businesses.
Our recent acquisition of Westwind and any future acquisitions or joint ventures could entail
a number of risks, including problems with the effective integration of operations, the inability
to maintain key pre-acquisition business relationships, the inability to retain key employees,
increased operating costs, exposure to unanticipated liabilities, risks of misconduct by employees
not subject to our control, difficulties in realizing projected efficiencies, synergies and cost
savings, and exposure to new or unknown liabilities.
Any future growth of our business may require significant resources and/or result in
significant unanticipated losses, costs or liabilities. In addition, expansions, acquisitions or
joint ventures may require significant managerial attention, which may be diverted from our other
operations.
-14-
Our international activities are subject to political, economic, legal, operational and other
risks that are inherent in operating in a foreign country.
In 2007, we expanded our international operations through the opening of our Zurich,
Switzerland office, and we recently completed our acquisition of Westwind Partners, which resulted
in our acquisition of operations and offices in Canada and the expansion of our operations in
London, England. In connection with our business activities in Canada, England, Switzerland and
India, and to the extent that we pursue other business opportunities outside the United States, we
will be subject to political, economic, legal, operational and other risks that are inherent in
operating in a foreign country, including risks of possible nationalization, expropriation, price
controls, capital controls, exchange controls and other restrictive governmental actions, as well
as the outbreak of hostilities. In many countries, the laws and regulations applicable to the
securities and financial services industries are uncertain and evolving, and it may be difficult
for us to determine the exact requirements of local laws in every market. Our inability to remain
in compliance with local laws in a particular foreign market could have a significant and negative
effect not only on our businesses in that market but also on our reputation generally. We are also
subject to the enhanced risk that transactions we structure might not be legally enforceable in the
relevant jurisdictions. Westwinds business is conducted and its revenues are substantially derived
from activities outside of the United States. Accordingly, following our acquisition of Westwind,
our exposure to risks relating to international operations have increased significantly.
As we expand our international operations, we will increase our exposure to foreign currency
risk.
As a result of the expanded international operations, we hold assets, incur liabilities, earn
revenues and pay expenses in foreign currencies, including the Canadian dollar, the Swiss franc and
the pound sterling. Because our financial statements will continue to be presented in U.S. dollars,
we will be required to translate assets, liabilities, income and expenses that relate to our
international operations and that are denominated in foreign currencies into U.S. dollars at the
then-applicable exchange rates. Consequently, increases and decreases in the value of the U.S.
dollar versus the various foreign currencies will affect the value of these items in our financial
statements, even if their value has not changed in such foreign currencies. As a result, our
financial results could be more volatile as a result of our international operations. Although we
may enter into transactions to hedge portions of this foreign currency translation exposure, we
will not be able to eliminate this exposure.
Thomas Weisel Partners may experience difficulties, significant additional expenses, unexpected
costs and delays as we continue to integrate our business, business model and culture with those
of the former Westwind Capital Corporation and the combined company may not realize synergies,
efficiencies or cost savings.
Prior to the completion of the acquisition of Westwind, Thomas Weisel Partners and Westwind
operated independently. The success of the combined company following the completion of the
transaction may depend in large part on the ability to integrate the two companies businesses,
business models and cultures. As we continue the integration of
-15-
Thomas Weisel Partners and Westwind, we may experience difficulties, unanticipated costs and
delays. The challenges involved in the continued integration include:
|
|
|
the necessity of coordinating geographically disparate organizations that employ a
significant number of employees and addressing possible differences in corporate and
regional cultures and management philosophies;
|
|
|
|
|
integrating and retaining personnel from different companies while maintaining focus on
providing consistent, high-quality client service;
|
|
|
|
|
integrating information technology systems and resources;
|
|
|
|
|
unforeseen expenses or delays associated with the transaction;
|
|
|
|
|
performance shortfalls at one or both of the companies as a result of the diversion of
managements attention to the transaction and subsequent integration; and
|
|
|
|
|
meeting the expectations of clients with respect to the integration.
|
As we continue the integration, we expect to incur significant additional expenses in
connection with the integration of the two businesses, including integrating personnel,
geographically diverse operations, information technology systems, customers and strategic partners
of each company.
We have made and expect to continue making changes to certain aspects of Westwinds operations
to integrate Westwinds operations with those of Thomas Weisel Partners. For example, we have made
changes to the way in which Westwinds research professionals interact with its investment banking
professionals to conform to Thomas Weisel Partners policies and procedures in this regard. In
addition, we expect that Westwinds combination with a larger firm could affect its existing client
relationships or its ability to enter into new client relationships. Any changes that we have made
or will make to Westwinds operations, in addition to the fact that Westwind is now part of a
larger organization, could disrupt Westwinds business and client relationships and could
substantially affect our ability to achieve the expected benefits of the transaction and our
business and results of operations.
The integration of certain operations, in particular regarding the two companies research and
brokerage businesses, following the transaction will continue to take time and will require the
dedication of significant management resources, which may temporarily distract managements
attention from the routine business of the combined company. The acquisition of Westwind
represented our first significant acquisition as a public company. Employee uncertainty and lack of
focus as we continue the integration process may also disrupt the business of the combined company.
It is possible that the continuation of the integration process could result in the loss of
key employees, diversion of the combined companys managements attention, the disruption or
interruption of, or the loss of momentum in, the combined companys ongoing business or
inconsistencies in standards, controls, procedures and policies, any of which could adversely
-16-
affect our ability to maintain relationships with clients and employees, our ability to
achieve the anticipated benefits of the transaction, or otherwise adversely affect the business and
financial results of the combined company. In addition, the integration process may strain the
combined companys financial and managerial controls and reporting systems and procedures. This may
result in the diversion of management and financial resources from the combined companys core
business objectives.
Even if Thomas Weisel Partners and Westwind are able to integrate such businesses and
operations successfully, there can be no assurance that this integration will result in any
synergies, efficiencies or cost savings or that any of these benefits will be achieved within a
specific time frame.
Evaluation of our prospects may be more difficult in light of our limited operating history.
Our company was formed in 1998 and we have a limited operating history upon which to evaluate
our business and prospects. In addition we recently acquired Westwind, which was formed in 2002 and
which also has a limited operating history. As a relatively young enterprise, we are subject to the
risks and uncertainties that face a company during its formative development. Some of these risks
and uncertainties relate to our ability to attract and retain clients on a cost-effective basis,
expand and enhance our service offerings, raise additional capital and respond to competitive
market conditions. We may not be able to address these risks adequately, and our failure to do so
may adversely affect our business and the value of an investment in our common stock.
We could be subject to unknown liabilities of Westwind, which could cause us to incur
substantial financial obligations and harm our business.
Although the former Westwind shareholders are required to indemnify us for certain breaches of
representations and warranties made in the arrangement agreement governing our acquisition of
Westwind, the shareholders obligation is subject to monetary and time limitations. In addition, if
we are entitled to indemnification by the former Westwind shareholders, it may be costly to enforce
those rights and/or we may not be successful in collecting amounts we are entitled to. If there are
liabilities of Westwind of which we are not aware, we may have little or no recourse against the
former Westwind shareholders and may be obligated to bear the costs of those liabilities. In
addition, many of the former Westwind shareholders will continue as employees of the combined
company following closing of the transaction. Accordingly, if an indemnifiable claim does arise, we
may need to weigh the need to be indemnified for that claim against the potential employee
distraction or damage to employee relations that may result if we were to seek recourse for that
claim.
As a result of the acquisition of Westwind, we are subject to additional risks relating to
Westwinds business.
As a result of the acquisition of Westwind, we are subject to the risks relating to Westwinds
business. Because the risks and uncertainties facing us may differ from those that faced Westwind,
the market price, results of operations and financial condition of the combined
-17-
company may be affected by risks and uncertainties different from those affecting us prior to
the acquisition. These risks include the following:
|
|
|
Westwinds focus on specific sectors of the economy
Westwinds investment banking
business focused principally on the mining and energy sectors of the economy. As a result
of the acquisition of Westwind, the combined companys business has more exposure to these
sectors than Thomas Weisel Partners business had prior to the transaction. Volatility in
the business environment in these sectors generally, including the related commodities
markets, or in the market for securities of companies within these sectors, could
substantially affect our business and results of operations.
|
|
|
|
|
Westwinds focus on Canada
Westwind generated a substantial majority of its revenues
from Canadian-based clients. As a result, Westwinds business and results of operations was
highly dependent on the strength of the Canadian economy. As a result of the acquisition of
Westwind, we expect that a significant portion of the combined companys business will be
derived from Canadian-based clients. Accordingly, our business will be affected by changes
in the Canadian economy and investment activity in Canada. To the extent that we experience
a decline in business in Canada, due to unfavorable conditions in the Canadian economy or
otherwise, we may not be able to offset these declines by increases in other aspects of our
business and our financial results could suffer.
|
An impairment in the carrying value of goodwill could negatively effect our consolidated
statements of financial position, results of operations and cash flows.
Under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets, we are required to evaluate goodwill to determine whether it is impaired under the
guidelines of the standard. Accordingly, we will test the value of our goodwill for impairment at
least annually and, under certain circumstances, we may be required to recognize an impairment
charge. While we believe our estimates and judgments about future cash flows are reasonable, future
impairment charges may be required if the cash flow estimates, as projected, do not occur
or if events change requiring us to revise our estimates, and thereby result in non-cash charges to
our earnings in the period in which we make the adjustment.
As of March 31,
2008, we had $95.8 million of goodwill related to our acquisition of Westwind.
While we believe such goodwill is not impaired,
materially different assumptions regarding future performance of our businesses could result in
significant impairment losses in the future.
Risks Related to Our Industry
Risks associated with regulatory impact on capital markets.
Highly-publicized financial scandals in recent years have led to investor concerns over the
integrity of the U.S. financial markets, and have prompted Congress, the SEC and the Financial Industry Regulatory Authority (FINRA) to
significantly expand corporate governance and public disclosure requirements. To the extent that
private companies, in order to avoid becoming subject to these new requirements, decide to
-18-
forgo initial public offerings, our equity underwriting business may be adversely affected. In
addition, provisions of the Sarbanes-Oxley Act of 2002 and the corporate governance rules imposed
by self-regulatory organizations have diverted many companies attention away from capital market
transactions, including securities offerings and acquisition and disposition transactions. In
particular, companies that are or are planning to be public are incurring significant expenses in
complying with the SEC and accounting standards relating to internal control over financial
reporting, and companies that disclose material weaknesses in such controls under the new standards
may have greater difficulty accessing the capital markets. These factors, in addition to adopted or
proposed accounting and disclosure changes or changes in laws and regulations governing brokerage
and research activities, may have an adverse effect on our business.
Financial services firms have been subject to increased scrutiny over the last several years,
increasing the risk of financial liability and reputational harm resulting from adverse
regulatory actions.
Firms in the financial services industry have been operating in a difficult regulatory
environment. The U.S. financial services industry has experienced increased scrutiny from a variety
of regulators, including the SEC, FINRA and state attorneys general. Penalties and fines sought by
regulatory authorities have increased substantially over the last several years. This regulatory
and enforcement environment has created uncertainty with respect to a number of transactions that
had historically been entered into by financial services firms and that were generally believed to
be permissible and appropriate. We may be adversely affected by changes in the interpretation or
enforcement of existing laws and rules by these governmental authorities and self-regulatory
organizations. We also may be adversely affected as a result of new or revised legislation or
regulations imposed by the SEC, other United States or foreign governmental regulatory authorities
or self-regulatory organizations that supervise the financial markets. Among other things, we could
be fined, prohibited from engaging in some of our business activities or subject to limitations or
conditions on our business activities. Substantial legal liability or significant regulatory action
against us could have material adverse financial effects or cause significant reputational harm to
us, which could seriously harm our business prospects.
In addition, financial services firms are subject to numerous conflicts of interest or
perceived conflicts. The SEC and other federal and state regulators have increased their scrutiny
of potential conflicts of interest. We have adopted various policies, controls and procedures to
address or limit actual or perceived conflicts and regularly seek to review and update our
policies, controls and procedures. However, appropriately dealing with conflicts of interest is
complex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal
appropriately with conflicts of interest. Our policies and procedures to address or limit actual or
perceived conflicts may also result in increased costs, additional operational personnel and
increased regulatory risk. Failure to adhere to these policies and procedures may result in
regulatory sanctions or client litigation. For example, the research areas of investment banks have
been and remain the subject of heightened regulatory scrutiny which has led to increased
restrictions on the interaction between equity research analysts and investment banking personnel
at securities firms. Several securities firms in the United States, including our wholly-owned U.S.
broker-dealer subsidiary, Thomas Weisel Partners LLC, reached a global
-19-
settlement in 2003 and 2004 with certain federal and state securities regulators and
self-regulatory organizations to resolve investigations into equity research analysts alleged
conflicts of interest. Under this settlement, the firms have been subject to certain restrictions
and undertakings, which have imposed additional costs and limitations on the conduct of our
businesses. Potential civil lawsuits implicating investment research analysts conflicts of
interest were not settled as part of the global settlement. The global settlements also did not
resolve potential charges involving individual employees, including supervisors, and regulatory
investigations are continuing. Our total potential liability in respect of such civil cases cannot
be reasonably estimated but could be material to our results of operations.
Financial service companies have experienced a number of highly publicized regulatory
inquiries concerning market timing, late trading and other activities that focus on the mutual fund
industry. These inquiries have resulted in increased scrutiny within the industry and new rules and
regulations for mutual funds, investment advisers and broker-dealers. Although we do not act as an
investment adviser to mutual funds, the regulatory scrutiny and rulemaking initiatives may result
in an increase in operational and compliance costs or the assessment of significant fines or
penalties against our business, and may otherwise limit our ability to engage in certain
activities.
Our exposure to legal liability is significant, and damages that we may be required to pay and
the reputational harm that could result from legal action against us could materially adversely
affect our businesses.
