Paulson Capital Corp. is a full service brokerage firm engaged in the purchase and sale of securities from and to the public and for its own account and in investment banking activities. Paulson Capital Corp. has a market cap of $10.3 million; its shares were traded at around $1.7501 with and P/S ratio of 0.4.
Highlight of Business Operations:Because we operate in the financial services industry, our revenues and earnings are substantially affected by general conditions in financial markets. Further, past performance is not necessarily indicative of results to be expected in future periods. In our securities brokerage business, the amount of our revenues depends on levels of market activity requiring the services we provide. Our corporate finance activity, which consists of acting as the managing underwriter of initial and follow-on public offerings, private investments in public equity (PIPEs) and private placements for smaller companies, is similarly affected by the strength of the market for new equity offerings, which has historically experienced substantial cyclical fluctuation. The number of initial public offerings (IPOs) in the U.S. has declined as volatility in the U.S. economy continues. According to Renaissance Capital LLC, during the first nine months of 2009, there were 30 U.S. IPOs with gross proceeds totaling $8.9 billion. During 2008, 43 companies completed IPOs in the U.S., with proceeds totaling $28 billion. This compares to 272 IPOs in 2007, with proceeds totaling $59.7 billion. With the VISA IPO excluded from the 2008 results, the IPOs in 2008 raised $10 billion. 2008 was the slowest year for U.S. IPOs since 1978. The low demand for IPOs in 2008 was also evidenced by the 101 companies that filed with the SEC to withdraw proposed offerings, almost double the 51 that did so in 2007. Although we attempt to match operating costs with activity levels, many of our expenses are either fixed or difficult to change on short notice. Accordingly, fluctuations in brokerage and corporate finance revenues tend to result in sharper fluctuations, on a percentage basis, in net income or loss.
Corporate finance revenue in the third quarter of 2009 included underwriting discounts earned from a bridge offering in which we raised $450,000. Corporate finance revenue in the nine-month period ended September 30, 2009 also included revenue related to a follow-on public offering in which we raised $3.4 million for ICOP Digital, Inc., as well as the Black-Scholes value of the underwriter warrants received in connection with that offering, and revenue related to our participation in closed-end mutual funds.
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