Boeing Faces New Challenges To Image, Reputation And Credibility

By Edward Segal

October 15, 2021

Boeing is facing two new challenges this week to its image, reputation and
credibility.

Federal Grand Jury Indictment

Yesterday CNN reported that a federal grand jury indicted a former key
executive of Boeing for fraud. They alleged “he deceived the Federal Aviation
Administration while it was first certifying the 737 Max jet that would go on to
have two fatal crashes caused by design flaws.”

“The charges were not against a top executive. Instead, they were against
Mark Forkner, 49, who was the chief technical pilot for Boeing during the
certification process for the jet and is accused of deceiving the FAA during that
process in 2016 and 2017.”

“Forkner’s attorney did not respond to a request for comment, and Boeing
declined to comment,” CNN said.

Improperly Made Dreamliner Parts

Boeing is confronting a different issue that involves another one of their
planes.

According to Reuters, the airplane manufacturer said that “some titanium 787
Dreamliner parts were improperly manufactured over the past three years,
the latest in a series of problems to plague the wide-body aircraft.”

The company said the quality issue does not affect the immediate safety of
flights, adding it had notified the Federal Aviation Administration. Boeing is
working to determine how many planes contain the defective part, Reuters
reported.

Boeing did not immediately respond to a request to comment for this article,
and there was no mention of the fraud charges or Dreamliner parts issue on
the company’s website.

Expect Increased Scrutiny

Dennis E. Sawan is a personal injury and insurance lawyer at Sawan & Sawan.
He observed that, “Given the callousness allegedly exhibited by Boeing with
respect to the [737 Max] we can expect that the company will face increasing
scrutiny from regulators, who will no doubt bring out the fine-tooth combs
when reviewing Boeing’s safety representations in the future.

“Moreover, companies that place profit over consumer safety have repeatedly
faced multi-million dollar punitive damage verdicts—and Boeing is unlikely to
escape this fate if the allegations in the fraud case prove to be true,” he
predicted.

“While Boeing remains a dominant force in commercial flight, airlines may be
increasingly wary of conducting business in the future —especially if it leads
them to incur additional and unexpected liability for the operation of certain
types of aircraft,” Sawan concluded.

Power To Damage

Jonathan Hemus is managing director of crisis management consultancy
Insignia. He said, “There are so many crisis management [lessons] from this
tragic [737 Max] case, not least the enormous power of crises to damage lives,
livelihoods, reputations and businesses.

Importance Of Culture

“These latest developments highlight the critical importance of leaders
instilling a culture that facilitates crisis prevention or swift resolution. Three
years [since] the first 737 Max crash, this latest attention on Boeing shows
how much easier it is to enter the spotlight due to a mishandled crisis than to
exit it. Mishandled crises are not ‘here today, gone tomorrow’ events; their
impact on an organization like Boeing can linger for years, sometime
decades,” he observed.

‘Massive Systemic Issues’

Joey Smith is the director of aviation services at investment bank Cassel
Salpeter & Co. He said, “Apart from Boeing’s lingering reputational issues and
its mismanagement of the 737 Max crisis, it’s also apparent that there are
massive and systemic issues within Boeing’s culture…”

Smith cited, “… the lack of checks and balances, transparency and
communication between senior management and the rank and file personnel
to do the right thing with safety as the first consideration. These company
culture issues allow for an environment where so many additional crises
develop with additional platforms and their supply chain. Boeing needs more
than just a tweak. It needs an overhaul.

“Additionally, the overhaul needs to address what appears to be
fear, intimidation and compensation issues related to pushing projects
forward, which can open the door to negative results and catastrophic
events,” he concluded.

Other Recent Boeing Crisis Situations

Boeing has had a lot of experience dealing with crisis situations over the past
several years.

Impact 737 Max Crashes

In November, the FAA lifted its ban against the 737 Max. Caroline Sapriel,
managing partner of crisis management firm CS&A International, told me at
the time that, “It will take time and this black mark on their history may never
be completely erased.”

Billions In Fines

Reuters reported that in January, “Boeing agreed to pay more than $2.5 billion
in fines and compensation after reaching a deferred prosecution agreement
with the U.S. Justice Department over the MAX crashes, which cost Boeing
more than $20 billion.”

Engine Explodes

Last February, three months after the company returned the 737 Max to
service, an engine on a United 777 exploded over Denver, raining debris on a
neighborhood below. Airlines in the U.S., Japan, and South
Korea grounded dozens of the Boeing 777s, and the Federal Aviation
Administration ordered United to increase their inspections of the aircraft.