We face significant legal risks in our businesses, and, in recent years, the volume of claims
and amount of damages sought in litigation and regulatory proceedings against financial
institutions have been increasing. These risks include potential liability under securities or
other laws for materially false or misleading statements made in connection with securities
offerings and other transactions, potential liability for fairness opinions and other advice we
provide to participants in strategic transactions and disputes over the terms and conditions of
complex trading arrangements. We are also subject to claims arising from disputes with employees
for alleged discrimination or harassment, among other things. These risks often may be difficult to
assess or quantify, and their existence and magnitude often remain unknown for substantial periods
of time.
Our role as advisor to our clients on important underwriting or mergers and acquisitions
transactions involves complex analysis and the exercise of professional judgment, including
rendering fairness opinions in connection with mergers and other transactions. Therefore, our
activities may subject us to the risk of significant legal liabilities to our clients and aggrieved
third parties, including shareholders of our clients who could bring securities class actions
against us. Our investment banking engagements typically include broad indemnities from our clients
and provisions to limit our exposure to legal claims relating to our services, but these provisions
may not protect us or may not be enforceable in all cases. For example, an indemnity from a client
that subsequently is placed into bankruptcy is likely to be of little value to us in limiting our
exposure to claims relating to that client. As a result, we may incur significant legal and other
expenses in defending against litigation and may be required to pay substantial damages for
settlements and adverse judgments. Substantial legal liability or significant regulatory action
against us could have a material adverse effect on our results of operations or
-20-
cause significant reputational harm to us, which could seriously harm our business and
prospects.
Employee misconduct could harm us and is difficult to detect and deter.
There have been a number of highly publicized cases involving fraud or other misconduct by
employees in the financial services industry in recent years, and we run the risk that employee
misconduct could occur at our company. For example, misconduct by employees could involve the
improper use or disclosure of confidential information, which could result in regulatory sanctions
and serious reputational or financial harm. It is not always possible to deter employee misconduct
and the precautions we take to detect and prevent this activity may not be effective in all cases,
and we may suffer significant reputational harm for any misconduct by our employees.
Risks Related to Ownership of Our Common Stock
Taken together, a significant percentage of our outstanding common stock and shares exchangeable
for common stock is owned or controlled by our senior professionals and other employees and
their interests may differ from those of other shareholders.
Our senior professionals
and other employees collectively own more than 40%of the total
shares of common stock outstanding (including exchangeable shares). Our Chief Executive Officer,
Thomas W. Weisel, beneficially owns approximately 7.8% of our common stock and our President and
Chief Operating Officer, Lionel F. Conacher, beneficially owns approximately 5.0% of our common
stock (including exchangeable shares). Mr. Weisel and Mr. Conacher, together with the other members
of our Executive Committee, collectively own approximately 16.2% of our common stock (including
exchangeable shares). As a result of these shareholdings, our senior professionals and employees
are effectively able to elect our entire board of directors, control our management and policies,
in general, determine without the consent of the other stockholders the outcome of any corporate
transaction or other matter submitted to the shareholders for approval, including mergers,
consolidations and the sale of all or substantially all of our assets. Our employees are
effectively able to prevent or cause a change in control of us. These actions may be taken even if
other shareholders oppose them.
Provisions of our organizational documents may discourage an acquisition of us.
Our organizational documents contain provisions that will impede the removal of directors and
may discourage a third party from making a proposal to acquire us. For example, our board of
directors may, without the consent of shareholders, issue preferred stock with greater voting
rights than our common stock. If a change of control or change in management that shareholders
might otherwise consider to be favorable is prevented or delayed, the market price of our common
stock could decline.
Future sales of our common stock could cause our stock price to decline and the trading volume
of our common stock may be volatile.
Sales of substantial amounts of common stock by our senior professionals, employees and other
shareholders, or the possibility of such sales, may adversely affect the price of our
-21-
common stock, may impede our ability to raise capital through the issuance of equity
securities, and may cause trading volume in our common stock to be volatile.
As
of May 27, 2008, there were approximately 31.3 million shares of our common stock outstanding,
including approximately 6.6 million exchangeable shares of TWP Acquisition Company (Canada) Inc., one of our
wholly-owned subsidiaries. Each exchangeable share is exchangeable at any time into common stock of
the registrant on a one-for-one basis, entitles the holder to dividend and other rights
economically equivalent to those of the common stock, and through a voting trust, votes at our
stockholder meetings.
Of
these shares, up to approximately one half are freely transferable without
restriction or further registration under the Securities Act of 1933 or pursuant to an exemption from registration under Rule 144.
Subject to certain
exceptions, the remaining approximately one half of these shares of common stock and shares
exchangeable for common stock will be available for future sale upon the expiration or the waiver
of transfer restrictions or in accordance with registration rights. In addition, since we became a
public company we have granted (and will continue to grant in the future) equity awards to our
employees that began to vest and become deliverable in 2007. Upon vesting and delivery of the
shares of common stock underlying these awards many employees may decide to sell all or a portion
of their shares in the public markets and these sales may happen at or around the same time due to
similar vesting dates or due to the limited periods of time (trading windows) when we allow our
employees to trade our common stock. These factors may affect both the price of our common stock
and the volume of shares traded. For further information refer to the Securities Authorized for
Issuance under Equity Compensation Plans within Item 5 Market for Registrants Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities of our Annual Report on Form
10-K for the fiscal year ended December 31, 2007.
The market price of our common stock may decline.
The price of our common stock may fluctuate widely, depending upon many factors, including our
perceived prospects and those of the financial services industry in general, differences between
our actual financial and operating results and those expected by investors, changes in general
economic or market conditions, broad market fluctuations and failure to be covered by securities
analysts. Declines in the price of our stock may adversely affect our ability to recruit and retain
key employees, including our senior professionals.
Your interest in our firm may be diluted due to issuance of additional shares of common stock.
Owners of our common stock may experience dilution of their equity investment as a result of
our issuance of additional shares of common stock or securities that are convertible into, or
exercisable for, shares of our common stock. We may issue additional shares of common stock in
connection with any merger or acquisition we undertake, in future public or private offerings to
raise additional capital or in satisfaction of currently outstanding restricted stock units,
warrants and options. For example, on January 2, 2008, we issued a total of 7,009,112 shares of our
common stock (and exchangeable shares) to former shareholders of Westwind in connection with our
acquisition of Westwind. We also have granted and will
-22-
continue to grant equity awards under our Equity Incentive Plan as part of our compensation
and hiring processes, and when these awards are vested or become deliverable we will issue
additional shares of common stock in satisfaction thereof.
As of March 31, 2008, there were 3,687,451 restricted stock units outstanding. Of these
restricted stock units, 393,530 were made in connection with our initial public offering and have a
three-year vesting period. The remaining 3,293,921 restricted stock units outstanding as of
March 31, 2008 have a four-year vesting period.
For further information refer to the Securities Authorized for Issuance under Equity
Compensation Plans within Item 5 Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007.
We may be required to make substantial payments under indemnification agreements.
In connection with our initial public offering and our conversion to corporate form, we
entered into agreements that provide for the indemnification of our members, partners, directors,
officers and certain other persons authorized to act on our behalf against certain losses that may
arise out of our initial public offering or the related reorganization transactions, certain
liabilities of our partners relating to the time they were members of Thomas Weisel Partners Group
LLC, and certain tax liabilities of our former members that may arise in respect of periods prior
to our initial public offering when we operated as a limited liability company.
In addition, in connection with acquisition transactions, such as our acquisition of Westwind,
and in connection with the ordinary conduct of our business, such as in our relationship with out
clearing brokers, we have provided and will continue to provide indemnities to counterparties.
We may be required to make payments under these indemnification agreements, which could
adversely affect our financial condition.
We do not expect to pay any cash dividends in the foreseeable future.
We intend to retain any future earnings to fund the operation and expansion of our business,
and, therefore, we do not anticipate paying cash dividends in the foreseeable future. Accordingly,
our shareholders must rely on sales of their shares of common stock after price appreciation, which
may never occur, as the only way to realize any future gains on an investment in our common stock.
Investors seeking cash dividends should not purchase our common stock.
-23-
We have broad discretion over the use of the net proceeds to us from our initial public offering
of common stock in February 2006 and our follow-on offering of common stock in May 2006.
We have broad discretion to use the net proceeds to us from our initial public offering of
common stock in February 2006 and our follow-on offering of common stock in May 2006, and our
shareholders rely on the judgment of our board of directors and our management regarding the
application of these proceeds. Through December 31, 2007, we have used a portion of the net
proceeds of our common stock offerings to repay notes to third parties, to increase the capital in
our broker-dealer subsidiary, Thomas Weisel Partners LLC, to provide seed investment funds for new
asset management products and for other general corporate purposes. In January 2008, we paid $45
million in cash from these proceeds to former shareholders of Westwind in connection with our
acquisition of Westwind, and during the three months ended March 31, 2008, we also utilized a portion of these proceeds for other general corporate purposes. The remaining portion of these net proceeds have been invested in
municipal debt securities, auction rate securities and tax exempt money market funds. We expect to
use the remaining net proceeds from these offerings for general corporate purposes, including
support and expansion of our underwriting, trading and asset management businesses and strategic
acquisitions and investments, but we have not allocated all of these net proceeds for specific
purposes. We may not be able to find appropriate opportunities to deploy these funds and any
investments, whether for specific corporate purposes, such as investment in our underwriting,
trading or asset management businesses, or for strategic acquisitions, may not generate favorable
returns.
Our common stock has only been publicly traded since February 2, 2006 and we expect that the
price of our common stock will fluctuate substantially.
There has only been a public market for our common stock since February 2, 2006 and since that
date through May 23, 2008 our stock price on the Nasdaq stock market has fluctuated between a
low of $5.01 per share and a high of $24.35 per share. The closing price of our common stock on
May 27, 2008 on the Nasdaq stock market was $6.35 per share.
Broad market and industry factors may adversely affect the market price of our common stock,
regardless of our actual operating performance. Factors that could cause fluctuations in our stock
price may include, among others, actual or anticipated variations in quarterly operating results,
changes in financial estimates by us or by any securities analysts who might cover our stock, or
our failure to meet the estimates made by securities analysts, announcements by us or our
competitors or significant acquisitions, strategic partnerships or divestitures, announcements by
our competitors of their financial or operating results, to the extent those announcements are
perceived by investors to be indicative of our future financial results or market conditions,
additions or departures of key personnel, sales of our common stock, including sales of our common
stock by our directors, officers and employees or by our other principal stockholders, and cyclical
changes in the market in the growth sectors of the economy.
-24-
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements under the captions Risk Factors and in other sections of this
prospectus and in the documents that are incorporated by reference into this prospectus that are
forward-looking statements. In some cases, you can identify these statements by forward-looking
words such as may, might, will, should, expect, plan, anticipate, believe,
estimate, predict, potential or continue, the negative of these terms and other comparable
terminology. These forward-looking statements, which are subject to risks, uncertainties and
assumptions about us, may include projections of our future financial performance, based on our
growth strategies and anticipated trends in our business. These statements are only predictions
based on our current expectations and projections about future events. There are important factors
that could cause our actual results, level of activity, performance or achievements to differ
materially from the results, level of activity, performance or achievements expressed or implied by
the forward-looking statements. In particular, you should consider the numerous risks outlined
under Risk Factors in this prospectus.
These risks are not exhaustive. Other sections of this prospectus may include additional
factors which could adversely impact our business and financial performance. Moreover, we operate
in a very competitive and rapidly changing environment. New risk factors emerge from time to time
and it is not possible for our management to predict all risk factors, nor can we assess the impact
of all factors on our business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, level of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness
of any of these forward-looking statements. You should not rely upon forward-looking statements as
predictions of future events. We are under no duty to update any of these forward-looking
statements after the date of this prospectus to conform our prior statements to actual results or
revised expectations.
-25-
USE OF PROCEEDS
Because the shares of our common stock will be issued in exchange for or upon retraction or
redemption of the exchangeable shares or upon the liquidation, dissolution or winding up of
Canadian Sub or any other distribution of Canadian Subs assets for the purpose of winding up its
affairs, we will not receive any cash proceeds from this offering.
-26-
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated statements of operations for the year
ended December 31, 2007 give effect to Thomas Weisel Partners acquisition of
Westwind as if the acquisition had occurred as of January 1, 2007. The unaudited pro forma
consolidated statements of operations are based on historical financial statements of Thomas
Weisel Partners and Westwind, giving effect to the acquisition applying the assumptions and
adjustments as discussed in the accompanying notes to the pro forma consolidated statements of
operations. The unaudited pro forma consolidated statements of operations should be read in
conjunction with the Annual Report on Form 10-K for the year ended December 31, 2007 for
Thomas Weisel Partners, as well as the historical financial statements of Westwind included in
this prospectus.
The consolidated statement of financial position as of March 31, 2008 and the
consolidated statement of operations for the three months ended March 31, 2008, as presented
within the Quarterly Report on Form 10-Q for the three months ended March 31, 2008 for
Thomas Weisel Partners, are not included herein as the acquisition of Westwind is already
reflected in such statements as of and for the three months ended March 31, 2008.
The unaudited pro forma consolidated statements of operations were prepared using the
purchase method of accounting with Thomas Weisel Partners treated as the accounting
acquiror. The unaudited pro forma consolidated statements of operations does not purport to be
indicative of the results of operations that would have actually been obtained had such
transactions been completed for the period presented, or which may be obtained in the future.
The pro forma adjustments are described in the accompanying notes and are based upon
available information and certain assumptions that management of Thomas Weisel Partners
believes are reasonable.
For purposes of preparing this pro forma information, a preliminary allocation of the
transaction consideration has been made to intangible assets. Net tangible assets were valued at
their respective fair values as management believes that these amounts approximate their current
fair values. These pro forma adjustments represent Thomas Weisel Partners preliminary
determination of purchase accounting adjustments and are based upon available information and
certain assumptions that Thomas Weisel Partners management believes to be reasonable.
Consequently, the amounts reflected below are subject to change and the actual allocation of the
purchase price and the resulting effect on net income from operations may differ.
Unless otherwise stated, all amounts presented in this section are in U.S. dollars.
