Alfred Ritter serves on US Capital Global’s business development team. He is responsible for all aspects of the firm’s debt and equity business development, advisory services, client negotiations, and relationship management.
Prior to US Capital Global, Alfred was a Managing Director at Columbia Capital Advisors, Inc. and Columbia Capital Securities, Inc. He brings extensive investment banking, operational, and entrepreneurial experience with emerging growth and middle market companies in the security, consumer products, and media and entertainment industries, including equity and debt financing, private placements, buy/sell side mergers and acquisitions advisory, restructuring, and strategic advisory engagements. Previously, Alfred served as a Managing Director at Angeles Capital Group, LLC, where he was an investment banker providing strategic advisory services, private placements, and M&A advisory services. He also served at Allen and Associates, LLC, a boutique corporate finance advisory firm.
Prior to this, Alfred held senior executive, business development, and financial analyst positions with firms in the specialty retail, media and entertainment, and manufacturing and logistics industries, during which time he also worked in Malaysia and Taiwan. Additionally, Alfred has collaborated with a charity called Operation Hope, in which he helped provide financial literacy training and volunteered for a program called “Banking on Our Future.”
Alfred received a BS in Business Administration, magna cum laude, with a minor in Economics from California State University, Los Angeles. After graduation, he studied at National Taiwan Normal University’s Mandarin Training Center.
Hey, everybody. It’s me again, Adam Chapnick, with the Security Token Academy. We are here in Los Angeles at CIS 2019. And I am lucky to be joined by the managing director of US Capital, Mr. Alfred Ritter.
How are you doing?
I’m doing great, doing great.
Good. It’s good to have you.
Good to be here.
Tell everybody, or tell me, what is US Capital and how did it come to be?
Well, it goes back about 20 years and it actually started off as an equipment leasing company and has become an investment bank. It started, as I said, debt, lending money to business, growth stage businesses. And then, we have an asset management division which manages funds, like GPLP funds. And also has a wealth management division. I’m on the security side and the investment banking side. So we have that whole side, as well. That’s what we are.
That’s what you are. So why would a company with that kind of pedigree end up ... or shouldn’t say why, but how and why, did you end up at a place like the crypto-invest summit?
I asked myself that just before I sat down.
How did any of us arrive here?
Actually, what we’re really interested in ... I mean, listen, I followed blockchain for a long time, and Bitcoin, a buyer and investor, owned some crypto myself. But really what we’re mostly interested in is that development of security tokens and how that affects the traditional security industry. Especially in regards to private placements and privately held companies, and funds, to give liquidity to investors prior to them going public. They’re waiting 10 years to go public, and you invest in a venture capital fund, hopefully you’ll see an exit.
Yeah, before you exit.
I know the pain all too well. So, yeah, that’s definitely the promise of the security token, or a major promise of the security token.
So how are you guys involved with security tokens, if at all yet?
So we are involved. Our role primarily is as a lead underwriter. Kind of like if you think of an IPO, this is an STO, right?
And so we’re the lead underwriter, so we’ll go in and we’ll analyze the companies, the management team, the financials, the evaluation, and we’ll go through the whole package. We’ll put together a whole diligence report on those companies. And we’ll provide that information then to verify it, provide it to investors. And so it gives them kind of ... we’re a FINRA licensed firm ... so it gives them kind of the Good Housekeeping seal of approval, right?
To say that somebody actually went through this, it’s not just representation by a CEO of a company. So there’s a third party review of it. So that’s what we primarily do. And then we distribute those securities. And we are working on a couple tokenized products right now. One is a fund, it’s called City Block Capital.
We know City Block, Rob Nance. Friend of the show.
Yeah, exactly. So we’re raising money for him. We got a listing agreement for SharesPost, so secondary trading is potential, as this works. And then we just launched a new one for a company called Metals House, and it’s 150 million dollar capital raise for ostensibly inventory finance for a gold trading firm. So you have invested and they use that money to buy gold. And then every year that increases in terms of the amount of gold that’s backing the token. And by year five it’s 100% backed. And they pay a dividend. So they pay a quarterly dividend, annual dividend of 8%, 2% per quarter.
