Tiny NJ Broker Behind 2,000% IPOs Set to Return After Hiatus
(Bloomberg) — After leading the world’s wildest initial public offerings in 2022 — one soared 13,000% in its debut — little-known brokerage Network 1 Financial Securities Inc. is preparing to guide a group of microcap companies to US exchanges.
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The Red Bank, New Jersey-based firm is listed as the underwriter for the parent of Macau-based alcoholic beverage wholesaler Epsium Enterprise Ltd. and Brazilian snack-producer BRB Foods Inc. in filings within the past month, setting up a return after leading just one deal last year, data compiled by Bloomberg show. That comes after the firm was listed on filings to help companies like Chinese supplement maker AiXin Life International up-list from trading on the pink sheets in the US, deals that have yet to materialize.
Network 1 captured Wall Street’s attention when tiny Chinese companies like garment maker Addentax Group Corp. became bigger than swaths of Corporate America before plunging in the following days. In 2022, the IPOs it worked on surged by an average of nearly 2,000% on their first day of trading, Bloomberg calculations show.
Read more: Wall Street’s Mysterious 2,200% IPOs Come From Tiny N.J. Broker
Now, its underwriting effort for Epsium and BRB comes as a financier linked to the company faces a civil lawsuit from the Securities and Exchange Commission.
The firm was the banker for 17 deals in 2021 and 2022 with day-one pops ranging from Addentax’s 13,000% surge to a 48% plunge for Laser Photonics Corp. While those companies saw gut-wrenching swings in the opening hours and days on US exchanges, all but the three blank-check firms it underwrote are trading lower, with a median 88% plunge since going public, data compiled by Bloomberg show.
Network 1, founded in 1983, has a history of run-ins with regulators that pre-date the booms and busts of the pandemic era. It paid fines for failing to detect suspicious transactions and insider trading as well as getting dinged by regulators for not developing written anti-money laundering programs, Financial Industry Regulatory Authority’s records show.
More recently, the SEC accused Shawn Huang Shanchun, one of Network 1’s apparent indirect owners, of manipulating the price of blockchain-based e-commerce company Future Fintech Group Inc. before and after he became chief executive officer in 2020.
Huang’s lawyer, Jacob Frenkel, said his client denied the allegations, that he will vigorously fight them and stated that Huang relied on the “advice and counsel of retained professionals in connection with his disclosure obligations.” The “case is just beginning, and we are a long way from any evidence being presented to a jury,” the statement continued.
Network 1 was not named in the lawsuit.
Representatives for Network 1, Huang and Future Fintech couldn’t immediately be reached for comment.
–With assistance from Austin Weinstein and Kiuyan Wong.
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