-27-
The following sets forth the preliminary purchase price and purchase price allocation (
in
thousands
):
|
|
|
|
|
Purchase Price:
|
|
|
|
|
Cash consideration
|
|
$
|
45,000
|
|
Fair value of Thomas Weisel Partners common stock issued
|
|
|
107,604
|
|
Acquisition related costs
|
|
|
2,823
|
|
|
|
|
|
Total purchase price
|
|
$
|
155,427
|
|
|
|
|
|
Purchase Price Allocation:
|
|
|
|
|
Cash
|
|
$
|
36,891
|
|
Securities owned
|
|
|
9,953
|
|
Goodwill
|
|
|
98,315
|
|
Other intangible assets
|
|
|
21,500
|
|
Other tangible liabilities assumed net
|
|
|
(19,398
|
)
|
Deferred tax liabilities on acquired identifiable assets
|
|
|
(7,275
|
)
|
|
|
|
|
Total purchase price allocation for the business acquisition
|
|
|
139,986
|
|
Non-compete intangible asset
|
|
|
23,321
|
|
Deferred tax liability on acquired non-compete intangible asset
|
|
|
(7,880
|
)
|
|
|
|
|
Total consideration
|
|
$
|
155,427
|
|
|
|
|
|
-28-
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Weisel Partners
|
|
|
Westwind(a)
|
|
|
Adjustments
|
|
|
Combined
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
127,228
|
|
|
$
|
69,613
|
|
|
$
|
|
|
|
$
|
196,841
|
|
Brokerage
|
|
|
120,187
|
|
|
|
15,560
|
|
|
|
|
|
|
|
135,747
|
|
Asset management
|
|
|
33,414
|
|
|
|
|
|
|
|
|
|
|
|
33,414
|
|
Interest income
|
|
|
17,718
|
|
|
|
1,740
|
|
|
|
(1,879
|
)(b)
|
|
|
17,579
|
|
Other revenue
|
|
|
920
|
|
|
|
|
|
|
|
|
|
|
|
920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
299,467
|
|
|
|
86,913
|
|
|
|
(1,879
|
)
|
|
|
384,501
|
|
Interest expense
|
|
|
(10,418
|
)
|
|
|
(235
|
)
|
|
|
|
|
|
|
(10,653
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
289,049
|
|
|
|
86,678
|
|
|
|
(1,879
|
)
|
|
|
373,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses excluding interest
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
187,902
|
|
|
|
56,529
|
|
|
|
|
|
|
|
244,431
|
|
Brokerage execution, clearance and
account administration
|
|
|
20,363
|
|
|
|
1,079
|
|
|
|
|
|
|
|
21,442
|
|
Communications and data processing
|
|
|
18,993
|
|
|
|
2,500
|
|
|
|
|
|
|
|
21,493
|
|
Depreciation and amortization of
property and equipment
|
|
|
6,450
|
|
|
|
569
|
|
|
|
(164
|
)(c)
|
|
|
6,855
|
|
Amortization of other intangible assets
|
|
|
|
|
|
|
|
|
|
|
15,349
|
(d)
|
|
|
15,349
|
|
Marketing and promotion
|
|
|
15,147
|
|
|
|
3,183
|
|
|
|
|
|
|
|
18,330
|
|
Occupancy and equipment
|
|
|
18,988
|
|
|
|
1,400
|
|
|
|
|
|
|
|
20,388
|
|
Other expense
|
|
|
23,979
|
|
|
|
4,392
|
|
|
|
|
|
|
|
28,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses excluding interest
|
|
|
291,822
|
|
|
|
69,652
|
|
|
|
15,185
|
|
|
|
376,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
|
(2,773
|
)
|
|
|
17,026
|
|
|
|
(17,064
|
)
|
|
|
(2,811
|
)
|
Provision for taxes (tax benefit)
|
|
|
(2,793
|
)
|
|
|
6,208
|
|
|
|
(9,028
|
)(e)
|
|
|
(5,613
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
20
|
|
|
$
|
10,818
|
|
|
$
|
(8,036
|
)
|
|
$
|
2,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
$
|
0.08
|
|
Diluted earnings per share
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
$
|
0.08
|
|
Weighted average shares used in computation
of per share data
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
26,141
|
|
|
|
|
|
|
|
7,009
|
(f)
|
|
|
33,150
|
|
Diluted weighted average shares
outstanding
|
|
|
26,446
|
|
|
|
|
|
|
|
7,009
|
(f)
|
|
|
33,455
|
|
-29-
Notes to the
Unaudited Pro Forma Consolidated Statement of Operations
(a) The Westwind consolidated statement of operations has been converted from Canadian dollars to
U.S. dollars for the pro forma presentation. Amounts were converted based on the average monthly
exchange rates from January 1, 2007 to December 31, 2007.
(b) An adjustment to interest income for the estimated interest amount that would not have been
recognized by Thomas Weisel Partners during the year ended December 31, 2007 on the $45 million
cash portion of the transaction consideration. The weighted average interest rate for the year
ended December 31, 2007 is estimated to be 4.26%.
(c) Adjustment to depreciation and amortization to reflect fair value on the date of acquisition.
(d) Reflects the amortization of other intangible assets for the year ended December 31, 2007.
Amortization amounts assume the following useful lives for each intangible asset:
|
|
|
|
|
Customer Relationships
|
|
7.5 years
|
Non-Compete Agreements
|
|
3.0 years
|
Investment Banking Backlog
|
|
1.0 year
|
The useful lives of other intangible assets are based upon available information and certain
assumptions that Thomas Weisel Partners management believe to be reasonable.
The following table provides the estimated amortization of the other intangible assets based on
accelerated and straight-line methods of amortization over the respective useful lives (
in
thousands
):
|
|
|
|
|
Year 1
|
|
$
|
15,349
|
|
Year 2
|
|
|
11,569
|
|
Year 3
|
|
|
10,688
|
|
Year 4
|
|
|
2,275
|
|
Year 5
|
|
|
1,755
|
|
Thereafter
|
|
|
3,185
|
|
|
|
|
|
Total
|
|
$
|
44,821
|
|
|
|
|
|
(e) To record an income tax impact on the pre-tax pro forma adjustments.
(f) The issuance of 7,009,112 shares of Thomas Weisel Partners common stock or exchangeable shares.
The fair value of the Thomas Weisel Partners common stock issued was based upon the average of the
closing prices of one share of common stock during the five trading day period beginning two
trading days prior to the date the transaction was announced.
-30-
PLAN OF DISTRIBUTION
We will issue the shares of our common stock covered by this prospectus only upon exchange,
retraction or redemption of the exchangeable shares or upon the liquidation, dissolution or winding
up of Canadian Sub or any other distribution of Canadian Subs assets for the purpose of winding up
its affairs. No broker, dealer or underwriter has been engaged in connection with these matters.
We have included as exhibits to the registration statement of which this prospectus forms a part,
the arrangement agreement, the form of plan of arrangement, exchangeable share provisions, voting
and exchange trust agreement and support agreement relating to the exchangeable shares, and the
following description is qualified in its entirety by reference to those documents.
Optional Retraction of Exchangeable Shares
The exchangeable shares were issued by Canadian Sub in connection with our acquisition of
Westwind. If you are a holder of exchangeable shares, you are entitled at any time to require
Canadian Sub to redeem, subject to the overriding call right of another of our Canadian
subsidiaries (referred to in this prospectus as CallRightCo), any or all of your exchangeable
shares for a price per exchangeable share of one share of our common stock and (provided that you
hold the exchangeable share on the applicable dividend record date), on the payment date for any
declared and unpaid dividends, an amount in cash equal to such dividends on that exchangeable
share.
In order to exercise this right, you must deliver to Canadian Sub at its registered office or
at an office of Canadian Subs transfer agent, among other things, a written retraction request and
the certificates representing the exchangeable shares to be redeemed. You must state in your
request the business day on which you desire Canadian Sub to redeem your exchangeable shares, which
business day must be 10 to 15 business days after Canadian Sub receives your request. If you fail
to specify a business day in your request, the retraction date will be the 15th business day after
your request is received by Canadian Sub.
If you exercise this retraction right to require that Canadian Sub redeem any of your
exchangeable shares, CallRightCo will have an overriding retraction call right, which is
CallRightCos right to purchase all but not less than all of those exchangeable shares for a price
per exchangeable share of one share of our common stock and (provided that you hold the
exchangeable share on the applicable dividend record date), on the payment date for any declared
and unpaid dividends, an amount in cash equal to such dividends on that exchangeable share. Upon
receipt of your retraction request, Canadian Sub will immediately notify CallRightCo, which must
then advise Canadian Sub within two business days as to whether it will exercise its retraction
call right. If CallRightCo does not so notify Canadian Sub, Canadian Sub will notify you as soon as
possible thereafter that CallRightCo will not exercise its retraction call right. If CallRightCo
advises Canadian Sub that CallRightCo will exercise its retraction call right within the two
business day period, then the retraction request will be considered only to be an offer by you to
sell the shares identified in your retraction request to CallRightCo in accordance with
CallRightCos retraction call right.
-31-
You may revoke your retraction request, in writing, at any time prior to the close of business
one business day before the contemplated date of retraction, in which case the exchangeable shares
identified in the retraction request will not be purchased by CallRightCo or redeemed by Canadian
Sub. Unless you revoke your retraction request, the shares identified in the retraction request
will be redeemed by Canadian Sub or purchased by CallRightCo, as the case may be, and Canadian Sub
or CallRightCo, as the case may be, will send you (i) a certificate representing the aggregate
number of shares of our common stock and (ii) on the payment date therefor, a check in an amount
equal to the amount of the declared and unpaid dividends, if any, on the retracted or purchased
exchangeable shares, less any amounts withheld on account of tax required to be deducted and
withheld therefrom.
If, as a result of solvency requirements or other provisions of applicable law, Canadian Sub
believes it is not permitted to redeem all exchangeable shares identified in a retraction request
and CallRightCo has not exercised its retraction call right, Canadian Sub will redeem only those
exchangeable shares tendered by you (rounded down to a whole number of shares) as would be
permissible. In addition, if you do not revoke your retraction request, the retraction request will
constitute notice from you to the trustee to exercise your exchange right under the voting and
exchange trust agreement entered into by Thomas Weisel Partners, Canadian Sub and the trustee
(referred to in this document as the voting and exchange trust agreement), and the trustee, on
your behalf, will require Thomas Weisel Partners to purchase any exchangeable shares on the
retraction date set forth in the retraction request.
Redemption of Exchangeable Shares
On the redemption date for the exchangeable shares, Canadian Sub will, subject to
CallRightCos redemption call right and applicable law, redeem all of the then outstanding
exchangeable shares of the class for a price per exchangeable share of one share of our common
stock and (provided that you hold the exchangeable share on the applicable dividend record date) an
amount in cash equal to the declared and unpaid dividends, if any, on that exchangeable share.
Canadian Sub will provide the registered holders of its exchangeable shares with at least 60 days
prior written notice of the proposed redemption of the exchangeable shares by Canadian Sub or the
purchase of the exchangeable shares by CallRightCo under the redemption call right described below.
CallRightCo has an overriding right to purchase on the redemption date all of the outstanding
exchangeable shares (other than those held by Thomas Weisel Partners and its affiliates) for a
price per exchangeable share of one share of our common stock and an amount in cash equal to the
declared and unpaid dividends, if any, on that exchangeable share held by a holder on any dividend
record date that occurred prior to the date of purchase of the share by CallRightCo.
To exercise this redemption call right, CallRightCo must notify the transfer agent and
Canadian Sub of CallRightCos intention to exercise this right at least 60 days before the
redemption date. The transfer agent will notify the holders of the exchangeable shares as to
whether or not CallRightCo has exercised its redemption call right after the expiry of the period
during which CallRightCo can exercise its redemption call right. If CallRightCo exercises its
-32-
redemption call right, it will purchase on the redemption date all of the exchangeable shares
then outstanding (other than those held by Thomas Weisel Partners and its affiliates).
The redemption date means the date upon which a change of control of Thomas Weisel Partners
occurs. If at any time there are outstanding fewer than 10% of the number of exchangeable shares
issued pursuant to the acquisition of Westwind (subject to adjustment for subdivisions or
consolidations or stock dividends and the like), then the board of directors of Canadian Sub may
accelerate the redemption date upon at least 90 days prior written notice to the registered
holders of exchangeable shares and the trustee under the voting and exchange trust agreement.
On or after the redemption date, upon your delivery of the certificates representing the
exchangeable shares and the other documents as may be required to an office of the transfer agent
or the registered office of Thomas Weisel Partners, Canadian Sub or CallRightCo will deliver, for
each exchangeable share, one share of our common stock and, provided that you held the exchangeable
shares on the applicable dividend record date, a check in an amount equal to the amount of declared
and unpaid dividends, if any, on the redeemed exchangeable shares, less any amounts withheld on
account of tax required to be deducted and withheld therefrom by Canadian Sub.
On and after the redemption date, you shall cease to be a holder of exchangeable shares and
shall not be entitled to exercise any of the rights of holders in respect thereof, other than the
right to receive your proportionate part of the total redemption price, unless payment of the total
redemption price shall not be made upon delivery of the certificates representing your exchangeable
shares, in which case your rights shall remain unaffected until the total redemption price has been
paid as described in the preceding paragraph.
Upon payment or deposit of the total redemption price, you shall thereafter be considered and
deemed for all purposes to be a holder of the shares of our common stock delivered to you or your
custodian on your behalf.
Purchase for Cancellation
Subject to applicable law, Canadian Sub may at any time and from time to time purchase for
cancellation all or any part of the outstanding exchangeable shares on such terms and conditions as
may mutually be agreed by a holder of exchangeable shares and Canadian Sub.
Liquidation Rights with Respect to Canadian Sub
In the event of the liquidation, dissolution or winding up of Canadian Sub or other
distribution of the assets of Canadian Sub among its shareholders for the purpose of winding up its
affairs, you will have, subject to applicable law and CallRightCos overriding liquidation call
right, preferential rights to receive from Canadian Sub for each exchangeable share you hold a
share of our common stock, plus, provided that you hold the exchangeable share on the applicable
dividend record date, the amount of all declared and unpaid dividends, if any, on that exchangeable
share. Upon the occurrence of a liquidation, dissolution or winding up, CallRightCo will have an
overriding liquidation call right to purchase all of the outstanding
-33-
exchangeable shares (other than exchangeable shares held by Thomas Weisel Partners and its
affiliates) from you on the liquidation date for the same consideration per share.
