BGC Partners, Inc. (Nasdaq: BGCP)
BGC Partners, Inc. (Nasdaq: BGCP) provides brokerage services to wholesale financial markets via electronic marketplaces for bonds, credit, and other financial assets. It is a Delaware corporation with its principal place of business in New York. An ideal client would be a continuous holder of the stock since March 15, 2010 or earlier.
BGC has engaged in at least three potentially unfair, related party transactions with its controlling shareholder, Cantor Fitzgerald. In March 2008, BGC issued $150 million in senior notes which were guaranteed by Cantor Fitzgerald. The Notes carried an annual interest rate of 5.19% payable to the note holders. In addition, Cantor Fitzgerald received an additional 2.31% on the principal amount of the notes in exchange for its guaranty. In April 2010, BGC issued $150 million in senior convertible notes to Cantor Fitzgerald, the proceeds of which were used to pay March 2008 note holders. The new notes carried an 8.75% annual interest rate (i.e., over 3.5 points above the interest rate of the prior notes) and also provided Cantor Fitzgerald with special conversion rights that could increase its voting power to 81.7% if exercised.
BGC has entered an agreement whereby Cantor Fitzgerald acts as the sales agent for a controlled equity offering of 10 million BGC shares. The deal is of significant benefit to Cantor Fitzgerald, and yet it is unclear why this offering was necessary or beneficial to BGC. While the Company claims that it will use the proceeds of the offering partially to finance existing business operations, make additional broker hires, and to make strategic acquisitions, the primary purpose of the offering is to funnel proceeds back to Cantor through the repurchase of Class A common stock and partnership interests in BGC Holdings (the Company’s operating subsidiary) from Cantor Fitzgerald, as well as to allow certain unidentified Partners in the BGC Holdings to repay loans made to them by Cantor Fitzgerald. In addition to receiving these proceeds, Cantor will receive a 2% commission on the sale of all stock for its role as sales agent.
Finally, a change of control agreement was modified to provide the Cantor Fitzgerald CEO and Chairman of the Board, Howard Lutnik, with windfall gains that could have a substantially dilutive effect on BGC shareholders; such an agreement is unnecessary since any change of control would only occur at Lutnik’s discretion.
The firm is seeking to commence a shareholder derivative action on behalf of BGC Partners to determine the fairness of these transactions and redress breaches of fiduciary duties in connection with the same.
If you are a current shareholder and would like to discuss your options of exercising your rights as a shareholder, which includes ensuring that the board of directors will act in the best interest of the shareholders, please contact us.
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