Potential Electrical Issue

In April, Boeing faced another crisis involving its 737 Max. As reported
by Forbes, the airline manufacturer recommended that a potential electrical
issue in a specific group of 737 Max airplanes be addressed before they fly
again.

 

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Cassel Salpeter & Co. Facilities Sale of Comprehensive Eye M.D. to Spectrum Vision Partners

Cassel Salpeter & Co., an independent investment banking firm that provides advice to middle-market companies in the U.S. and worldwide, represented Comprehensive Eye M.D., a highly regarded eye care specialist, in the company’s sale to Spectrum Vision Partners, LLC (Spectrum), an organization serving many of the top ophthalmology groups and ambulatory eye surgery centers in New York, New Jersey, Connecticut, and Pennsylvania, and a portfolio company of Blue Sea Capital, a private equity firm based in West Palm Beach, Florida.

“We are proud to have worked with Comprehensive Eye M.D., Dr. Marc Wietschner, and the Spectrum team. It took hard work, persistence, and expertise, but we found them the right partner to move forward within this transaction,” said Cassel Salpeter’s co-founder and chairman James Cassel.

Comprehensive Eye M.D.’s owner and founder Dr. Wietschner added: “We couldn’t be more thrilled to have teamed up with Cassel Salpeter. The expertise and professionalism shown by Cassel Salpeter in connection with this sale was second to none. They made the entire process as painless as possible, even through the difficulties brought on by the pandemic.”

The Cassel Salpeter team was led by co-founder and chairman James Cassel and Vice President Laura Salpeter. Comprehensive Eye M.D.’s attorneys were Douglas Menikheim, Benjamin Malerba, Scott Feuer, and Joseph DiBella of Rivkin Radler LLP, while Spectrum used David Manko, Peter Eggers, and Cyrus Abbassi of Proskauer Rose LLP as its legal counsel.

Cassel Salpeter would like to thank Greg Wappett of Spectrum, and Heidi Wietschner of Comprehensive Eye M.D. who worked diligently to expedite the transaction’s closing.

About Cassel Salpeter & Co., LLC
Cassel Salpeter & Co. is an investment banking firm with professionals who have more than forty years of financial experience. They deliver smart, straightforward advisory services to middle-market companies across America. With a thorough understanding of their clients’ industries and a keen sense of the economy, the Cassel Salpeter team provides independent, timely advice so clients can capitalize on a rapidly changing global environment. Headquartered in Miami, Florida, Cassel Salpeter is led by James Cassel and Scott Salpeter. Member FINRA and SIPC.

With Merck’s COVID Antiviral Announcement, Can the Pharma Pipeline Build Treatment Momentum?

By Justin Honore

October 8th, 2021

At the start of the month, pharmaceutical company Merck dropped big news: it has developed a COVID antiviral drug that would cut hospitalization and mortality risks by 50%. In the drug’s study, patients taking the placebo pill saw 14% hospitalization rate and eight deaths, the trial group with Merck’s drug had only 7% hospitalized, and zero deaths.

But this appears to be just the tip of the iceberg: Kaiser Health News reports at least three COVID antiviral candidates, including Merck’s, going through latestage clinical trials, meaning a variety of COVID drugs could be on patient’s prescriptions here soon. What’ll be some of the positive domino effects to come from approval of COVID antivirals, not only on the pharmaceutical production pipeline, but on the general population’s health? Ira Leiderman, managing director of the healthcare practice at Cassel Salpeter & Co., gave MarketScale his take on the coming treatment

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Spectrum Vision Partners acquired Comprehensive Eye

  • Background: Comprehensive Eye M.D. (“Comprehensive Eye”), based in Long Island, NY, is a physician-owned and operated ophthalmology practice. Comprehensive Eye provides patients with best-in-class ophthalmologic medical and surgical care.
  • Cassel Salpeter:
    • Served as financial advisor to the Company
    • Assisted company in exploring strategic alternatives including the sale of the company
    • Introduced and evaluated potential strategic partners
    • Worked closely with physician owner to navigate all phases of the sale process and achieve optimal transaction for a long-time, closely held business
  • Challenges:
    • Sale process conducted during pandemic
    • Ensuring seamless transition after decades of physician ownership
    • Maximizing and delivering value for synergies
    • Navigating extensive diligence review process
  • Outcome: In October 2021, Comprehensive Eye was acquired as part of a significant regional roll-up strategy by Spectrum Vision Partners, a portfolio company of Blue Sea Capital.

What Happens to Evergrande in China Stays in China

While US markets were a little shaken by news of Evergrande, commercial real estate will likely be fine.