Upon the occurrence and during the continuance of an insolvency event (as defined in the
following paragraph), you will be entitled to instruct the trustee under the voting and exchange
trust agreement to exercise the exchange right with respect to any or all of the exchangeable
shares you hold and require Thomas Weisel Partners to purchase these shares. As soon as practicable
following the occurrence of an insolvency event or any event which may, with the passage of time
and/or the giving of notice, become an insolvency event, Canadian Sub and Thomas Weisel Partners
must, under the voting and exchange trust agreement, give written notice to the trustee. As soon as
practicable after receiving notice, the trustee will notify you of the insolvency event and will
advise you of your rights with respect to the exchange right. The purchase price payable by Thomas
Weisel Partners for each exchangeable share purchased under the exchange right will be equal to one
share of our common stock plus, provided you hold the exchangeable share on the applicable dividend
record date, an amount in cash equal to any declared and unpaid dividends on that exchangeable
share, less any amount withheld on account of tax.
An insolvency event means:
|
|
|
the institution by Canadian Sub of any proceeding to be adjudicated a bankrupt or
insolvent or to be wound up, or the consent of Canadian Sub to the institution of
bankruptcy, insolvency or winding up proceedings against it;
|
|
|
|
|
the filing of a petition, answer or consent seeking dissolution or winding up under
any bankruptcy, insolvency or analogous laws, including the Companies Creditors
Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and Canadian
Subs failure to contest in good faith the proceedings commenced in respect of Canadian
Sub within 30 days of becoming aware of the proceedings, or the consent by Canadian Sub
to the filing of the petition or to the appointment of a receiver;
|
|
|
|
|
the making by Canadian Sub of a general assignment for the benefit of creditors, or
the admission in writing by Canadian Sub of its inability to pay its debts generally as
they come due; or
|
|
|
|
|
Canadian Sub not being permitted, under solvency requirements or other provisions of
applicable law, to redeem any retracted exchangeable shares under the exchangeable
share provisions.
|
In addition, if, as a result of solvency requirements or other provisions of applicable law,
Canadian Sub is not permitted to redeem all exchangeable shares identified in a retraction request,
and CallRightCo has not exercised its retraction call right, then the retraction request will
constitute notice from you to the trustee to exercise your exchange right under the voting and
exchange trust agreement and the trustee, on your behalf, will require Thomas Weisel Partners to
purchase any exchangeable shares on the retraction date set forth in the retraction request.
-34-
Liquidation Rights with Respect to Thomas Weisel Partners
In order for the holders of exchangeable shares to participate on a pro rata basis with the
holders of shares of our common stock, on the fifth business day prior to the effective date of a
Thomas Weisel Partners liquidation event (a specified event relating to the voluntary or
involuntary liquidation, dissolution, winding up or other distribution of the assets of Thomas
Weisel Partners among its shareholders for the purpose of winding up its affairs), each
exchangeable share (other than those held by Thomas Weisel Partners and its affiliates) will
automatically be exchanged for a share of our common stock plus, provided that you hold the
exchangeable share on the applicable dividend record date, an amount in cash equal to any declared
and unpaid dividends on that exchangeable share, less any amount withheld on account of tax. Upon
your request and surrender of exchangeable share certificates, duly endorsed in blank and
accompanied by those instruments of transfer that Thomas Weisel Partners may reasonably require,
Thomas Weisel Partners will deliver to you certificates representing an equivalent number of shares
of our common stock, plus on the payment date therefor, a check for the amount of those dividends,
if any, on the exchangeable shares exchanged by you under the automatic exchange right, less any
amount withheld on account of tax.
We will pay all expenses incurred in connection with the distribution described in this
prospectus. We estimate that the total expense of this distribution
will be approximately $160,000.
-35-
INCOME TAX CONSIDERATIONS
Certain Canadian Federal Income Tax Consequences
The
following is a summary of certain Canadian federal income tax consequences under the
Income Tax Act
(Canada) (the Canadian Tax Act), generally applicable to holders of exchangeable
shares who, for purposes of the Canadian Tax Act, and at all relevant times, are or are deemed to
be resident in Canada, hold their exchangeable shares and shares of Thomas Weisel Partners common
stock, as the case may be, as capital property, and deal at arms length with Canadian Sub and
Thomas Weisel Partners. Exchangeable shares and shares of Thomas Weisel Partners common stock will
generally be considered to be capital property to a shareholder unless the shares are held in the
course of carrying on a business of trading or dealing in securities or acquired in a transaction
considered to be an adventure in the nature of trade. Certain Canadian Sub shareholders who are
residents of Canada for the purposes of the Canadian Tax Act, and whose exchangeable shares might
not otherwise qualify as capital property, may be entitled to make an irrevocable election in
accordance with subsection 39(4) of the Canadian Tax Act to have their exchangeable shares and
every Canadian security (as defined in the Canadian Tax Act) owned by such shareholder in the
taxation year of the election and in all subsequent taxation years deemed to be capital property.
Shareholders who do not hold their exchangeable shares or shares of Thomas Weisel Partners common
stock, as the case may be, as capital property, should consult their own tax advisors regarding
their particular circumstances.
This summary is based on the Canadian Tax Act and the regulations thereunder and the current
published administrative practices and assessing policies of the Canada Revenue Agency (CRA),
all in effect as of the date of hereof. This summary takes into account all proposed amendments to
the Canadian Tax Act and the regulations thereunder that have been publicly announced by or on
behalf of the Minister of Finance (Canada) prior to the date hereof and assumes that such proposed
amendments will be enacted substantially as proposed. However, no assurance can be given that such
proposed amendments will be enacted in the form proposed, or at all. This summary does not take
into account or anticipate any other changes in law or any changes in CRA administrative practices
and assessing policies, whether by judicial, governmental or legislative action or decision, nor
does it take into account other federal or any provincial, territorial or foreign income tax
legislation or considerations, which may differ from the material Canadian federal income tax
consequences described herein.
This summary is of a general nature only and is not intended to be, and should not be construed to
be, legal, business or tax advice to any particular shareholder. This summary does not take into
account any particular circumstances of any particular shareholder and does not address
consequences that may be particular to any particular shareholder. Therefore, shareholders should
consult their own tax advisor regarding their particular circumstances.
In particular, this summary does not apply to financial institutions, insurers carrying on
business in Canada and elsewhere that are not Canadian residents for the purpose of the
-36-
Canadian Tax Act or corporations to whom the functional currency reporting rules apply.
Holders to which these rules apply should consult their own tax advisors.
For the purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or
disposition of securities (including dividends, adjusted cost base and proceeds of disposition)
must be expressed in Canadian dollars based on the noon rate of exchange as quoted by the Bank of
Canada at the time such transactions arise or such other rate of exchange acceptable to CRA at the
time such transactions arise.
Dividends on Exchangeable Shares
Individuals
. In the case of a holder of exchangeable shares who is an individual (including
most trusts), dividends received or deemed to be received on such exchangeable shares by the
shareholder are required to be included in computing the individuals income for the taxation year
in which such dividends are received and are subject to the gross-up and dividend tax credit rules
generally applicable to taxable dividends received from taxable Canadian corporations.
Corporations
. In the case of a holder of exchangeable shares that is a corporation, dividends
received or deemed to be received on such exchangeable shares are required to be included in
computing the corporations income for the taxation year in which such dividends are received and,
subject to the special rules and limitations described below, such dividends will normally be
deductible in computing the corporations taxable income.
In the case of a holder of exchangeable shares that is a private corporation (as defined in
the Canadian Tax Act) or any other corporation controlled or deemed to be controlled by or for the
benefit of an individual (other than a trust) or a related group of individuals (other than
trusts), such shareholder will generally be liable to pay a refundable tax under Part IV of the
Canadian Tax Act of 33 1/3% on dividends received (or deemed to be received) on such exchangeable
shares, to the extent such dividends are deductible in computing such shareholders taxable income.
A Canadian-controlled private corporation may be liable to pay an additional refundable tax of 6
2/3% on dividends received or deemed to be received on such exchangeable shares if such dividends
are not deductible in computing taxable income.
The exchangeable shares are taxable preferred shares and short-term preferred shares for
the purpose of the Canadian Tax Act. Accordingly, a holder of exchangeable shares who receives or
is deemed to receive dividends on such shares should not be subject to the 10% tax under Part IV.1
of the Canadian Tax Act.
Dividends on Thomas Weisel Partners Common Stock
Individuals and Corporations
. In the case of a holder of shares of Thomas Weisel Partners common stock who is
an individual, dividends received or deemed to be received by the shareholder on such stock will be
required to be included in computing the shareholders income for the taxation year in which such
dividends are received and will not be subject to the gross-up and dividend tax credit rules in the
Canadian Tax Act.
-37-
Corporations
. In the case of a holder of shares of Thomas Weisel Partners common stock that is
a corporation, dividends received or deemed to be received by the shareholder on such stock will be
required to be included in computing the shareholders income for the taxation year in which such
dividends are received and generally will not be deductible in computing the shareholders taxable
income. A shareholder that is a Canadian-controlled private corporation may be liable to pay an
additional refundable tax of 6 2/3% on such dividends.
Any
United States non-resident withholding tax on such dividends generally will be eligible to
be credited against the holders income tax or deducted from income subject to certain limitations
under the Canadian Tax Act.
Redemption or Exchange of Exchangeable Shares
A shareholder will be considered to have disposed of exchangeable shares (i) on a redemption
(including pursuant to a retraction request) of such exchangeable shares by Canadian Sub and (ii)
on an acquisition of such exchangeable shares by CallRightCo or Thomas Weisel Partners. However,
the Canadian federal income tax consequences of the disposition for the holder will be quite
different depending on whether the event giving rise to the disposition is a redemption or an
acquisition.
A shareholder who exercises the right to require redemption of an exchangeable share by giving
a retraction request cannot control whether such exchangeable share will be acquired by CallRightCo
under the retraction call right or redeemed by Canadian Sub; however, the shareholder will be
notified as soon as possible if CallRightCo will not exercise the retraction call right. You may
revoke your retraction request, in writing, at any time prior to the close of business one business
day before the contemplated date of retraction, in which case the exchangeable shares identified in
the retraction request will not be purchased by CallRightCo or redeemed by Canadian Sub.
Redemption by Canadian Sub.
On a redemption (including a retraction) of exchangeable shares by
Canadian Sub, a shareholder will generally be deemed to have received a dividend equal to the
amount, if any, by which the redemption proceeds exceed the paid-up capital (for purposes of the
Canadian Tax Act) of the exchangeable shares so redeemed. On the redemption, the holder of an
exchangeable share will be considered to have proceeds of disposition equal to the redemption
proceeds less the amount of the deemed dividend. A holder will also realize a capital gain (or a
capital loss) equal to the amount, if any, by which the proceeds of disposition exceed (or is less
than) the sum of (i) the adjusted cost base to the holder of the exchangeable share, and (ii) any
reasonable costs of disposition. For this purpose, the redemption proceeds of an exchangeable
share will be equal to the sum of (i) the fair market value at the time of the redemption of a
share of Thomas Weisel Partners common stock, and (ii) the amount of all declared but unpaid
dividends, if any, on the exchangeable share. The deemed dividend will be subject to the tax
treatment described above under Dividends on Exchangeable Shares.
-38-
In the case of a shareholder that is a corporation, it is possible that in some circumstances
all or part of the deemed dividend may be treated as proceeds of disposition and not as a dividend.
Purchase by CallRightCo.
On the acquisition of exchangeable shares by CallRightCo pursuant to
its redemption call right, a shareholder will generally be considered to realize a capital gain (or
a capital loss) equal to the amount by which the proceeds of disposition exceed (or are less than)
the total of (i) the adjusted cost base of such exchangeable share to the shareholder and (ii) any
reasonable costs of disposition. For this purpose, the proceeds of disposition in respect of an
acquisition of an exchangeable share by CallRightCo will be equal to the sum of (i) the fair market
value at the time of the exchange of a share of Thomas Weisel Partners common stock, and (ii) the
amount of all declared but unpaid dividends on the exchangeable share. The acquisition of an
exchangeable share by CallRightCo will not result in a deemed dividend. For a description of the
tax treatment of capital gains and losses, see Taxation of Capital Gains and Capital Losses
below.
Disposition of Exchangeable Shares Other Than on Redemption or Exchange
A holder of exchangeable shares who disposes or is deemed to dispose of such shares, other
than on a redemption or exchange, as described above, will generally realize a capital gain (or
capital loss) equal to the amount by which the proceeds of disposition, net of any reasonable costs
of disposition, exceed (or are less than) the adjusted cost base to such shareholder immediately
before the disposition. The taxation of capital gains and capital losses is described below.
Acquisition and Disposition of Thomas Weisel Partners Common Stock
The cost of the shares of Thomas Weisel Partners common stock received on a retraction,
redemption or exchange of exchangeable shares to a particular shareholder will be equal to the fair
market value of the common stock at the time of that event, and generally will be averaged with the adjusted
cost base of any other shares of Thomas Weisel Partners common stock held by such shareholder at
that time as capital property for the purpose of determining the adjusted cost base of the common
stock under the Canadian Tax Act.
A holder of shares of Thomas Weisel Partners common stock who disposes or is deemed to dispose
of such shares will generally realize a capital gain (or a capital loss) equal to the amount, if
any, by which the proceeds of disposition, net of any reasonable costs of disposition, exceed (or
are less than) the adjusted cost base to such holder of such common stock immediately before the
disposition. The taxation of capital gains and capital losses is described below.
Taxation of Capital Gains and Capital Losses
Generally, a shareholder is required to include in computing its income for a taxation year
half of the amount of any capital gain (the taxable capital gain). A shareholder may deduct half
of the amount of any capital loss (the allowable capital loss) realized in a taxation year from
taxable capital gains realized by the shareholder in such year, subject to and in
-39-
accordance with rules contained in the Canadian Tax Act. Any allowable capital losses in
excess of taxable capital gains for the year of disposition generally may be carried back up to
three taxation years or carried forward indefinitely and deducted against taxable capital gains in
such other years to the extent and under the circumstances described in the Canadian Tax Act.
