Chapman ponders his next move

A merger and going private are among eChapman options

Shares have fallen to 50 cents

November 10, 2001|By M. William Salganik | M. William Salganik,SUN STAFF

Its stock price at historic lows, Baltimore-based eChapman Inc. is considering buying back its stock to take the company private, merging its investment banking subsidiary or taking another division public, according to a letter to state pension officials from company President and Chairman Nathan A. Chapman.

eChapman went public in June 2000, priced at $13 a share, but fell to $7.38 on the first day of trading. The stock continued to slip, and traded in the $2 range for several months until mid-October, when it began tumbling rapidly. It closed yesterday at 50 cents, off 4 cents for the day.

The companies now conglomerated into eChapman have gone through a number of transformations in the past few years, which included taking two separate companies public, merging those two into a third, then taking that new company public. Considering further changes now is simply "prudent management," Nathan Chapman said yesterday. "Since Sept. 11, there have been a number of dislocations in the stock market overall, and it's caused people to look at a number of different options."

Peter Vaughn, executive director of the State Retirement Agency, said that when state pension officials saw eChapman's stock was at "a record low," they asked Chapman to send them a letter "as to whether he's still a viable concern."

According to state pension records, a Chapman subsidiary, Chapman Capital Management Inc., managed $189.7 million in state pension funds as of June 30. The pension fund has about $29.5 billion in total assets, so the portion managed by Chapman represents less than 1 percent.

The pension fund staff assured members of the system's investment committee yesterday that the assets are secure, whatever happens to Chapman's companies, because they are being held by the agency's custodian bank.

In both the letter and an interview, Nathan Chapman said members of the pension system do not need to have any concerns about the price of his company's stock.

"Our stock price going up and down has nothing to do with the day-to-day-operations of our companies," he said. "If our stock price went to 100 or went to 0, it would have no material impact."

Chapman said the pension system does not have any money invested in his company. As for the investments he manages for the system, he said, "I won't discuss any client's account."

The publicly traded parent company, eChapman, was formed by the combination of two companies Chapman had taken public in 1998: Chapman Holdings Inc., an investment banking and brokerage firm, and Chapman Capital Management Holdings Inc., an investment advisory firm.

The parent now controls four subsidiary companies, all based in Baltimore. Collectively, they have fewer than 100 employees, Chapman said.

Chapman Capital Management, the investment bank, is one being considered for a merger, Chapman said, although he declined to say whether it is in active merger talks.

Another, Chapman Networks, which runs the company's Web sites, is the one being considered for being spun off in a public offering. The others are Chapman Insurance, which offers annuities, and Chapman Capital Management, the investment advisory unit that manages some of the state pension money.

Nathan Chapman personally owns about 70 percent of eChapman's 12.5 million outstanding shares. The company could be taken private by buying the shares, an option sometimes taken by companies when share prices are low.

In his letter to the pension officials, Chapman said, "We have continued to grow our business across the board with new clients. We expect 2002 to be a good year for us."

He said yesterday that his consideration of strategic options for his companies had not proceeded far enough that he could estimate a time frame for making a decision.

Sun staff writer Michael Dresser contributed to this article.

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