By Erik Sherman

September 24th, 2021

Concerns about property developer China Evergrande Group had investors going early in the week of September 20. Dow futures were off by nearly 500 points, when Fortune took a pulse on Monday. They’d ultimately drop by more than 664 points, as the site DowFutures.org’s historical graph noted.

A look at the same Dow futures history graph showed that by Tuesday, roughly two-thirds of the drop had come back. So, maybe not the next Lehman Brothers, as some opined?

“With more than $300 billion in liabilities and only $15 billion in cash on hand, Evergrande is currently the world’s most indebted real estate developer,” wrote Ryan Detrick, chief market strategist for LPL Financial. “Worries are mounting that starting next week it won’t be able to pay $84 billion of interest due (according to Bloomberg), along with potentially missing a principal payment on at least one of its loans.”

There was reason for concern, especially if you were a shareholder. And if you were holding a portion of the company’s bond debt through global mutual funds or ETFs, that could well be the case.

When it comes to impacts on commercial real estate and the US stock markets, one needs to look at how much of the securities are held in funds controlled by fund groups like Vanguard and Blackrock. “If they have substantial positions in the China Evergrande Group, this could be a problem,” James Cassel, chairman and cofounder of investment bank Cassel Salpeter & Co., tells GlobeSt.com.

But there are hard assets, unlike Lehman, and the danger seems largely in someone else’s backyard.

“The Evergrande issues are important but shouldn’t be overblown,” David Russell, vice president of market intelligence at TradeStation Group, tells GlobeSt.com. “Global banks don’t have a lot of exposure to Chinese real estate so global contagion isn’t a huge concern now. There’s no significant links to US commercial real estate. We’ve also seen little impact on high-yield credit spreads.”

There might even be some good news for the commercial real estate industry. “We may see a small shock to equity and real-estate markets globally depending on the Chinese government’s response in the short term,” Vinny Yu, a former portfolio manager at investment firms and co-founder of investment app JAVLIN Invest, tells GlobeSt.com. “But in the medium term, there may be a flight to quality for both real-estate and equity investments from China to the US.”

“It could ultimately be a positive because less Chinese construction means less demand for copper and steel,” Russell adds. “That could help bring down inflationary pressures and reduce the need for interest-rate hikes in the US. Never forget that the roaring bull market of the 1990s followed the collapse of Japanese real estate in 1992.”

 

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1H 2021 Florida PE Deal Report

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MoSys and Peraso Technologies Announce Definitive Agreement for Business

September 15, 2021

Combined Company to Capitalize on Significant Growth in 5G,

Targeting Opportunities in mmWave and Multi-Edge Computing

 

SAN JOSE, CA and TORONTO, ON / ACCESSWIRE / September 15, 2021 / MoSys, Inc. (NASDAQ:MOSY) (“MoSys”), a provider of semiconductor solutions that enable fast, intelligent data access for cloud, networking, security and communications systems, and Peraso Technologies Inc. (“Peraso”), a global leader in the development of 5G mmWave silicon devices, announced today the signing of a definitive agreement (the “Arrangement Agreement”) for a business combination by way of a statutory plan of arrangement under the Business Corporations Act (Ontario) (the “Business Combination”). Upon the closing of the Business Combination (the “Closing”), the stockholders of Peraso are expected to hold, on a fully-diluted basis, a 61% equity interest in the combined company, with the remaining 39% equity interest to be retained by the stockholders of MoSys, assuming the Escrow Release Conditions (as defined below) are satisfied, or a 57.7% equity interest by the stockholders of Peraso and a 42.3% equity interest by the stockholders of MoSys, assuming the Escrow Release Conditions are not satisfied, in each case, as described further below. On Closing, MoSys will change its name to Peraso Inc. and expects shares of its common stock to continue to trade on the Nasdaq Capital Market under the new ticker symbol PRSO. The Arrangement Agreement and the Business Combination have been approved by MoSys’ and Peraso’s boards of directors and are subject to approval by MoSys’ and Peraso’s stockholders. The Business Combination is expected to close in the fourth quarter of 2021.

 

Management Commentary

“We are pleased to sign the Arrangement Agreement with Peraso, as we believe the Business Combination will provide substantial opportunities for our business across expanded high-growth markets,” stated Dan Lewis, MoSys’ Chief Executive Officer. “The combination will broaden our product lines, add operating scale and unlock potential selling synergies across common customers. Together, the company is uniquely positioned to target high-growth opportunities in 5G, as well as telecom and data networks. The deployment of 5G faces two key bottlenecks: the sub-6Ghz spectrum is exhausted and software-only solutions have become a limiting factor in effectively accelerating network hardware. Peraso’s market-leading mmWave technology, combined with MoSys’ accelerator engine ICs and virtual accelerator engine IP, directly addresses these bottlenecks and the significant spectrum needs of future 5G networks. With a combined IP portfolio of 130 patents, our technologies and solutions provide more bandwidth, better latency and faster throughput to meet the increased requirements of the more than 70 billion connected devices forecasted by 2030, as well as significantly expanded growth prospects beyond what MoSys can achieve as a standalone company.”