Capital gains realized by a shareholder who is an individual or trust, other than certain
specified trusts, may give rise to alternative minimum tax under the Canadian Tax Act.
A shareholder that is a Canadian-controlled private corporation, as defined in the Canadian
Tax Act, may be liable to pay an additional refundable tax of 6 2/3% on its aggregate investment
income for the year which will include an amount in respect of taxable capital gains.
If a holder of exchangeable shares or of shares of Thomas Weisel Partners common stock is a
corporation, the amount of any capital loss realized on a disposition or deemed disposition of such
shares may be reduced by the amount of dividends received or deemed to have been received on such
shares to the extent and under circumstances prescribed by the Canadian Tax Act. Similar rules may
apply where a corporation is a member of a partnership or a beneficiary of a trust that owns such
shares or where a trust or partnership of which a corporation is a beneficiary or a member is a
member of a partnership or a beneficiary of a trust that owns any such shares. Shareholders to whom
these rules may be relevant should consult their own tax advisors.
Foreign Property Information Reporting
In general, a specified Canadian entity, as defined in the Canadian Tax Act, for a taxation
year or fiscal period whose total cost amount of specified foreign property, as defined in the
Canadian Tax Act, at any time in the year or fiscal period exceeds CAD$100,000, is required to file
an information return for the year or period disclosing prescribed information, including the cost
amount, any dividends received in the year, and any gains or losses realized in the year, in
respect of such property. With some exceptions, a taxpayer resident in Canada in the year will be a
specified Canadian entity. Exchangeable shares, ancillary rights and shares of Thomas Weisel
Partners common stock will constitute specified foreign property to a shareholder for these
purposes.
Accordingly, holders of exchangeable shares and/or of shares of Thomas Weisel Partners common stock
should consult their own advisors regarding compliance with these rules.
Foreign Investment Entity Tax Proposals
Bill C-10, which received second reading in the Senate on December 4, 2007, contains draft
legislation regarding the taxation of investments in foreign investment entities (the FIE
Rules). In general, where the FIE Rules apply, a holder of an interest in a foreign investment
entity will be required to either (i) include in (or deduct from) income on an annual basis any
increase (or decrease) in the value of that interest or (ii) include in income annually, an imputed
return at the prescribed rate on the designated cost of such interest. A corporation is not a
foreign investment entity if the carrying value of all of its investment property is not
-40-
greater than one-half of the carrying value of all of its property or if its principal
undertaking is the carrying on of a business that is not an investment business within the
meaning of those terms in the FIE Rules.
In any event, in general, the proposed rules will not apply to shares of Thomas Weisel
Partners common stock so long as such shares qualify as an arms length interest under the
Canadian Tax Act, it is reasonable to conclude that the holder has no tax avoidance motive in
respect of such shares, Thomas Weisel Partners continues to be resident in a country in which there
is a designated stock exchange (which currently includes the United States) and shares of Thomas
Weisel Partners are listed on a designated stock exchange (which currently includes the Toronto
Stock Exchange).
No assurance can be given that the exchangeable shares or the shares of Thomas
Weisel Partners common stock will qualify as arms length interests, and shareholders should
consult their own tax advisors in this respect.
Certain U.S. Federal Income Tax Considerations
The section summarizes certain United States federal income and estate tax consequences to
Non-U.S. Holders (as defined below) of ownership and disposition of exchangeable shares and common
stock. If you are a U.S. Holder (as defined below) you should consult your own tax advisor as to
the United States tax consequences of owning and disposing such shares.
You are a Non-U.S. Holder if you are a beneficial owner of exchangeable shares and you are,
for United States federal income tax purposes:
|
|
|
a nonresident alien individual,
|
|
|
|
|
a foreign corporation, or
|
|
|
|
|
an estate or trust that in either case is not subject to United States federal
income tax on a net income basis on income or gain from common stock.
|
You are a U.S. Holder if you are not a Non-U.S. Holder.
This section is limited to Non-U.S. Holders who hold their exchangeable shares as capital
assets. This section does not apply to you if you are a member of a class of holders subject to
special rules.
This section does not consider the specific facts and circumstances that may be relevant to a
particular Non-U.S. holder and does not address the treatment of a Non-U.S. holder under the laws
of any state, local or foreign taxing jurisdiction. This section is based on the tax laws of the
United States, including the Internal Revenue Code of 1986, as amended, existing and proposed
regulations, and administrative and judicial interpretations, all as currently in effect. These
laws are subject to change, possibly on a retroactive basis. Any such changes may significantly
change the conclusions expressed in this summary. This section is not intended as a complete
analysis of all possible tax considerations relevant to owning and disposing of exchangeable shares
and common stock.
-41-
If a partnership holds exchangeable shares or common stock, the United States federal income
tax treatment of a partner will generally depend on the status of the partner and the tax treatment
of the partnership. A partner in a partnership holding the exchangeable shares or common stock
should consult its tax advisor with regard to the United States federal income tax treatment of an
investment in the exchangeable shares.
The following summary is not binding on the IRS. Neither Thomas Weisel Partners nor Canadian
Sub has requested a ruling from the IRS with respect to any of the U.S. federal income tax
consequences of the ownership and disposition of exchangeable shares, and as a result, there can be
no assurance that the IRS will not disagree with or challenge any of the conclusions described
below.
You are strongly urged to consult a tax advisor regarding the United States federal tax
consequences of acquiring, holding and disposing of exchangeable shares or common stock in your
particular circumstances, as well as any tax consequences that may arise under the laws of any
state, local or foreign taxing jurisdiction.
U.S. Federal Income Tax Characterization of Exchangeable Shares
There is no statutory, judicial or administrative authority that directly addresses the proper
characterization and treatment of instruments with characteristics similar to the exchangeable
shares and the ancillary rights for U.S. federal income tax purposes. Since the exchangeable shares
are exchangeable into shares of Thomas Weisel Partners common stock, have dividend rights based on
the dividends paid with respect to Thomas Weisel Partners common stock, and have the benefit of
voting rights similar to the voting rights attributable to the shares of Thomas Weisel Partners
common stock, there is a significant risk that, for U.S. federal income tax purposes, the IRS or
the United States courts may assert that the exchangeable shares should be treated as shares of
Thomas Weisel Partners rather than as shares of Canadian Sub. In the absence of specifically
applicable authority, Thomas Weisel Partners and Canadian Sub intend to take the position that the
exchangeable shares constitute stock of Canadian Sub, and not stock of Thomas Weisel Partners, for
U.S. federal income tax purposes. However, this characterization is not binding on the IRS, and
the IRS or the courts could treat the exchangeable shares as shares of Thomas Weisel Partners.
Neither Thomas Weisel Partners nor Canadian Sub have requested, nor do they intend to request, an
opinion from United States legal counsel or a ruling from the IRS regarding the U.S. federal income
tax classification of the exchangeable shares.
U.S. Federal Income Tax Characterization Dividends Received by Non-U.S. Holders on Exchangeable
Shares
Canadian Sub does not intend to withhold any amounts in respect of U.S. withholding tax from
dividends paid with respect to exchangeable shares. However, as discussed above, no statutory,
judicial or administrative authority exists that directly addresses the proper characterization and
treatment of instruments with characteristics similar to the exchangeable shares and the ancillary
rights, including dividends, for U.S. federal income tax
-42-
purposes. If dividends on the exchangeable shares were determined to constitute income from
U.S. sources, their treatment would be the same as the treatment of dividends paid on the common
stock of Thomas Weisel Partners. See Dividends Received by Non-U.S. Holders on Thomas Weisel
Partners Common Stock below.
Dividends Received by Non-U.S. Holders on Thomas Weisel Partners Common Stock
Except as described below, dividends paid to a Non-U.S. Holder of Thomas Weisel Partners
common stock will be subject to withholding of U.S. federal income tax at a 30% rate or at a lower
rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Even if you are eligible for a lower treaty rate, we and other payors will generally be
required to withhold at a 30% rate (rather than the lower treaty rate) on dividend payments to you,
unless you have furnished proper certification to us or another payor establishing eligibility to
the reduced rate. If you are eligible for a reduced rate of United States withholding tax under a
tax treaty, you may obtain a refund of any amounts withheld in excess of that rate by filing a
refund claim with the United States Internal Revenue Service.
Under the Canada-U.S. Income Tax Convention, dividends from U.S. sources distributed to
persons that are residents of Canada for purposes of the Canada-U.S. Income Tax Convention and are
eligible for treaty benefits are currently subject to a maximum withholding rate of 15%.
If dividends paid to you are effectively connected with your conduct of a trade or business
within the United States, and, if required by a tax treaty, the dividends are attributable to a
permanent establishment that you maintain in the United States, we and other payors generally are
not required to withhold tax from the dividends, provided that you have furnished to us or another
payor a valid Internal Revenue Service Form W-8ECI or an acceptable substitute form upon which you
represent, under penalties of perjury, that:
|
|
|
you are a non-United States person, and
|
|
|
|
|
the dividends are effectively connected with your conduct of a trade or business
within the United States and are includible in your gross income.
|
Effectively connected dividends are taxed at rates applicable to United States citizens,
resident aliens and domestic United States corporations.
If you are a corporate non-U.S. holder, effectively connected dividends that you receive
may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or
at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a
lower rate.
Gain or Loss on Disposition of the Exchangeable Shares or the Thomas Weisel Partners Common Stock
If you are a Non-U.S. Holder, you generally will not be subject to United States federal
income tax on gain that you recognize on a disposition of the exchange shares or the Thomas Weisel
Partners common stock unless:
-43-
|
|
|
the gain is effectively connected with your conduct of a trade or business in the
United States, and the gain is attributable to a permanent establishment that you
maintain in the United States, if that is required by an applicable income tax treaty
as a condition for subjecting you to United States taxation on a net income basis,
|
|
|
|
|
you are an individual, you hold the common stock as a capital asset, you are present
in the United States for 183 or more days in the taxable year of the sale and certain
other conditions exist, or
|
|
|
|
|
we are or have been a United States real property holding corporation for federal
income tax purposes and you held, directly or indirectly, at any time during the
five-year period ending on the date of disposition, more than 5% of the common stock
and you are not eligible for any treaty exemption.
|
If you are a corporate Non-U.S. Holder, effectively connected gains that you recognize may
also, under certain circumstances, be subject to an additional branch profits tax at a 30% rate
or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a
lower rate.
Thomas Weisel Partners believes it is not currently and does not anticipate becoming a United
States real property holding corporation for U.S. federal income tax purposes.
United States Federal Estate Tax
. Thomas Weisel Partners common stock (and the exchangeable
shares, if treated as Thomas Weisel Partners common stock) held by an individual Non-U.S. Holder at
the time of death will be included in that Holders gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
If you are a Non-U.S. Holder, you are generally exempt from backup withholding and information
reporting requirements with respect to:
|
|
|
dividend payments and
|
|
|
|
|
the payment of the proceeds from the sale of common stock effected at a United
States office of a broker,
|
as long as the income associated with such payments is otherwise exempt from United States federal
income tax, and:
|
|
|
the payor or broker does not have actual knowledge or reason to know that you are a
United States person and you have furnished to the payor or broker:
|
|
|
|
a valid Internal Revenue Service Form W-8BEN or an acceptable substitute
form upon which you certify, under penalties of perjury, that you are (or, in
the case of a Non-U.S. holder that is a partnership or an
|
-44-
|
|
|
estate or trust, such forms certifying that each partner in the partnership
or beneficiary of the estate or trust is) a non-United States person, or
|
|
|
|
|
other documentation upon which it may rely to treat the payments as made to
a non-United States person in accordance with U.S. Treasury regulations, or
|
|
|
|
you otherwise establish an exemption.
|
Payment of the proceeds from the sale of the exchangeable shares or the common stock effected
at a foreign office of a broker generally will not be subject to information reporting or backup
withholding. However, a sale of the exchangeable shares or the common stock that is effected at a
foreign office of a broker will generally be subject to information reporting and backup
withholding if:
|
|
|
the proceeds are transferred to an account maintained by you in the United States,
|
|
|
|
|
the payment of proceeds or the confirmation of the sale is mailed to you at a United
States address, or
|
|
|
|
|
the sale has some other specified connection with the United States as provided in
U.S. Treasury regulations.
|
In addition, a sale of the exchangeable shares or the common stock will generally be subject
to information reporting if it is effected at a foreign office of a broker that is:
|
|
|
a United States person,
|
|
|
|
|
a controlled foreign corporation for United States tax purposes,
|
|
|
|
|
a foreign person 50% or more of whose gross income is effectively connected with the
conduct of a United States trade or business for a specified three-year period, or
|
|
|
|
|
a foreign partnership, if at any time during its tax year:
|
|
|
|
one or more of its partners are U.S. persons, as defined in U.S. Treasury
regulations, who in the aggregate hold more than 50% of the income or capital
interest in the partnership, or
|
|
|
|
|
such foreign partnership is engaged in the conduct of a United States trade
or business.
|
You generally may obtain a refund of any amounts withheld under the backup withholding rules
that exceed your income tax liability by filing a refund claim with the Internal Revenue Service.
-45-
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered hereby will be passed upon for us by
Sullivan & Cromwell LLP, Palo Alto, California.
EXPERTS
The financial statements incorporated in this prospectus by reference from Thomas Weisel
Partners Group, Inc. and Subsidiaries Annual Report on Form 10-K for the year ended December 31,
2007, and the effectiveness of Thomas Weisel Partners Group, Inc. and Subsidiaries internal
control over financial reporting have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their reports, which are incorporated herein by
reference. Such financial statements have been so incorporated in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
The
consolidated financial statements of Westwind Capital Corporation as of and for the years
ended December 31, 2007 and 2006 included in this prospectus have been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report appearing
therein, and are incorporated by reference in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
Where You Can Find More Information
We have filed with the Securities and Exchange Commission, or SEC, a registration statement on
Form S-3 under the Securities Act of 1933, as amended, with respect to the common stock offered
hereby. This prospectus does not contain all of the information set forth in the registration
statement and the exhibits and schedules thereto. For further information with respect to us and
our common stock, reference is made to the registration statement and the exhibits and any
schedules filed therewith. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each instance, if such
contract or document is filed as an exhibit, reference is made to the copy of such contract or
other document filed as an exhibit to the registration statement, each statement being qualified in
all respects by such reference. A copy of the registration statement, including the exhibits and
schedules thereto, may be read and copied at the SECs Public Reference Room at 100 F Street, N.E.,
Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website at
http://www.sec.gov, from which interested persons can electronically access the registration
statement, including the exhibits and any schedules thereto.