So it’s got income. So that’s kind of cool.
Nice, old fashioned clip with a new twist.
Exactly. Exactly. So yeah, I like income products, especially given where we’re at in the cycle. And people like income.
So, you guys kind of do an old fashioned ... I hate to say that ... but a traditional review of the underpinnings of an offering.
So, sort of say the fundamentals are sound.
Do you have someone around that kind of figures out the technical part of an offering, if it’s blockchain, if that’s working and sound, as well?
Yeah, we’ll work through that and then we’ll bring in experts, depending on the field. So if it was a medical device company, we’ll bring in an expert who knows something about medical devices, unless we have that internal capability. And I think the same is true about digital securities or tokens. And having an audit, we’ll review the paperwork, we’ll require them to provide us with the documentation related to the smart contract and how that matches up to the actual analog contract. Kind of underpins it.
And we’ll work with auditing firms to do that, as well.
Got it. So what do you think in the future, are you guys looking to see STO’s become a predominate part of your portfolio? Or is it just something that if the fundamentals are there, and it happens to be offering digitally then fine, and if not, also fine?
I think we’ll continue to do both. Certainly in the short term, and a lot of issuers, we’re doing an analog and a digital version. The analog can convert into the digital version, because there’s some institutional buyers that just aren’t going to buy a digital security now.
Right. Not ready.
They’re just not ready for it and the custody, all the issues there. But in the future, we see more and more. I equate to like ... I think somebody used this other day, but I’ve been using it before them ... But, you used to make a mixed tape, it was kind of analog, right?
And then it went digital, or electronic, and you’d have a CD-
You had to burn it.
And you could burn it, right? And now you can send an MP whatever we’re at, at this point, to somebody, or a play list. So I see securities going very much the same way. And I think one day, all securities will be digital.
Yeah, actually that’s a great analogy. Because if you use that analogy, it’s just the song is either good or not. And so you need to like the song, really doesn’t matter if you hear it on the tape or the CD or the MP-
Well, as I say, a good deal’s a good deal is a good deal.
Right, that’s what I mean.
And so if it’s not a good deal, then I don’t care how you package it, whether it’s digital or it’s a paper certificate, if it’s not a good deal, it’s just plain not a good deal, and you shouldn’t invest in it.
And so I see it very much the same. The cool thing is just the liquidity potential as this trading develops. And I call it a potential, it’s not a foregone conclusion, there’s plenty of publicly traded companies on pink sheets and over-the-counter that don’t trade.
Not a lot of liquidity.
Not a lot of liquidity. So it’s not a guarantee by any stretch of the imagination.
Yeah. Now, what you said was interesting, though, about this sort of the dual offering. Do you think that’s a model that’s a good bridge from here to when we have the actual volume?
I think it’s a model until the institutional investors feel comfortable putting their money in. So if you’re 100% not going institutional and it’s all going to be family office, high net worth individuals, and you’re going to be selling to that market, then maybe you don’t need the paper product as well. But I think it’s a stop gap for right now, until the institutionals really get on board.
Yeah, very smart.
And I think offering both is a reasonable approach to that. We counsel most of our clients to do so. Again, unless it’s clear that it’s going to just go to high net worth individuals and more individual investors who are interested in buying a token, and are good with that.
So interesting. It makes perfect sense to me, at least. So, US Capital, the next six to nine months, the remainder of 2019, what can we expect from you guys?
I would expect that we’ll have more offerings coming to market. We should be announcing some closing on these deals.
And raising a couple hundred million dollars hopefully for our different issuers. And I think then those will be positioned to start trading. Obviously, most of the deals we’re doing are Reg D, Reg S, so internationally they could start trading after 40 days, as long as they’re not coming back here. So I would expect that we’ll, you know, we have relationships with a lot of the different trading platforms, and the tokens that we originate and that we distribute will then start trading in the secondary market.
Terrific. Well, thanks for sharing with us all about what you guys do.
Yeah, great. Glad to be here.
You’ll have to come back, Alfred.
All right. Absolutely. Thank you so much.
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