“It has been our goal at Peraso to develop market-leading technologies addressing the needs of the 5G market,” stated Ronald Glibbery, Chief Executive Officer of Peraso. “By joining with MoSys, we believe we can deliver a broader set of solutions to our combined customer base, using complementary technologies to address the networking and communication needs of our customers from the edge to the core and into the cloud. As a Nasdaq-listed company, Peraso will gain increased visibility and recognition, along with broader access to the global capital markets, which will support our long-term growth initiatives given the forecasted ramp in mmWave and 5G networks in the coming years. We believe the Business Combination provides meaningful benefit to both companies, their stockholders and other stakeholders. I am excited to become CEO of the combined company and look forward to working closely with Dan and all of the other members of the MoSys and Peraso teams, as we move forward.”

 

Business Combination Summary

The following is a summary of the key terms of the pending Business Combination, as contemplated by the Arrangement Agreement. The current report on Form 8-K filed by MoSys, Inc. with the U.S. Securities and Exchange Commission (“SEC”) will contain additional information about the Business Combination. The Closing is subject to the satisfaction or waiver of customary closing conditions, including approvals by stockholders of MoSys and Peraso. There can be no assurances that the Business Combination will be consummated. Pertinent terms of the Business Combination include:

The Business Combination will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario), under which a Canadian subsidiary of MoSys will acquire the issued and outstanding shares of Peraso. Peraso will survive the Business Combination and become a wholly-owned subsidiary of MoSys.

Directors, officers and significant stockholders of Peraso and the directors and officers of MoSys have entered into voting agreements under which the parties have agreed to vote their shares in favor of the Business Combination.

Peraso stockholders may elect to receive either shares of MoSys common stock or shares of a Canadian subsidiary of MoSys, which will be exchangeable into MoSys common stock (the “Exchangeable Shares”). Holders of Exchangeable Shares will be entitled to cast votes on matters for which holders of MoSys common stock are entitled to vote and will be entitled to receive dividends, if any, that are economically equivalent to the dividends, if any, declared by MoSys with respect to its common stock.

On a fully-diluted basis, the stockholders of Peraso will receive consideration of approximately 14.2 million shares of MoSys common stock or Exchangeable Shares on Closing, with approximately 1.8 million of such shares (the “Escrowed Shares”) to be deposited into escrow pursuant to the terms of an escrow agreement (the “Escrow Agreement”), such Escrowed Shares to be released to the stockholders of Peraso if, between 12 months and 36 months of the Closing, the common stock of the combined company achieves a VWAP (volume-weighted average price) of at least $8.57 per share for any 20 trading days within a period of 30 consecutive trading dates subject to earlier release upon a corporate sale or reorganization (the “Escrow Release Conditions”).

Prior to Closing, all debt of Peraso is to be converted into common stock or repaid in full, or will be reflected in an adjustment to the share exchange ratio.

The Arrangement Agreement also contains indemnification and termination provisions, and, under certain circumstances, requires the payment of a termination fee.

 

Management and Organization

The combined company will be led by Ronald Glibbery, Peraso’s CEO, with Dan Lewis, MoSys’ President and CEO, continuing to serve as President. The board of directors is expected to initially comprise five members, including three appointed by Peraso and two by MoSys.

 

Webcast Presentation

MoSys and Peraso invite all interested parties to view a webcast presentation by Ron Glibbery, Dan Lewis and Jim Sullivan for an overview of the combined company. The recorded presentation is available for viewing on the Investor Relations section of MoSys’ website or by clicking here.

 

Advisors

In connection with the Business Combination, Cassel Salpeter & Co. served as financial advisor to MoSys, and Mitchell, Silberberg and Knupp, LLP and Borden Ladner Gervais LLP served as legal counsel to MoSys. Evans and Evans served as financial advisor to Peraso and provided a fairness opinion to the board of directors of Peraso, and Stikeman Elliott LLP served as legal counsel to Peraso.

 

About MoSys, Inc.