We are subject to the full informational requirements of the Securities Exchange Act of 1934,
as amended. We fulfill our obligations with respect to such requirements by filing periodic reports
and other information with the SEC. We furnish our stockholders with annual reports containing
consolidated financial statements certified by an independent registered public accounting firm. We
also maintain an Internet website at http://www.tweisel.com. The information on our website shall
not be deemed to be incorporated into this prospectus or the registration statement of which it
forms a part.
-46-
Our Investor Relations Department can be contacted at Thomas Weisel Partners Group, Inc., One
Montgomery Street, San Francisco, California 94104, Attention: Investor Relations; telephone:
415-364-2500, email: investorrelations@tweisel.com.
Incorporation of Certain Information by Reference
Some of the information that you may want to consider in deciding whether to invest in the
shares of common stock is not included in this prospectus, but rather is incorporated by reference
to certain reports that we have filed with the SEC. This permits us to disclose important
information to you by referring to those documents rather than repeating them in full in the
prospectus. The information incorporated by reference in this prospectus contains important
business and financial information. In addition, information that we file with the SEC after the
date of this prospectus and prior to the completion of this offering will update and supersede the
information contained in this prospectus and incorporated filings. We incorporate by reference the
following documents filed by us with the SEC:
|
|
|
our annual report on Form 10-K for the fiscal year ended December 31, 2007;
|
|
|
|
|
our quarterly report on Form 10-Q for the three months ended March 31, 2008;
|
|
|
|
|
our Current Report on Form 8-K filed on January 3, 2008 (other than the information
furnished under Item 2.02 and Exhibit 99.1 thereto);
|
|
|
|
|
our Current Report on Form 8-K filed on February 20, 2008;
|
|
|
|
|
our Current Report on Form 8-K filed on February 21, 2008;
|
|
|
|
|
our Current Report on Form 8-K filed on March 5, 2008 (other than the information
furnished under Item 9.01 and Exhibit 99.1 thereto);
|
|
|
|
|
our Current Report on Form 8-K filed on April 8, 2008;
|
|
|
|
|
our Current Report on Form 8-K filed on April 30, 2008 (other than the information
furnished under Items 2.02 and 9.01 and Exhibit 99.1 thereto);
|
|
|
|
|
the description of our common stock contained in our registration statement on Form
8-A, filed with the SEC on January 17, 2006, including any amendments or reports filed
for the purpose of updating such description; and
|
|
|
|
|
all filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus but prior to the
completion of the offering of the shares of common stock.
|
Any statement contained in a document incorporated by reference, or deemed to be incorporated
by reference, in this prospectus shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference in this prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
-47-
deemed, except as so modified or superseded, to constitute a part of this prospectus.
Statements contained in this prospectus as to the contents of any contract or other document
referred to in this prospectus do not purport to be complete and where reference is made to the
particular provisions of such contract or other document, such provisions are qualified in all
respects by reference to all of the provisions of such contract or other document.
You may request a copy of these filings, at no cost, by writing or telephoning us at the
following address: Thomas Weisel Partners Group, Inc., One Montgomery Street, San Francisco,
California 94104, Attention: Investor Relations; telephone: 415-364-2500, e-mail:
investorrelations@tweisel.com.
The information in this prospectus may not contain all of the information that may be
important to you. You should read the entire prospectus, as well as the documents incorporated by
reference in the prospectus, before making an investment decision.
-48-
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
WESTWIND CAPITAL CORPORATION
|
|
|
|
|
F-2
|
Consolidated Financial Statements:
|
|
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
F-1
REPORT OF INDEPENDENT AUDITORS
To the Directors of
Westwind Capital Corporation
We have audited the consolidated balance sheets of
Westwind Capital Corporation
as at December 31,
2007 and 2006 and the consolidated statements of income and retained earnings and cash flows for
each of the years in the two-year period ended December 31, 2007. These financial statements are
the responsibility of the Companys management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards and the
standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. We were not engaged to perform an audit of the Companys
internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all material respects,
the financial position of the Company as at December 31, 2007 and 2006 and the results of its
operations and its cash flows for each of the years in the two-year period ended December 31, 2007
in conformity with Canadian generally accepted accounting principles.
As explained in Note 3 to the consolidated financial statements, in 2007, the Company adopted the
requirements of the Canadian Institute of Chartered Accountants Handbook, Section 1530
Comprehensive Income, Section 3855 Financial Instruments Recognition and Measurement,
Section 3861 Financial Instruments Presentation and Disclosure, and Section 3865 Hedges.
|
|
|
|
|
|
|
|
/s/ Ernst & Young LLP
|
|
|
|
Toronto, Canada,
|
|
Chartered Accountants
|
February 25, 2008.
|
|
Licensed Public Accountants
|
F-2
Westwind Capital Corporation
CONSOLIDATED
BALANCE SHEETS
(Expressed
in Canadian Dollars)
As at December 31
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
48,488,277
|
|
|
|
17,259,968
|
|
Securities owned
[note 4]
|
|
|
19,884,406
|
|
|
|
22,048,587
|
|
Due from carrying broker
|
|
|
6,712,134
|
|
|
|
6,327,510
|
|
Investment banking fees and commissions
receivable
|
|
|
4,052,934
|
|
|
|
4,688,630
|
|
Income taxes receivable
|
|
|
|
|
|
|
355,286
|
|
Prepaid expenses and deposits
|
|
|
419,065
|
|
|
|
418,800
|
|
Other receivables
|
|
|
990,400
|
|
|
|
486,801
|
|
Related party loan
[note 7]
|
|
|
2,620,962
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
83,168,178
|
|
|
|
51,585,582
|
|
|
|
|
Deposit with carrying broker
[note 1]
|
|
|
350,000
|
|
|
|
350,000
|
|
Capital assets, net
[note 5]
|
|
|
2,099,151
|
|
|
|
1,604,342
|
|
|
|
|
|
|
|
85,617,329
|
|
|
|
53,539,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Securities sold short
[note 4]
|
|
|
|
|
|
|
256,480
|
|
Due to carrying broker
[note 4]
|
|
|
|
|
|
|
7,853,464
|
|
Accounts payable and accrued liabilities
|
|
|
22,280,808
|
|
|
|
14,767,691
|
|
Discretionary bonus payable
|
|
|
13,615,233
|
|
|
|
5,148,419
|
|
Income taxes payable
[note 6]
|
|
|
7,184,751
|
|
|
|
1,977,538
|
|
Future tax liability
[note 6]
|
|
|
1,564,895
|
|
|
|
1,224,500
|
|
|
|
|
Total current liabilities
|
|
|
44,645,687
|
|
|
|
31,228,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Share capital
[note 7]
|
|
|
17,378,088
|
|
|
|
10,647,578
|
|
Retained earnings
|
|
|
23,593,554
|
|
|
|
11,664,254
|
|
|
|
|
Total shareholders equity
|
|
|
40,971,642
|
|
|
|
22,311,832
|
|
|
|
|
|
|
|
85,617,329
|
|
|
|
53,539,924
|
|
|
|
|
See accompanying notes
F-3
Westwind Capital Corporation
CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS
(Expressed
in Canadian Dollars)
Years ended December 31
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
Investment banking fees and commissions
|
|
|
62,610,791
|
|
|
|
33,548,205
|
|
Agency commissions
|
|
|
19,359,234
|
|
|
|
14,739,469
|
|
Principal trading gains
|
|
|
8,046,743
|
|
|
|
8,581,167
|
|
Interest and other income
|
|
|
2,217,024
|
|
|
|
1,113,434
|
|
|
|
|
|
|
|
92,233,792
|
|
|
|
57,982,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Employees compensation and benefits
|
|
|
15,712,190
|
|
|
|
14,312,473
|
|
Amortization
|
|
|
601,106
|
|
|
|
469,469
|
|
Other operating and administrative
|
|
|
12,604,830
|
|
|
|
10,508,671
|
|
|
|
|
|
|
|
28,918,126
|
|
|
|
25,290,613
|
|
|
|
|
Income before the following
|
|
|
63,315,666
|
|
|
|
32,691,662
|
|
Discretionary bonus
|
|
|
43,949,194
|
|
|
|
22,248,623
|
|
|
|
|
Income before income taxes
|
|
|
19,366,472
|
|
|
|
10,443,039
|
|
|
|
|
Provision for income taxes
[note 6]
|
|
|
|
|
|
|
|
|
Current
|
|
|
6,725,517
|
|
|
|
3,220,423
|
|
Future
|
|
|
340,395
|
|
|
|
734,220
|
|
|
|
|
|
|
|
7,065,912
|
|
|
|
3,954,643
|
|
|
|
|
Net income for the year
|
|
|
12,300,560
|
|
|
|
6,488,396
|
|
|
|
|
|
|
|
|
|
|
Retained earnings, beginning of year
|
|
|
11,664,254
|
|
|
|
5,385,722
|
|
Dividends declared
[note 7]
|
|
|
|
|
|
|
(10,039
|
)
|
Premium on retirement of common shares
[note 7]
|
|
|
(371,260
|
)
|
|
|
(199,825
|
)
|
|
|
|
Retained earnings, end of year
|
|
|
23,593,554
|
|
|
|
11,664,254
|
|
|
|
|
See accompanying notes
F-4
Westwind Capital Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed
in Canadian Dollars)
Years ended December 31
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
12,300,560
|
|
|
|
6,488,396
|
|
Add items not involving cash
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
601,106
|
|
|
|
469,469
|
|
Future income taxes
|
|
|
340,395
|
|
|
|
734,220
|
|
|
|
|
|
|
|
13,242,061
|
|
|
|
7,692,085
|
|
Net change in non-cash working capital balances
related to operations
|
|
|
15,343,875
|
|
|
|
(11,270,653
|
)
|
|
|
|
Cash provided by (used in) operating activities
|
|
|
28,585,936
|
|
|
|
(3,578,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase of capital assets
|
|
|
(1,095,915
|
)
|
|
|
(664,195
|
)
|
Loan repaid by related party
|
|
|
35,542
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
(1,060,373
|
)
|
|
|
(664,195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares
|
|
|
4,738,951
|
|
|
|
2,829,392
|
|
Dividends paid
|
|
|
|
|
|
|
(28,671
|
)
|
Retirement of common shares
|
|
|
(1,036,205
|
)
|
|
|
(308,855
|
)
|
Redemption of preference shares
|
|
|
|
|
|
|
(319,199
|
)
|
|
|
|
Cash provided by financing activities
|
|
|
3,702,746
|
|
|
|
2,172,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash during the year
|
|
|
31,228,309
|
|
|
|
(2,070,096
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
17,259,968
|
|
|
|
19,330,064
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
|
48,488,277
|
|
|
|
17,259,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
|
4,896,598
|
|
|
|
3,660,483
|
|
|
|
|
See accompanying notes
F-5
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in Canadian Dollars)
December 31, 2007 and 2006
1. INCORPORATION AND CORPORATE ACTIVITIES
Westwind Capital Corporation [the Company] was incorporated under the Ontario Business
Corporations Act as Westwind Capital Partners Inc. on January 31, 2002 and commenced operations on
June 1, 2002. In October 2002, the Company changed its name to Westwind Capital Corporation.
The primary business of the Company is the investment in and management of its 100% owned
subsidiaries, Westwind Partners Inc. [WP Canada"], Westwind Partners (USA) Inc. [WP USA] and
Westwind Partners (UK) Limited [WP UK].
WP Canada is an Investment Dealer registered in the Canadian provinces of Ontario, Quebec, Alberta,
British Columbia, Saskatchewan, Manitoba and Nova Scotia and is a member of the Investment Dealers
Association of Canada. WP USA is a U.S. broker-dealer and is registered with the Securities and
Exchange Commission and the Financial Industry Regulatory Authority. WP UK is a U.K. securities
firm authorized by the Financial Services Authority in the United Kingdom.
WP Canada operates as an Introducing Broker and conducts its operations under an agreement with
National Bank Financial Inc. and NBCN Inc. [together as National Bank"]. National Bank is the
Carrying Broker and performs certain securities trading, clearing activities and record keeping
as the agent for WP Canada for a fee based on the number of trades executed, settled and cleared.
As a result, National Bank is responsible for WP Canadas client accounts subject to
indemnification by WP Canada for any related losses. Under the terms of the agreement, WP Canada
has lodged a deposit of $350,000 with National Bank, which has been presented as deposit with
carrying broker on the consolidated balance sheet.
WP USA deals with U.S. institutional clients and has an agreement with WP Canada under which its
clients are also handled by National Bank.
WP UK deals with European institutional clients only and has a clearing and settlement services
agreement with Pershing Securities Limited.
F-6
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with Canadian generally
accepted accounting principles [GAAP]. The significant accounting policies are summarized as
follows:
Basis of consolidation
The consolidated financial statements include the accounts of the Company, WP Canada, WP USA and WP
UK.
Use of estimates
The preparation of financial statements in conformity with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingencies at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual
results may vary from those estimates. Those estimates are reviewed periodically by management
and, as adjustments become necessary, they are reported in income in the period in which they
become known.
Foreign currency translation
WP USA and WP UK are considered to be integrated foreign operations; accordingly, their accounts
are translated using the temporal method. Under this method, monetary assets and liabilities
denominated in foreign currencies are translated at exchange rates in effect at the consolidated
balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are
translated at rates in effect on the dates the assets were acquired or liabilities were assumed.
Revenue and expenses are translated at rates of exchange prevailing on the transaction dates.
Gains and losses on translation are reflected in income.
Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit and short-term interest bearing notes with a
term to maturity of less than three months from the date of purchase.
