A small cap company that supplies bodycams to law enforcement, Digital Ally, saw its stock jump over 100% on Monday after protest riots in the U.S. extended over the weekend. The newly minted company gains got the attention of New York-based broker Aegis Capital Corp who convinced Digital Ally’s CEO, Stan Ross, to use its already filed shelf offering to sell an overnight discounted stock purchase agreement to retail investors. Aegis clients were rejoicing last night when their brokers, working under Anthony Lapadula, offered them the stock at only $1.65 after it had traded at a high of $2.53 on Monday. But people familiar with the transaction say there could be problems with an accurate account of the company’s stock float, which mean Aegis could have some problems with regulators in how the offering was sold.
Before the price hike the company had a float of around 13,000,000 shares and traded barely over a $1. But with Monday’s pop it caused institutional funds, with prior investments in the stock, to exercices their warrants, turn them into free trading stock, and cash out of their positions. This means there were more shares in the open market. Digital Ally had previously made SEC filings stating they were going to raise money with Roth Capital Partners and Lake Street. SEC rules say you can’t sell more than one third of the float off of a shelf offer in a 12 month period. And Digital Ally just sold an offering around $3 million a few months back.
Other broker dealers who had spoken with the company to raise money said they would need a ‘comfort letter’ from Digital Ally’s auditors or lawyers to confirm what the new share count is given so many warrants were exercised. That kind of proper due diligence check would take two to three days. But Stan Ross apparently found a firm, with a history of complaints against it’s broker dealer practices, to raise money off the hype. Additionally Aegis investment banking unit has made an exodus leaving it with only jr bankers. According to investors who bought the offering and insiders at Aegis, Anthony Lapadula was the lead I.B on last night’s deal. But Lapadula doesn’t have a series 79 license which is need to run an investment banking offer, according to Broker Check.
Last fall I was informed by company insiders that around half a dozen Aegis brokers had been called into their regulator, FINRA, for on the record interviews. Then in October I saw a SEC subpoena issued to a former Aegis broker who worked for Anthony Lapadula. It’s unclear which offering the SEC was focusing their questions on. A review in Broker Check shows Aegis has at least 34 regulator events. This includes complaints range from selling clients unsuitable offers to violating broker dealers rules regarding how and when they can sell an offering.
At press time Stan Ross and Anthony Lapadula did not return an email for comment. Aegis is run by Robert Eide, who goes by Bob, and founded the broker dealer in the mid-80s.
Share Your Voice