MoSys, Inc. (NASDAQ:MOSY) provides both integrated circuits (ICs) and intellectual property (IP) solutions that enable fast, intelligent data access and decision making for a wide range of markets. MoSys’ primary product line is marketed under the Accelerator Engine name and includes the Bandwidth Engine IC products, which integrate its proprietary, 1T-SRAM high-density embedded memory and a highly efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth and transaction access performance. In 2020, MoSys began offering for license its initial Virtual Accelerator Engine IP, which consists of software, firmware and related IP. The Virtual Accelerator Engine IP include multiple function accelerator platform products, which target specific application functions, initially Packet Inspection for routing, security and operations, and will use a common software interface to allow performance scalability over multiple hardware environments. For additional information on MoSys, Inc., please visit www.mosys.com.

 

About Peraso Technologies Inc.

Based in Toronto, Canada, Peraso is a fabless semiconductor company with a focus on the development of mmWave wireless technology and Wireless Gigabit (WiGig®) chipsets. Peraso is also a leading supplier of semiconductors in the PtP and PtMP markets. Since its inception in 2008, Peraso has developed a broad range of core competencies in the field of 5G mmWave semiconductors, including mmWave RF circuits, mmWave signal processing algorithms, beam forming and beam steering algorithms, real time calibration and system monitoring, low cost/high performance antenna technology and high volume production test capability. For additional information, please visit www.perasotech.com.

 

Additional Information and Where to Find It

A full description of the terms of the Business Combination will be provided in a proxy statement for the stockholders of MoSys (the “Proxy Statement”) to be filed with the SEC. MoSys urges stockholders, investors and other interested persons to read, when available, the preliminary Proxy Statement, as well as other documents filed with the SEC because these documents will contain important information about MoSys, Peraso, and the proposed Business Combination. The definitive Proxy Statement will be mailed to MoSys stockholders as of a record date to be established for voting on the proposed transaction. Stockholders will also be able to obtain a copy of the definitive Proxy Statement (when available), without charge, by directing a request to: MoSys, Inc, 2309 Bering Drive, San Jose, CA 95131, attention: CFO or by sending an e-mail to priv_IR@mosys.com. The preliminary and definitive versions of the Proxy Statement, once available, can also be obtained, without charge, at the SEC’s website (www.sec.gov).

 

Participants in Solicitation

Under SEC rules, MoSys, Peraso, and their respective directors, executive officers and other members of their management and employees may be deemed to be participants in the solicitation of proxies of MoSys’ stockholders in connection with the proposed Business Combination. Investors and security holders may obtain more detailed information regarding the names, affiliations and interests of MoSys’ directors in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on March 18, 2021. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of proxies to MoSys’ stockholders in connection with the proposed Business Combination will be set forth in the Proxy Statement for the proposed Business Combination when available. Information concerning the interests of MoSys’ and Peraso’s participants in the solicitation, which may, in some cases, be different than those of MoSys’ and Peraso’s stockholders generally, will be set forth in the Proxy Statement relating to the proposed Business Combination when it becomes available.

 

Non-Solicitation

This press release is not a proxy statement or solicitation of a proxy, consent, or authorization with respect to any securities or in respect of the proposed Business Combination and shall not constitute an offer to sell or a solicitation of an offer to buy the securities of MoSys or Peraso, nor shall there be any sale of any such securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

 

No Offer or Solicitation to Sell

This communication is for informational purposes and is not intended to, and shall not, constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the “safe harbor” created by those sections. All statements in this release that are not based on historical fact are “forward looking statements.” These statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “strategy,” “goal,” or “planned,” “seeks,” “may,” “might”, “will,” “expects,” “intends,” “believes,” “should,” and similar expressions, or the negative versions thereof, and which also may be identified by their context. All statements that address operating performance, development of the events, objectives or goals, refinement of strategy, and anticipation of certain behavior of stockholders in connection with MoSys, Peraso, or the Arrangement Agreement, the expected synergies, and other financial benefits from the Business Combination, that are not otherwise historical facts, are forward-looking statements.

There can be no guarantee that the proposed Business Combination described in this press release will be completed, or that they will be completed as currently proposed, or at any particular time. Actual results may vary materially from those expressed or implied by the statements here due to changes in economic, business, competitive or regulatory factors, and other risks and uncertainties affecting the operation of the businesses of MoSys and Peraso. There are a number of specific factors related to the Business Combination, including:

  • The ability of MoSys and Peraso to obtain stockholder approval for the Business Combination and related transactions;
  • The ability of Peraso to obtain court approval for the plan of arrangement implementing the Business Combination;
  • The ability of the combined company to successfully maintain a Nasdaq Capital Market listing;
  • The ability of the combined company to successfully integrate the operations of MoSys and Peraso;
  • Conditions to the Closing that may not be satisfied or that the Business Combination may involve unexpected costs, liabilities, or delays;
  • The occurrence of any other risks to consummation of the Business Combination, including the risk that the Business Combination will not be consummated within the expected time period or any event, change or other circumstances that could give rise to the termination of the Arrangement Agreement;
  • Risks that the Business Combination disrupts current MoSys’ plans and operations or that the business or stock price of MoSys may suffer as a result of uncertainty surrounding the Business Combination;
  • Risks related to the COVID-19 pandemic, including public health requirements in response to the outbreak of COVID-19 and the impact on MoSys’ business and operations; and
  • MoSys or Peraso may be adversely affected by other economic, business, or competitive factors.