F-7
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
Accounting for security transactions
Security transactions and related revenue and expenses are accounted for on a trade-date basis.
Securities owned and securities sold short are recorded at fair value, where long positions are
measured at their bid price and short positions are measured at their ask price at the last trade
of a business day, except in situations where the securities are not publicly traded or where
restrictions on their marketability exist. In these circumstances, securities are valued at
managements estimate of fair value, which would not exceed quoted market value. Any unrealized
gains and losses are included in principal trading gains.
Broker warrants are not traded on an exchange, as a result no market value is readily available.
When there is sufficient and reliable observable market inputs, a valuation technique is used; if
no such market inputs are available, the broker warrants are valued at intrinsic value.
Derivative financial instruments are recorded in securities owned or securities sold short on the
consolidated balance sheets. They are marked-to-market with the resulting realized and unrealized
gain or loss recognized in income. If the derivative financial instrument is an over-the-counter
derivative, fair market value is based on an appropriate valuation pricing model.
Revenue recognition
Investment banking fees are recorded at the time the transaction is completed and the related
income is reasonably determinable.
Agency commissions consist of revenue generated through traditional commission-based brokerage
services and are recognized on a trade date basis.
Principal trading gains consist of income earned in connection with principal trading operations
and are recognized on a trade date basis.
Interest income consists of amounts earned on balances due from clients, cash deposited in bank
accounts and investments in money market instruments. Interest earned is recognized on an accrual
basis.
Income taxes
Income taxes are accounted for using the liability method. Under this method, future income taxes
are recognized for future income tax consequences attributable to differences between the
consolidated financial statement carrying values and their respective income tax bases. Future tax
assets and liabilities are measured using substantively enacted tax rates and laws expected to
apply to taxable income in the period in which the temporary differences are expected to be
recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is
included in income in the period in which the change occurs. The amount of future tax assets
recognized is limited to the amount that is more likely than not to be realized.
F-8
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
Capital assets
Capital assets are recorded at cost less accumulated amortization. Amortization is provided using
the following annual rates and methods:
|
|
|
Furniture and fixtures
|
|
20% declining balance
|
|
|
|
Computer equipment
|
|
30% declining balance
|
|
|
|
Leasehold improvements
|
|
Straight-line over the term of the lease
|
|
|
|
Artwork
|
|
Not depreciated
|
Future accounting changes
Capital Disclosures
The CICA issued a new accounting standard, Section 1535,
Capital Disclosures
, which requires the
disclosure of both qualitative and quantitative information that enables users of financial
statements to evaluate the entitys objectives, policies and processes for managing capital. This
new standard will be effective for Westwind effective January 1, 2008.
Financial Instruments
The CICA issued two new accounting standards, Section 3862,
Financial Instruments Disclosure
and
Section 3863,
Financial Instruments Presentation
, which apply to interim and annual financial
statements relating to fiscal years beginning on or after October 1, 2007. Westwind intends to
adopt these new standards effective January 1, 2008.
3. CHANGES IN ACCOUNTING POLICIES
On January 1, 2007, the Company adopted the provisions of CICA Handbook Section 3855
Financial
Instruments Recognition and Measurement"
, Handbook Section 3861
Financial Instruments
Presentation and Disclosure,
CICA Handbook Section 3865,
Hedges
and CICA Handbook Section 1530
Comprehensive Income"
. These standards were adopted prospectively as required by the transition
provisions and accordingly, comparative amounts for prior periods have not been restated.
Financial Instruments Recognition and Measurement
Section 3855 requires all financial assets and liabilities [including derivatives] be measured at
fair value on initial recognition except for certain related party transactions. Measurement in
subsequent periods depends on the classification of the financial instruments. All financial
instruments must be classified as one of the following categories: held for trading, held to
maturity, loans or receivables and available for sale.
F-9
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
The financial assets and liabilities categorized by management as held for trading at inception are
measured at fair value with unrealized gains and losses recognized in income. The Companys
financial instruments classified as held for trading include trading securities owned including
broker warrants and obligations related to securities sold short. The Company has historically
measured these instruments at fair value and any unrealized gains and losses have been included in
income. The Companys accounting treatment of these instruments remains unchanged as a result of
adoption of the new accounting standards.
The Company has not historically applied hedge accounting, therefore the derivative financial
instruments are not designated as effective hedging financial instruments and as such, are
classified as held for trading and measured at fair value. The Company enters into forward
contracts in order to economically manage foreign exchange risk on pending security settlements
in foreign currencies. Historically, the forward contracts have been recorded at their estimated
fair value with realized and unrealized gains and losses recorded in income during the period. The
Companys accounting treatment of these instruments remains unchanged as a result of adoption of
the new accounting standards.
Available for sale financial assets are measured at fair value with unrealized gains and losses
recognized in other comprehensive income until realized. The Company does not hold any securities
that would be classified as available for sale.
Financial assets classified as loans and receivables and held to maturity are measured at amortized
cost. The Company does not hold any securities that would be classified as held to maturity. The
assets and liabilities classified as loans and receivables include due to and from carrying broker,
investment banking fees and commissions receivable and accounts payable and accrued liabilities.
Hedges
This standard sets out the criteria of when hedge accounting is applied and how it is applied. It
provides the option of designating qualifying transactions as hedges for accounting purposes. The
qualifying hedging relationships include fair value hedges, cash flow hedges and hedges of foreign
currency exposures of net investments in self-sustaining foreign operations. The changes in the
fair value of the hedging derivatives will be recognized in income or other comprehensive income
depending on the nature of the hedging relationships. Any gains and losses resulting from any
ineffectiveness in hedging relationships are recognized in income immediately. The Company does
not currently apply hedge accounting and as a result Section 3865 does not apply to the Company at
this time.
F-10
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
Comprehensive Income
This section establishes standards for the reporting and disclosure of other comprehensive income
in a new category, Accumulated Other Comprehensive Income [AOCI], which will be added to the
shareholders equity on the consolidated balance sheets. Comprehensive income includes all changes
in equity during the period except those resulting from investments by shareholders and
distributions to shareholders. The major components included in AOCI will be unrealized gains and
losses on financial assets classified as available for sale and unrealized foreign exchange gains
and losses arising on translation of the financial statements of self-sustaining foreign
operations. The Company does not currently hold any financial assets classified as available for
sale and the foreign operations are considered to be integrated foreign operations. Accordingly,
Section 1530 does not apply to the Company at this time.
Transition
On January 1, 2007, the Company recognized all of its financial assets and liabilities in the
consolidated balance sheet according to their classification under the new standards. As described
above, there were no changes in the carrying values of the Companys financial asset and financial
liabilities as a result of implementing these new accounting standards.
4. SECURITIES OWNED AND SECURITIES SOLD SHORT
Securities owned and securities sold short consist of Canadian equities and warrants quoted in
active markets of nil [2006 $8,520,027], broker warrants of $4,869,406 [2006 $3,368,000] and
$15,015,000 [2006 $10,160,550] relates to an underwriting commitment by WP Canada. The Canadian
equities and warrants are pledged as collateral for amounts owing, if any, to National Bank, as the
carrying broker.
F-11
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
5. CAPITAL ASSETS
Capital assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
Accumulated
|
|
book
|
|
|
Cost
|
|
amortization
|
|
value
|
|
|
$
|
|
$
|
|
$
|
|
|
|
Furniture and fixtures
|
|
|
1,322,280
|
|
|
|
613,220
|
|
|
|
709,060
|
|
Computer equipment
|
|
|
1,025,742
|
|
|
|
447,371
|
|
|
|
578,371
|
|
Leasehold improvements
|
|
|
1,570,239
|
|
|
|
968,834
|
|
|
|
601,405
|
|
Artwork
|
|
|
210,315
|
|
|
|
|
|
|
|
210,315
|
|
|
|
|
|
|
|
4,128,576
|
|
|
|
2,029,425
|
|
|
|
2,099,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
Accumulated
|
|
book
|
|
|
Cost
|
|
amortization
|
|
value
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and fixtures
|
|
|
1,158,906
|
|
|
|
454,745
|
|
|
|
704,161
|
|
Computer equipment
|
|
|
617,204
|
|
|
|
282,555
|
|
|
|
334,649
|
|
Leasehold improvements
|
|
|
1,155,422
|
|
|
|
691,019
|
|
|
|
464,403
|
|
Artwork
|
|
|
101,129
|
|
|
|
|
|
|
|
101,129
|
|
|
|
|
|
|
|
3,032,661
|
|
|
|
1,428,319
|
|
|
|
1,604,342
|
|
|
|
|
6. TAXES
The total tax provision for the year ended December 31, 2007 was $7,065,912 [2006 $3,954,643],
which represented an effective consolidated group tax rate of 36% [2006 38%]. Included in income
taxes payable is $4,622,270 associated with the sale of the shares of the Bourse de Montreal Inc.
The future tax liability of $1,564,895 [2006 $1,224,500] represents taxes on unrealized gains on
securities owned. As these gains are realized, income taxes will become payable.
F-12
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
7. SHARE CAPITAL
[a] Share capital consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
#
|
|
$
|
|
#
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unlimited common shares, 1 vote
per share
750,000 Class A common shares, 10
votes per share convertible at
holders option into common shares
on a share-for-share basis. The
Class A common shares rank equally
with the common shares in all
other respects
Unlimited Class A preference
shares, non-voting
Unlimited Class B preference
shares, non-voting, 10% cumulative
dividend, redeemable at $10 per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
9,825,678
|
|
|
|
16,515,588
|
|
|
|
8,882,156
|
|
|
|
12,441,582
|
|
Less related party loan
[note 7[b]]
|
|
|
|
|
|
|
|
|
|
|
(1,283,629
|
)
|
|
|
(2,656,504
|
)
|
|
|
|
|
|
|
9,825,678
|
|
|
|
16,515,588
|
|
|
|
7,598,527
|
|
|
|
9,785,078
|
|
Class A common shares
|
|
|
750,000
|
|
|
|
862,500
|
|
|
|
750,000
|
|
|
|
862,500
|
|
|
|
|
|
|
|
|
|
|
|
17,378,088
|
|
|
|
|
|
|
|
10,647,578
|
|
|
|
|
During the year, 1,167,605 [2006 1,052,796] common shares were issued for a cash
consideration of $4,738,951 [2006 $2,829,392]. Also during the year, 224,083 [2006 95,532]
common shares were purchased for retirement for $1,036,205 [2006 $308,855], representing a
premium on retirement of $371,260 [2006 $199,825].
During 2006, the Company declared dividends on the Class B preference shares amounting to
$10,039. Also during 2006, the Company purchased for retirement
32,481 Class B preference shares with a redemption value of $319,199 representing a discount of $5,611.
F-13
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
[b]
|
|
Related party loan
|
|
|
|
In 2004, the Company lent $5,585,641 to 1619372 Ontario Inc.
[Acquisition Co.], a company owned by four shareholders of the
Company. The loan was arranged to allow Acquisition Co. to purchase
3,565,725 shares in the Company from former shareholders. Under the
terms of the loan agreement, Acquisition Co. is obligated to pay 100%
of the proceeds received on the resale of these shares to the Company
to reduce the loan.
|
|
|
|
The related party loan has no fixed repayment term and no interest
obligation. At December 31, 2007, the related party loan balance is
$2,620,962 [2006 $2,656,504]. Subsequent to year end, on January 1,
2008, the related party loan was repaid. As such, it is no longer
necessary to reflect the related party loan as a reduction of share
capital. The related party loan is reflected on the consolidated
balance sheets as at December 31, 2007 as an asset.
|
8. RISK MANAGEMENT ACTIVITY
Credit risk
Credit risk on financial instruments is the risk of a financial loss occurring as a result of the
default of a counterparty on its obligations to the Company. Credit risk is managed by dealing
with counterparties the Company believes to be creditworthy and by regular monitoring of credit
exposures and collateral. The Companys significant credit concentration is with counterparties
who are acceptable institutions, as defined by regulation.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect the value
of the financial instruments. The Company does not hedge its exposure to interest rate risk as it
is minimal.
Foreign currency risk
The Company enters into forward contracts in order to economically manage foreign exchange risk on
pending security settlement in foreign currencies.
F-14
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
9. COMMITMENTS
The Company is committed to future minimum annual lease payments and estimated annual realty and
operating costs on office premises and equipment under existing operating leases as follows:
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
2008
|
|
|
1,366,300
|
|
2009
|
|
|
685,837
|
|
2010
|
|
|
661,969
|
|
2011
|
|
|
661,969
|
|
2012 and thereafter
|
|
|
1,162,908
|
|
|
|
|
|
Shares of the Bourse de Montreal Inc.
Under the terms of the Share Purchase Agreement under which the Company acquired the shares of
Westwind Partners Inc. [then called DLJ Canada Inc.], any gain on sale of the shares and dividend
income, net of tax, of the Bourse de Montreal Inc. is to be paid to the previous shareholder group.
During the year, the shares of the Bourse de Montreal Inc. were sold and the after-tax gain has
been paid to the previous shareholder group.
10. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
The Company prepares its consolidated financial statements in accordance with Canadian GAAP, which
conform in all material respects with GAAP in the United States as applied to the consolidated
financial statements of Westwind.
Future Accounting Changes
Statement of Financial Accounting Standards No. 157 Fair Value Measurements
(SFAS No. 157).
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements which defines fair value,
establishes a framework for measuring fair value in GAAP and expands disclosures about fair value
measurements. The primary focus of this statement is to increase consistency and comparability in
fair value measurements, as well as providing better information about the extent to which fair
value is used to measure recognized assets and liabilities, the inputs used to develop the
measurements, and the effect fair value measurements have on income for the year, if any. SFAS No.
157 is effective for fiscal years beginning after November 15, 2007. The impact, if any, that the
adoption of SFAS No. 157 will have on the consolidated balance sheets, operations and cash flows
will need to be determined.
F-15
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
Statement of Financial Accounting Standards No. 159 The Fair Value Option for Financial Assets
and Financial Liabilities (SFAS No. 159).
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities which permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be measured at fair value and
establishes presentation and disclosure requirements designed to facilitate comparisons between
entities that choose different measurement attributes for similar types of assets and liabilities.
SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The impact, if any,
that the adoption of SFAS No. 159 will have on the consolidated balance sheets, operations and cash
flows will need to be determined.
Statement of Financial Accounting Standards No. 141R, Business Combinations (FAS 141R)
.
In December 2007, the FASB issued FAS 141R, a replacement of Statement of Financial Accounting
Standards No. 141, Business Combinations. FAS 141R provides revised guidance on how an acquirer
recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree. In addition, it provides
revised guidance on the recognition
and measurement of goodwill acquired in the business combination. FAS 141R also provides guidance
specific to the recognition, classification, and measurement of assets and liabilities related to
insurance and reinsurance contracts acquired in a business combination. FAS 141R applies to
business combinations for acquisitions occurring on or after January 1, 2009. The Company does not
expect the provisions of FAS 141R to have any effect on the consolidated balance sheets, operations
and cash flows.
Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of Accounting Research Bulletin No. 51 (FAS 160).
In December 2007, the FASB issued FAS 160. FAS 160 amends Accounting Research Bulletin No. 51 to
establish accounting and reporting standards for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. In addition, it clarifies that a noncontrolling interest
in a subsidiary is an ownership interest in the consolidated entity that should be reported as a
component of equity in the consolidated financial statements. FAS 160 is effective on a prospective
basis beginning January 1, 2009, except for the presentation and disclosure requirements which are
applied on a retrospective basis for all periods presented. The Company does not expect the
provisions of FAS 160 to have any effect on the consolidated balance sheets, operations and cash
flows.
11. SUBSEQUENT EVENTS
On January 2, 2008, the Company completed an arrangement agreement with Thomas Weisel Partners
Group, Inc. for the sale of all of the outstanding shares of the Company. As consideration for the
sale, the shareholders received in the aggregate U.S.$45,000,000 in cash and 7,009,112 Thomas
Weisel Partners Group, Inc. common shares. Prior to the closing of the transaction, on January 1,
2008, the related party shareholder loan from 1619372 Ontario Inc. was repaid to the Company and
the two companies were amalgamated with the effect that the shares of the
F-16
Westwind Capital Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
Company held by 1619372
Ontario Inc. were cancelled and an equivalent number of shares were issued to the four shareholders
of that company. The arrangement agreement also provided for a shareholder distribution of excess
capital above that required for regulatory and operating purposes. As such, on January 1, 2008,
the Company paid to the common and Class A common shareholders of record on January 1, 2008, a
capital dividend of $8,650,000 and a shareholder distribution, by way of reduction in the stated
capital in respect of the common and Class A common shares, of $6,173,150. This payment was made
as a pre-closing distribution based on estimated amounts for December 31, 2007. In addition, the
Company issued a promissory note to the common and Class A common shareholders of record on January
1, 2008 for the balance of any excess capital as at December 31, 2007. The promissory note amount
will be determined based on the December 31, 2007 audited consolidated financial statements and is
payable no later than the earlier of [i] five business days following the receipt by the Company of
the audited consolidated financial statements of the Company for the financial year ended December
31, 2007 and [ii] June 30, 2008.
As a result of the sale, on January 18, 2008, the Company changed its name to Thomas Weisel Capital
Corporation. On January 2, 2008, Westwind Partners Inc. changed its name to Thomas Weisel Partners
Canada Inc. On the same date, Westwind Partners (USA) Inc. changed its name to Thomas Weisel
Partners (USA) Inc. and Westwind Partners (UK) Limited changed its name to Thomas Weisel Partners
(UK) Limited.
12. CONTINGENCY
During the year, the Company received a claim in the amount of $861,000 from a former shareholder
alleging that he was entitled to participate in the arrangement agreement referred to in note 11.
The Company has filed a statement of defense and counterclaim and intends to defend this claim
vigorously. At this time, the ultimate loss, if any, cannot be determined.
F-17
PROSPECTUS ,2008
Thomas Weisel Partners Group, Inc.
6,639,478 Shares
Common Stock
PART II
Information Not Required in Prospectus
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
|
|
|
|
|
|
|
Amount
|
|
SEC registration fee
|
|
$
|
1,561
|
|
Legal fees and expenses
|
|
$
|
55,000
|
|
Accounting fees and expenses
|
|
$
|
96,766
|
|
Printing expenses
|
|
$
|
7,000
|
|
Miscellaneous
|
|
$
|
0
|
|
|
|
|
|
|
Total
|
|
$
|
160,327
|
|
|
|
|
|
Each of the amounts set forth above, other than the SEC registration fee, is an estimate.
II-1
ITEM 15. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify
directors and officers as well as other employees and individuals against expenses (including
attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being or having been a
director, officer, employee or agent to the Registrant. The Delaware General Corporation Law
provides that Section 145 is not exclusive of other rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise. Article Eleventh of the Registrants Certificate of Incorporation provides for
indemnification by the Registrant of its directors, officers and employees to the fullest extent
permitted by the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in
its certificate of incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the directors duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or
unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from
which the director derived an improper personal benefit. The Registrants Certificate of
Incorporation provides for such limitation of liability to the fullest extent permitted by the
Delaware General Corporation Law.
The Registrant maintains standard policies of insurance under which coverage is provided (a)
to its directors and officers against loss rising from claims made by reason of breach of duty or
other wrongful act, while acting in their capacity as directors and officers of the Registrant, and
(b) to the Registrant with respect to payments which may be made by the Registrant to such officers
and directors pursuant to any indemnification provision contained in the Registrants Certificate
of Incorporation or otherwise as a matter of law.
The Registrant has also entered into separate indemnification agreements with each of its
directors and executive officers which may be broader than the specific indemnification provisions
contained in the Delaware General Corporation Law.
II-2
ITEM 16. INDEX TO EXHIBITS.
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
2.1
|
|
Arrangement Agreement, dated as of September 30, 2007, by and among
Thomas Weisel Partners Group, Inc., TWP Acquisition Company (Canada),
Inc., Westwind Capital Corporation and the shareholders
representative (incorporated by reference to Exhibit 2.1 to the
Registrants Current Report on Form 8-K (File No. 000-51730), filed
October 1, 2007)
|
|
|
|
2.2*
|
|
Form of Plan of Arrangement (including Exchangeable Share Provisions).
|
|
|
|
4.1
|
|
Certificate of Incorporation (incorporated by reference to Exhibit
3.1 to the Registrants Registration Statement on Form S-1 (File No.
333-129108), filed October 19, 2005)
|
|
|
|
4.2
|
|
Certificate of Designations (incorporated by reference to Exhibit 3.3
to the Registrants Current Report on Form 8-K (File No. 000-51730),
filed January 3, 2008)
|
|
|
|
4.3
|
|
Bylaws (incorporated by reference to Exhibit 3.2 to the Registrants
Registration Statement on Form S-1 (File No. 333-129108), filed
October 19, 2005)
|
|
|
|
4.4
|
|
Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Registrants Annual Report on Form 10-K (File No.
000-51730), filed March 29, 2006)
|
|
|
|
5.1*
|
|
Opinion of Sullivan & Cromwell LLP
|
|
|
|
23.1*
|
|
Consent of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm.
|
|
|
|
23.2*
|
|
Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm.
|
|
|
|
23.3*
|
|
Consent of Sullivan & Cromwell LLP (contained in exhibit 5.1)
|
|
|
|
24.1*
|
|
Power of Attorney (included in the signature pages hereto)
|
|
|
|
99.1*
|
|
Support Agreement, dated as of January 2, 2008, by and among Thomas
Weisel Partners Group, Inc., TWP Holdings Company (Canada), ULC and
TWP Acquisition Company (Canada), Inc.
|
|
|
|
99.2*
|
|
Voting and Exchange Trust Agreement, dated as of January 2, 2008, by
and among Thomas Weisel Partners Group, Inc., TWP Acquisition Company
(Canada), Inc. and CIBC Mellon Trust Company.
|
II-3
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement:
(i)
|
|
to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
|
|
(ii)
|
|
to reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration statement; and
|
|
(iii)
|
|
To include any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such information in the
registration statement;
|
provided, however, that paragraphs (i), (ii) and (iii) do not apply if the information required to
be included in a post-effective amendment by those paragraphs is contained in reports filed with or
furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the registration statement,
or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the
registration statement.
That, for the purpose of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
To remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(A)
|
|
Each prospectus filed by a Registrant pursuant to Rule 424(b)(3) shall be deemed to be part
of the registration statement as of the date the filed prospectus was deemed part of and
included in the registration statement; and
|
(B)
|
|
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of
a registration statement in reliance on Rule 430B relating to an offering made pursuant to
Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by
|
II-4
|
|
Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of securities in the offering
described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be deemed to be a new
effective date of the registration statement relating to the securities in the registration
statement to which the prospectus relates, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such effective date.
|
That, for the purpose of determining liability of the Registrant under the Securities Act of
1933 to any purchaser in the initial distribution of the securities, the undersigned Registrant
undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this
registration statement, regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the purchaser and will be considered
to offer or sell such securities to such purchaser:
(i)
|
|
Any preliminary prospectus or prospectus of the undersigned Registrant relating to the
offering required to be filed pursuant to Rule 424;
|
|
(ii)
|
|
Any free writing prospectus relating to the offering prepared by or on behalf of the
undersigned Registrant or used or referred to by the undersigned Registrant;
|
|
(iii)
|
|
The portion of any other free writing prospectus relating to the offering containing
material information about the undersigned Registrant or its securities provided by or on
behalf of the undersigned Registrant; and
|
|
(iv)
|
|
Any other communication that is an offer in the offering made by the undersigned Registrant
to the purchaser.
|
That, for purposes of determining any liability under the Securities Act of 1933, each filing
of Registrants annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of each Registrant pursuant to the
foregoing provisions, or otherwise, each Registrant has been advised that in the opinion of the
II-5
Securities and Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of a Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, that Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California, on this 28
th
day of May,
2008.
|
|
|
|
|
|
Thomas Weisel Partners Group, Inc.
|
|
|
By:
|
/s/ Thomas W. Weisel
|
|
|
|
Name:
|
Thomas W. Weisel
|
|
|
|
Title:
|
Chairman and Chief Executive Officer
|
|
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Thomas W. Weisel, Lionel F. Conacher and Mark P. Fisher, and each of them
acting individually, as his true and lawful attorneys-in-fact and agents, each with full power of
substitution, for the undersigned in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments or any abbreviated registration
statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of
securities for which registration is sought), and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, with full power of each to act alone, full power and authority
to do and perform each and every act and thing requisite and necessary to be done in connection
therewith, as fully for all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
/s/ Thomas W. Weisel
Thomas W. Weisel
|
|
Director, Chairman and
Chief
Executive Officer
(principal
executive officer)
|
|
May 28, 2008
|
|
|
|
|
|
/s/ Shaugn Stanley
Shaugn Stanley
|
|
Chief Financial Officer
(principal financial and
accounting officer)
|
|
May 28, 2008
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
/s/ Thomas I.A. Allen
Thomas I.A. Allen
|
|
Director
|
|
May 28, 2008
|
|
|
|
|
|
/s/ Matthew R. Barger
Matthew R. Barger
|
|
Director
|
|
May 28, 2008
|
|
|
|
|
|
/s/ Michael W. Brown
Michael W. Brown
|
|
Director
|
|
May 28, 2008
|
|
|
|
|
|
/s/ B. Kipling Hagopian
B. Kipling Hagopian
|
|
Director
|
|
May 28, 2008
|
|
|
|
|
|
/s/ Alton F. Irby III
Alton F. Irby III
|
|
Director
|
|
May 28, 2008
|
|
|
|
|
|
Timothy A. Koogle
|
|
Director
|
|
|
|
|
|
|
|
/s/ Michael G. McCaffery
Michael G. McCaffery
|
|
Director
|
|
May 28, 2008
|
INDEX TO EXHIBITS
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
2.1
|
|
Arrangement Agreement, dated as of September 30, 2007, by and among
Thomas Weisel Partners Group, Inc., TWP Acquisition Company (Canada),
Inc., Westwind Capital Corporation and the shareholders
representative (incorporated by reference to Exhibit 2.1 to the
Registrants Current Report on Form 8-K (File No. 000-51730), filed
October 1, 2007)
|
|
|
|
2.2*
|
|
Form of Plan of Arrangement (including Exchangeable Share Provisions).
|
|
|
|
4.1
|
|
Certificate of Incorporation (incorporated by reference to Exhibit
3.1 to the Registrants Registration Statement on Form S-1 (File No.
333-129108), filed October 19, 2005)
|
|
|
|
4.2
|
|
Certificate of Designations (incorporated by reference to Exhibit 3.3
to the Registrants Current Report on Form 8-K (File No. 000-51730),
filed January 3, 2008)
|
|
|
|
4.3
|
|
Bylaws (incorporated by reference to Exhibit 3.2 to the Registrants
Registration Statement on Form S-1 (File No. 333-129108), filed
October 19, 2005)
|
|
|
|
4.4
|
|
Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Registrants Annual Report on Form 10-K (File No.
000-51730), filed March 29, 2006)
|
|
|
|
5.1*
|
|
Opinion of Sullivan & Cromwell LLP
|
|
|
|
23.1*
|
|
Consent of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm.
|
|
|
|
23.2*
|
|
Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm.
|
|
|
|
23.3*
|
|
Consent of Sullivan & Cromwell LLP (contained in exhibit 5.1)
|
|
|
|
24.1*
|
|
Power of Attorney (included in the signature pages hereto)
|
|
|
|
99.1*
|
|
Support Agreement, dated as of January 2, 2008, by and among Thomas
Weisel Partners Group, Inc., TWP Holdings Company (Canada), ULC and
TWP Acquisition Company (Canada), Inc.
|
|
|
|
99.2*
|
|
Voting and Exchange Trust Agreement, dated as of January 2, 2008, by
and among Thomas Weisel Partners Group, Inc., TWP Acquisition Company
(Canada), Inc. and CIBC Mellon Trust Company.
|
Thomas Weisel (NASDAQ:TWPG)
Historical Stock Chart
From May 2024 to Jun 2024
Thomas Weisel (NASDAQ:TWPG)
Historical Stock Chart
From Jun 2023 to Jun 2024