Meet ZombiEF Hutton

In the 1970s and 80s, EF Hutton was one of America’s biggest retail brokers. The brand has recently been . . . reanimated.

Led by new ownership and management, EF Hutton has underwritten lots of US blank-cheque company offerings this year, even after regulators proposed strict new rules on the space. That and a broad drought in IPOs have made it one of 2022’s top underwriters in US equity markets.

A stranger twist: a special purpose vehicle also bearing the EF Hutton name is trying to buy an Oregon microcap health food company founded by famous mega-wave surfer Laird Hamilton. More on that later.

Before we dig into the peculiar details, we should give a quick history; many of our readers will remember the firm’s old advertisements:

That version of EF Hutton was founded in 1904. It “was a venerable, highly thought of retail broker whose business model was destroyed by things like index trading,” said one former New York portfolio manager. (Well, there was that messy business with the cheque kiting in the 1980s, of course, but how is one supposed to keep track of an overdrafted account or two-thousand while watching the races in Saratoga?)

There aren’t many links between the EF Hutton of yore and today’s Spac-tacular version. The clearest is Stanley Hutton Rumbough, grandson of the original firm’s founder and a photographer. Regulatory filings show he is a board member and shareholder of EF Hutton’s Spac, EF Hutton Acquisition I Corp, the first of four reportedly planned.

Yet the modern version of the firm existed as Kingswood Capital Markets for about a year before it sought out the EF Hutton name (and presumably Rumbough’s involvement). It was founded in May 2020 by executives David Boral and Joseph Rallo.

Whatever you call it, the firm has soared in the league tables recently, in large part because it keeps underwriting Spac IPOs while bigger banks shy away.

Of the 63 Spac IPOs to have closed in the US so far this year, EF Hutton is responsible for 14, Bloomberg data show. That puts it at the top of the list in Spac IPO count and second in volume, with $1.2bn to Cantor Fitzgerald’s $1.5bn. For context, last year there were 511 Spac IPOs, according to Bloomberg; EF Hutton was 15th on that list.

In fact, EF Hutton ranks third for all US equity-market IPOs this year. And even including volumes from less risky follow-on offerings, EF Hutton ranks 13th for 2022. That’s an impressive showing for a firm that didn’t exist three years ago.

It got there by underwriting shares of companies in a range of industries that might be described as diverse.

Among many deals this year, it raised more than $10mn for Graphex Group Ltd, which has three business lines: landscaping, catering, and “processes raw graphite into purified spherical graphite, used for the anode of electric vehicle Lithium-Ion batteries”. Graphex shares are down 56 per cent since the company announced the share sale.

It raised about $9mn for Treasure Global, a US-based company that created a Malaysian shopping app called “ZCity”. The stock popped 18 per cent on IPO day but has dropped 75 per cent from there. EF Hutton also raised $5mn for Reborn Coffee, a coffee shop with eight locations in California. Reborn’s shares are down 76 per cent from the IPO price.

This raises several questions. An important one: How does an underwriter find investors for these types of companies? We have contacted EF Hutton twice but haven’t heard a response.

The firm’s parent company, called Benchmark Investments, hasn’t yet responded to a request for comment either. To be clear, this is not the Benchmark that became famous for investing in an early round of Uber. Nor is it the smallish but generally known shop called The Benchmark Company.

Rather, it is a wealth-management firm based in the suburbs of Atlanta, Georgia. In fact, the EF Hutton name is included as an “also known as” of Benchmark Investments LLC on Finra’s Brokercheck. The wealth-manager arm of the company is called Benchmark Advisory Services. It is also affiliated with the US branch of Kingswood Group, a UK-based wealth management group that’s listed on AIM.

Benchmark Advisory said in its latest ADV filing that it does not “recommend to advisory clients, or act as a purchaser representative for advisory clients with respect to, the purchase of securities for which [they] or any related person serves as underwriter or general or managing partner.”

Another wealth manager with the same mailing address, Kingswood Wealth Advisors LLC (also listed as Chalice Wealth), said the same in its latest filing.

In other words, the IPO mystery persists.

But IPO placements aren’t the only puzzle surrounding zombiEF Hutton. We can’t forget Riding Giants star Laird Hamilton!

It started with a look at EF Hutton’s executive team. Besides Rallo and Boral, who worked together at Aegis Capital and Maxim Group, there’s Ben Piggott.

Piggott’s background is at asset management firms, but he most recently worked as head of corporate development at a company called Laird Superfood. The Oregon company, which sells non-dairy creamers, plant-based snacks and “functional mushroom blends” and of course was founded by the eponymous surfer, is publicly listed.

Imagine our surprise to find an August SEC filing from Laird Superfood. With our emphasis, it reads:

Laird Superfood, Inc . . . has received an unsolicited offer from EF Hutton SPV I LLC to acquire all of the Company’s outstanding common stock for $3.00 per share in cash.

Interesting! Then on Oct. 11, after we contacted Laird Superfood, EF Hutton and Benchmark for comment, another filing hit. This one announced that the EF Hutton SPV I LLC — a partnership between Piggott, Rallo, Boral, and former Laird board member Thomas Wetherald — had withdrawn its offer.

We heard back from a Laird Superfood representative on Oct. 11, who declined to comment. As mentioned above, we have yet to hear back from Benchmark or Hutton and will update this post as soon as a response is received.

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