 

MoSys does not intend to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

For further information:

Investor Relations Contact:

 

Shelton Group

Leanne K. Sievers | Jeffrey Schreiner

949-224-3874 | 512-243-8976

sheltonir@sheltongroup.com

 

MoSys, Inc. Contact:

Jim Sullivan, CFO

MoSys, Inc.

408-418-7500

jsullivan@mosys.com

 

Peraso Technologies Inc. Contact:

Ronald Glibbery, CEO

Peraso Technologies Inc.

416-637-1048

ronald@perasotech.com

 

SOURCE: MoSys, Inc.

 

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Q2 2021 Healthcare Investment Banking Report

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Investment Bank Cassel Salpeter on Institutional Investors

By Javacia Harris Bowser
August 20, 2021 

  • An institutional investor is a company or organization that invests pooled assets on behalf of its clients.
  • Examples of institutional investors include hedge funds, mutual funds, and endowment funds.
  • Because institutional investors buy and sell large amounts of securities, they can greatly influence price dynamics in the market.
  • Visit Insider’s Investing Reference library for more stories.

All investors are not created equal, and institutional investors are in a league of their own. They’re often called the “whales of Wall Street” because of their influence on the market. There are several different types of institutional investors, and you may be wondering what sets them apart from the average investor.

What is an institutional investor?

An institutional investor is a company or organization that invests pooled assets on behalf of its clients. Institutional investors buy and sell much larger quantities of stocks, bonds, or other securities than the average individual investor. Examples of institutional investors include mutual funds, pensions funds, and insurance companies.

Because institutional investors manage more capital than everyday investors, they often have access to resources the average investor does not.

“Institutional investors have access to a fair amount of databases and analytical tools to help them do their job,” says investment banker James Cassel, chairman and cofounder of Cassel Salpeter & Co. “They also sometimes have access to the management of companies and to individuals with expertise in different fields that can help them in making investment decisions. They try to do proprietary research that individuals may not have access to.”

The access they have to the management of companies helps them to have deeper insight into the businesses, explains Jeremy Cohen, senior vice president of Investor Relations at Edelman.

“Institutional investors have more resources to conduct deeper due diligence, whether that is channel checking or having their analyst call on customers to get a better sense of trends,” Cohen says.

Quick tip: Institutional investors sometimes use program trading, which is the use of computer-powered algorithms to automatically buy or sell stock based on certain momentum in the market. Institutional investors employ teams to examine every aspect of the different markets they buy, sell, and trade in. Individuals on these teams must have extensive knowledge of the markets and money management, and may come from a finance or accounting background.

They may be former investment bankers or stock analysts. Many will have a CFA certification on their resume, but Cohen says a liberal arts degree can be just as valuable if research and critical thinking skills were adopted along the way.

How do institutional investors impact the market?

Institutional investors are sometimes called market makers because they can have such huge influence in the financial industry. This is because of the large amounts they trade and how involved they are in important market events.

  • Influence security prices: Institutional investors routinely trade large amounts in the market and are a driving force of supply and demand. In fact, the proportion of US public equities managed by institutions has risen to about 67% in 2010. These large movements cause stock prices to rise and fall depending on their activities. These changes in prices, although typically short-term, do influence how other investors interact with the market and can have a wider effect on the economy.
  • Report earnings: Institutional investors are responsible for reporting earnings, usually on a quarterly basis so that clients know how a company is performing financially. This will provide insights into whether investors should buy or sell – which can result in volatility within that quarter.
  • Provide liquidity in the market: Because institutional investors are often large funds and financial institutions, they’re able to provide capital to companies when they need it.
  • Participate in initial public offerings (IPOs): Institutional investors have the resources to utilize both public and private information to inform how and when to engage in an emerging company IPO. An academic study found that newly public companies with substantial institutional investment significantly outperformed those with less. The same study found that these institutional investors succeeded by making better use of the available public information – focusing on key metrics such as operating history, prior earnings, size, and liquidity.
  • Monitor governance issues: Institutional investors play an important role in monitoring corporate governance issues, which has previously included: majority voting, focusing on the quality and diversity of Boards of Directors, as well as compensation structures and concerns about the runaway growth in executive pay.

