SteadyServ Technologies, Inc. Investigation
If you are an investor in SteadyServ Technologies, Inc., you probably know that the company has filed for Chapter 11 Bankruptcy. If you are one of the hundreds of preferred stock holders of this company, your investment is now worthless. According to SteadyServ’s bankruptcy filings, which are available publicly through the Pacer system, the company filed for Chapter 11 bankruptcy in February 2019, which allows the company to stay in business and try to dig its way out of its unmanageable debt and operating expenses.
The SteadyServ court filings provide some important information for creditors and investors alike. First, SteadyServ disclosed $6,457,359 in liabilities on only $54,999 in assets. Of the almost $6.5 million in liabilities, $5,785,643 is identified as “secured”, meaning in the event the bankruptcy results in a sale of assets and property, including its intellectual property, that roughly $5.7 million will be paid before unsecured creditors of about $700,000. If there is any money left, then preferred shareholders would get their pro rata share, which in this circumstance, there is nothing left to distribute. In order to make payroll and to operate the business during the pendency of the bankruptcy, SteadyServ entered into a special loan agreement for an additional $1 million subject to specific restrictions set by the bankruptcy court. This special loan is given “super-priority”.
According to additional SteadyServ filings, the company’s projections for 2019 account for total sales of between $26,000 and $28,000 per month. Almost all of the company’s income comes from loans and capital financing. The filings also show “gross revenue” for 2017 of $664,666 and only $379,010 in 2018.Preferred Stock Investors have been Wiped Out.
If you are a SteadyServ investor, you probably own “preferred stock”. In a bankruptcy like this, with a company that has virtually no assets and a mountain of debt, the difference between being a common stock holder and preferred stock holder is nothing more than semantics. If the company liquidates, there won’t be anything left to pay you. If the company miraculously navigates Chapter 11 and can restructure its debt – the majority of which is owned by a disgruntled former executive of the company who sued SteadyServ in Indiana state court just prior to the bankruptcy filing – in order to further finance operations, SteadyServ will need to sell more stock, which will dilute your preferred shares. In this situation, all preferred stock holders’ interests have been wiped out.Financial Advisors Used Misleading Sales Materials When Promoting SteadyServ
We have been contacted by SteadyServ investors who were solicited by a financial advisor to invest in the preferred stock issued by this company. Advertising materials we have reviewed contain incredibly misleading revenue “projections”. One advertising “slick” estimates revenue for 2016 – the year of the preferred stock offering – of over $4million. These projections further reflect revenues for 2017 of over $18 million, and over $43 million for 2018. Talk about a growth company! Another advertising slick reviewed by this office shows even more ridiculous projections. Based on the reality reflected in the Bankruptcy filings, these projections were totally baseless. Their incentive to sell SteadyServ was quite high, with commission rates near 10% which is exponentially higher than what brokers get paid for selling traditional investments like publicy traded stocks and bonds.Investors Have a Chance To Recover Their Losses Through FINRA Arbitration
If you invested in SteadyServ because of the solicitation by your financial advisor, you may have a claim to pursue through FINRA Arbitration against the firm or brokerage firm behind the solicitation. SteadyServ was a floor-level capital raise, meaning this was a true start-up. Any money invested in a company at this level should be limited to those investors comfortable with the notion that it is likely you will lose any money put into this company. For every Google or Tesla, there are thousands of companies that flame-out like Fisker Automotive or Theranos. Further, the advertising slicks we have seen were promoted and authored by a FINRA Registered brokerage firm. This firm had a legal obligation to ensure that any promotional materials it distributed to its clients in connection with any private offering like this were reasonable, fair, and balanced. These financial projections were obviously false and baseless.
Brokerage firms and financial advisors have a regulatory obligation to perform reasonable due diligence into private offerings like SteadyServ BEFORE they offer the investment to their customers. Based upon the advertising materials we have reviewed, it appears as if no reasonable investigation could have been performed into SteadyServ’s financials or business prospects given the exponential disconnect between these representations and reality.
If you invested money in preferred stock issued by SteadyServ as a result of the solicitation of a financial advisor, please call Joe Wojciechowski of Stoltmann Law Offices at 312-332-4200 for a no-obligation free consultation. We are a contingency fee firm, which means we don’t get paid until you do. To learn more about me and the work our firm does to enforce investor rights, please visit www.stoltmannlaw.com