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Spring Street Brewing, the New York contract brewing company producing Wit, Amber Wit and a new Black Wit wheat beer in the spring, initiated public trading of its stock on its World Wide Web site March 1 but suspended trading March 20 after inquiries from the Securities and Exchange Commission (SEC). Trading had been sparse, with only a handful of completed transactions before Spring Street ceased trading activities.. "Trading started on Friday, March 1 and on Monday, eleven lawyers from the SEC had called with questions about a host of issues," said Andrew Klein, founder and president of Spring Street, in a telephone interview with The Erickson Report. Klein is a 35-year-old Harvard-educated securities lawyer who worked for six years in New York at Cravath, Swaine & Moore before abandoning the corporate boardrom in 1993 for the burgeoning contract brewing industry. "On the basis of their inquiries," Klein said, "they suggested we temporarily suspend trading as constructed. . "The SEC's biggest concern is the 'self-clearing' nature of the transaction," Klein said. "The way it was to work, when a sale was arranged, the buyer would send a check to us, which we would deposit, and the seller would send us the stock. When the check cleared, we would issue new stock to the buyer. That put us in the middle of the transaction, so we become a self- clearing broker." According to Klein, about 60 requests to buy were posted on the bulletin board trying to buy at a price of about $1.85. Sellers tried to negotiate at $3, $5, or even $10 a share. Only four transactions were recorded in the $1.85 range. "We have other issues to talk about, but none of them appear to be fatal," Klein said. "We could go to a bank or broker-dealer and have them act as an escrow agent," he said. |
Spring Street already had a presence in cyberspace, launching its Regulation A IPO in February, 1995, via a posting on the Internet. It sold 844,581 shares of common stock to 3,500 shareholders at $1.85, raising nearly $1.6 million. The proceeds went for marketing expenses and expanded distribution.
Secondary trading was conducted on Spring Street's Web site called Wit-Trade, for which the company has applied for a trademark (http://www.interport.net/witbeer). Buyers or sellers posted their name and address and used e-mail to negotiate the transaction. Wit-Trade provided an offer and acceptance form to document the agreement. Spring Street's trading activity and financial reports are also posted on the Web site bulletin board. Securities trading has recently moved onto the Internet. The popularity of fledgling online brokerage firms derives not only from consumers' fascination with the Internet but also from the lure of trading securities without paying the high fees or commissions of conventional trading. Charles Schwab, Fidelity Investments, E* Trade Securities, Ameritrade, Brown & Co., Quick & Reilly, and PC Financial Network, a subsidiary of Donaldson, Lufkin & Jenrette, are companies that have initiated trading on individual Web sites. Spring Street has also announced the release in March of their third beer, Black Wit, a black wheat ale which the company says is the first of its kind sold in the U.S. Wit is brewed with orange peel, coriander, and special Belgian ale yeast. A strong ale and peach beer are in development. Wit beers are contract brewed at Minnesota Brewing in St. Paul, MN. Herm Hegger, a Belgian brewer, and Joseph Owades are technical consultants to the company. Spring Street is negotiating to build small brewpubs in Georgia and Connecticut. |