Types of institutional investors
There are several types of institutional investors, and each type is responsible for managing a large number of assets and investing these funds based on their clients’ goals. Examples of institutional investors include hedge funds, pension funds, endowment funds, and private equity funds.

Let’s break down each type:

  • Hedge funds: These are pooled investment funds that aggressively invest in a wide array of assets, with the goal of providing the highest return as quickly as possible.
  • Private equity funds: These types of funds gather money to be invested in companies that likely will have a high return rate. Unlike hedge funds, private equity funds are focused on long-term potential and may not seek a return on investment for four to seven years.
  • Pension funds: These types of fund accumulates money that will be paid to employees after retirement. These funds gather contributions from employees and employers – or both – to be invested in capital markets such as stock or bond markets. The goal, of course, is to multiply the money for the benefit of retirees.
  • Endowment funds: These are investment funds established by a foundation with donations made to the organization. Universities, nonprofit organizations, churches, and hospitals often use endowment funds. The foundation typically makes frequent withdrawals from the endowment fund, within the guidelines of the fund’s established usage policy. A university, for example, may use an endowment fund to award scholarships.
  • Commercial banks: These types of financial institutionals invest a portion of the money they hold for customers, but federal regulations restrict how much risk banks can take on to protect your deposits.
  • Insurance companies: These types of companies make money in part by investing a portion of the premiums received from their customers.
  • Mutual funds: These investing vehicles allow investors to pool their money for investments that are actively managed. Examples include bond funds, money market funds, stock funds, and target-date funds.

Quick tip: Institutional investors oftentimes have experience in specific industries that helps them make their investment decisions.

Retail investors vs. institutional investors

Institutional investors are not to be confused with retail investors. Understanding the difference is important because institutional investors and retail investors have different resources and regulations and even face different fees. “A retail investor is an individual; an institutional investor is an organization,” Cohen explains.

If you’re working with a brokerage firm or robo investing app to invest your own money for your own personal goals – such as planning for retirement, paying for kids’ education, or buying a beach house – you’re a retail investor.

Retail investors are considered less savvy than institutional investors and therefore are subject to more protective regulations from the Securities and Exchange Commission (SEC) to prevent them from making complex, high-risk investments. Retail investors also have considerably smaller purchasing power and thus often pay higher fees.

Institutional investors, on the other hand, invest funds from other entities for the benefit of those clients and on a much larger scale and more frequently. “The biggest difference is size and sophistication,” Cohen says. “An institutional investor will have analysts and portfolio managers and they’ll have the infrastructure to trade more quickly.” Because of their size and sophistication, institutional investors can typically negotiate better fees and are under fewer restrictions. Here’s an overview of the major differences between the two types of investors:

Institutional investor

  • Invests and manages the money of other people and organizations
  • Trades frequently and works with large amounts of money
  • Able to negotiate lower fees
  • Has access to specialized knowledge, research, and resources
  • Subject to fewer protective regulations

Retail investor

  • Invests own money
  • Trades infrequently and works with a relatively small amount of money
  • Subject to high brokerage fees
  • Has limited investing knowledge and resources
  • Subject to more protective regulations

Quick tip: Individual investors can get access to professional money management. You could, for example, invest in a mutual fund through Fidelity or Berkshire Hathaway and get institutional management with expertise in investing.

The financial takeaway Institutional investors are companies or organizations that invest on behalf of their clients – usually other companies or organizations. Institutional investors are the big fish of investing because they can greatly impact the market, in part by making much larger and more frequent trades than the average individual investor.

As with nearly all things, when it comes to investing, knowledge is power. Institutional investors have deep pockets and a wealth of information to help them manage the massive amount of funds they’re in charge of. While you may not be able to buy, sell, and trade like the market makers, you can empower yourself with a deeper understanding of investing.

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As Delta Variant Spreads, Business Leaders Continue To Struggle Against Covid

By Edward Segal

August 9, 2021

The list of major companies and organizations affected by the Covid pandemic
and recently discovered delta variant continues to grow, as do the lessons
business leaders can learn on how to respond to the crisis.

According to Bloomberg.com, ‘’Some events, like the New York International
Auto Show, are being canceled due to virus concerns. Companies including
Alphabet Inc.’s Google, Amazon.com Inc. and BlackRock Inc. have all
recently pushed back plans to return to the office as well.’’ And Apple
has delayed plans to open its first brick-and-mortar store in India this year
because of Covid’s impact on that country.

