Two companies that broker Nathan A. Chapman Jr. plans to merge to create a publicly traded Internet financial services firm restated 1999 earnings yesterday, giving both companies losses for the year.
Chapman Holdings Inc., a Baltimore-based brokerage and investment banking firm, lost $442,000 last year as a result of an accounting change. The move reversed a $364,000 profit previously reported.
Chapman Capital Management Holdings Inc., an investment advisory company, said it lost $853,000 last year, widening its previously reported loss of $582,000.
Shares of Chapman Holdings slipped 12.5 cents yesterday to $13.875, while Chapman Capital Management's shares rose 62.5 cents to $15.25.
The companies revised their income after management "decided to take a much more conservative posture in looking at our affiliated companies," said Chapman, president of the companies.
He said the companies were not prompted by their accountants to make the changes.
In Chapman Holdings' case, gains or losses on stocks marketed by its brokerage arm were reflected in its bottom-line profit figure. After the change, gains or losses will be calculated in the company's overall shareholder equity on its balance sheet.
Chapman Capital Management's income was revised after it established a reserve against previously recorded tax benefits.
Neither company's 1999 operating revenue or cash flows will change as a result of the restatements.
The revisions come four months after eChapman.com filed a registration statement with the Securities and Exchange Commission for an initial public offering.
The company plans to raise as much as $53 million by selling 3.3 million shares at $14 to $16 a share, according to a prospectus.
Chapman declined to comment on specifics of the offering because the company is in the Securities and Exchange Commission's "quiet period."
In conjunction with the offering, Chapman Holdings, Chapman Capital and Chapman Insurance Holdings Inc. have agreed to merge into the new company.
Chapman's latest venture is designed to take "advantage of the unique opportunities presented by the growth of the Internet," according to the prospectus.
The company plans to offer brokerage services, mutual funds and insurance products online. It also plans to operate an Internet bank and widen its audience by offering lifestyle, educational, sports and cultural content to appeal to African-Americans, Asian-Americans, Hispanic-Americans and women.
The prospectus notes that "risks" are associated with the new company, including the fact that it has no Internet-related operating history.