‘Multiple Headwinds’

Laurence Ales, associate professor of economics at Carnegie Mellon
University’s Tepper School of Business, observed that, “The pandemic has
presented businesses with multiple headwinds hindering growth and
expansion opportunities. First and foremost is the increased level of
uncertainty. This is not only a pure economic uncertainty but is also
entangled with the uncertainty on the evolution of the pandemic and of the
vaccination effort in the U.S. and abroad. In addition, consumers have reacted
to this pandemic-induced recession differently than previous recession[s].
“The consumption basket has changed, sometimes in expected ways (decline
in travel and hospitality) sometimes in less expected ways (the boom in home
furnishings). Finally, firms have to also confront headwinds in terms of their
inputs when considering expansions,” he noted.

Ales said, “These obstacles have been not only in the form of limited access to
intermediate and capital goods (supply chain disruptions) but also limited in
the access to workers. This last labor component is driven by multiple forces
ranging from fear of working in public, to lack of childcare
to disincentive[s] provided by various forms of fiscal expansions.”

Business leaders continue to do the best they can in responding to the many
challenges and consequences of the 18-month-old crisis.

Disruptions

Lucinda Wright, CEO and co-founder of Cask & Kettle, said “The impact of the
current surge in Covid on our business has been very direct. The president of
our distillery informed me yesterday that they must shut down for up to a
week because of an outbreak at the facility.

“Additionally, while ordering ingredients for our next big production we have
been told that the lead time for several critical components will take twice as
long (or more) to be delivered, which jeopardizes the substantial new
distribution we worked hard to secure,” she said.

According to Wright, “This evolving situation puts our young company in a
cash flow crunch as well as in danger of losing business that is essential to our
survival and growth. Based on decades of manufacturing and supply chain
experience, we know that ‘top-to-top’ collaboration with critical suppliers is
key to developing creative, out-of-the-norm, solutions to solve these
extraordinary challenges. No company can successfully navigate these
turbulent waters on their own without help from their ecosystem.”
Daniel Rutberg is the co-founder and chief operations manager of digital
marketing agency MuteSix. He observed that, “This pandemic has created a
number of challenges, but the most apparent ones in the business realm have
been the disruptions in plans, expansions, and strategies. Many of these
obstacles were spurred by budget cuts, but others had to do with acclimating
to the completely new environment seemingly created overnight.
“For example, marketing strategies geared toward friends and families
enjoying themselves at group gatherings were suddenly a no-go, so marketers
struggled to find compelling ways to promote products and services that
weren’t exactly useful during a global lockdown. In short, company leaders
had to dig deeper and pivot faster than ever before,” he said.
Rutberg noted that, “Those who were most successful adapted quickly and
went on to take the necessary measures to get their team onboard. Sadly,
those who settled for a ‘let’s wait and see approach’ didn’t experience many
positive outcomes.

Closing A Store

Will Cutler is the co-owner of 23 Subway franchises in South Carolina. He told
me that they had to shutter one of their stores because of slow sales and the
lack of help. At other locations, operating hours were shortened, stores were
closed on some days and remodeling was postponed.
“We are having difficulty getting products from suppliers for our
restaurants…. having trouble finding parts to fix items in our locations [and]
have increased wages several times and offset them with increases in pricing.
[We also] offered bonuses to get people to come on board and stay on board,”
Cutler said.

Expansion On Hold

Danielle Ferrari, owner and founder of Valhalla Resale, recalled, “We had
plans to expand Valhalla to our second retail location in 2020. Plans for
expansion had already begun before the country started shutting down to help
slow the spread of Covid-19. Luckily, we were in the very initial stages
of expansion, so the impact was minimal. We planned on using an equity
crowd sourcing platform to sell shares to raise the funds for expansion.
“I hope that one day we can bring Valhalla to every major city. While
expansion is still in the [works], those plans remain in the future as Covid-19
lingers. I’m not sure when we’ll be able to put expansion plans back into
motion,” she said.

Advice For Business Leaders

Investment banker James Cassel, chairman and co-founder of Cassel Salpeter
& Co. said, “The biggest concern that I see is what will really transpire long-
term. Is this a new way of working or will things slowly go back to the way it
was?

“Being flexible will become very important. Companies will be required to
make a major decision when their leases come up for renewal. Companies also
need to expend more money in technology especially relating to security when
their workers are working remotely,” he advised.

“Keep in mind many businesses don’t have this option. They need their people
to be on site. Be it a retailer, a restaurant or other kind of service organization,
you can’t do this remotely,” Cassel counseled.

Follow Edward Segal on Twitter or LinkedIn. Check out his website or some
of his other work here.

 

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