Hedge funds have certainly been in the news a lot lately. Corey Ribotsky’s investment firm, the NIR Group, based in Roslyn, New York, is one of the top hedge fund investors in the United States, so perhaps it would be wise to discuss a bit what exactly hedge funds are.

Let’s start with a bit of history to get perspective and context. Surprisingly it was not an investor in the usual sense that is credited with creating the first hedge fund. In 1949 Alfred W. Jones, a writer, sociologist and financial journalist made some observations that gave him an idea which has since changed the way we invest today.

Jones surmised that the price fluctuations of individual assets could be separated into two distinct components; one part due to the activity of the overall market, and the other part due to the performance of the investment itself. He therefore devised a way to cancel out the effect of the overall market performance. Jones achieved this by creating a balanced portfolio. Some of the assets he purchased he believed would outperform the general market, while others he sold short, expecting these to perform weaker than the overall market.

In this way Jones would have an investment in which market fluctuations in the price of the investments would be neutralized. If the overall market rose, the loss on shorted assets would be evened out by the extra gain on the purchased assets. The same effect would apply if the market as a whole fell in value. The term ‘hedge fund’ was used because the effect of this style of investing is to ‘hedge’ the part of the risk which is due to the general movements of the market. Like the expression “hedging your bets.”

After General Motors Corporation filed for bankruptcy the U.S. Government created a bailout plan that looked and felt remarkably like a PIPE transaction. Or as Corey Ribotsky puts it in his insightful opinion piece about the bailout, “If it looks like a duck and quacks like a duck, then it must be a duck.”

The heart of the bailout plan includes giving $30.1 billion in financing which take GM through the process of bankruptcy while the government takes a 60% stake. This stake includes $8.8 billion in debt and preferred stock in the new company that will be created. Ontario, Canada will also lend GM a huge sum, $9.5 billion and will receive in return $1.7 billion in debt and preferred stock in addition to 12% of the equity in the new company which will be a public entity. All the preferred stock will be registered with the SEC so that resale of the shares to the public can be carried out.

According to Corey Ribotsky these transactions look obviously like the PIPE transactions he has been involved in for over 10 years as an investment manager at the NIR Group in Roslyn, New York. Quack!

In response to being asked his opinion on the recent bailout plan of General Motors Corporation by the U.S. government, Corey Ribotsky of the NIR Group hedge fund firm offered the assessment that the bailout is actually

“a PIPE transaction funded by the largest, most accredited investor in the world, the United States of America.”

This view was published in June, 2009 on the internet business news magazine Reuters Hedgeworld, entitled “A Duck is Still a Duck-GM and the Greatest PIPE Deal of Our Time.”

In this opinion piece Ribotsky lays out his theory by first explaining what a PIPE transaction is, and then comparing the bailout plan’s particular requirements and features to convincingly show readers the striking similarity between the financing strategies.

According to Corey Ribotsky, the General Motors Corporation bailout bears an uncanny resemblance to a traditional PIPE transaction. To prove this point Ribotsky first explains what a PIPE transaction is.

A Private Investment in a Public Equity (PIPE) is a special transaction in which investors that are accredited purchase stock in a company for a price that has been predetermined in advance. The stock must be registered with the SEC (Securities and Exchange Commission) so that the stock can be resold sometime in the future. There can be additional aspects to the PIPE transaction as well, such as including a coupon rate if there is debt associated with the transaction or including a detached option or warrant package.

Ribotsky goes on to explain that even before the long predicted bankruptcy of G.M. the U.S. government had invested $19.4 billion in a structure which already had the look and feel of a typical PIPE deal. This move by the U.S. government gave important legitimacy to this particular type of investment structure and certainly validates it as a mainstream form of financing.

In a step which is designed to make raising capital easier, cheaper and faster for small to mid cap companies, the NIR Group and Corey Ribotsky have introduced the Haverstock Fund, LLC.

Among the many benefits to the issuer that can be expected are:

• • Speed: Capital can be acquired more quickly this way than with traditional financing methods.
  • Implementation Risk is Reduced: There is a considerable reduction in time to market when compared with the more traditional types of financing.
  • Timing: Immediately upon registering the Agreement with the SEC the company can begin selling equity to the investor.
  • No Selling Short: It will be agreed upon by the buyer and all its affiliates that no short selling or hedging will be engaged in any manner, directly or indirectly, of the securities of a partner company.
  • Net Long: The buyer will represent them on every secondary in which they will continue to maintain some equity stake.

Now small to mid cap companies have access to capital while maintaining control and flexibility over just about every aspect of the process. The Haverstock Fund LLC, is being offered to companies by the NIR Group of which Corey Ribotsky is a principal.

Among the many characteristics which benefit the issuer of the Haverstock Fund are:

•    Less Dilution: It is easier to raise more capital using fewer shares during a period when prices are strong.
•    No Overhang: The company itself decides when shares are issued, there is no question or hesitation due to dilution.
•    Commitment: No need to worry about financing since there is firm commitment; therefore the company can focus its resources on its business.
•   Reduced Cost: There is a lower cost funding mechanism than the traditional means of financing, so more of the company’s money can be used for growth and development.

A new fund established by the NIR Group of Roslyn, New York, the Haverstock Fund, will provide financing specially designed to give small and mid cap companies easier and faster access to capital. Haverstock also provides less dilution, more control and greater flexibility of the issuance of capital.

Benefits to the issuer include:

• • Control: The issuer keeps control over the timing and amount of each option issued.
• • Complete Flexibility: CEF, Committed Equity Facility, can happen in just about any market condition. Structured to perfectly match the particular needs of the company, it is easy to set a minimum acceptable price.
• • No Dilation: It is common for companies to raise more capital than what is really needed at the time due to a hesitation to return to the capital markets. The CEF allows the company to take a “just in time” approach to issuing equity.

According to Ribotsky, “There are a couple of ways of looking at the green space. Either one has to be “green focused” or pick and choose green technology (hardware and software) or one can look at green infrastructure where you are investing in actual products and services involving everything from energy to automobiles to almost anything under the sun.”

Recently Ribotsky has seen a lot of people with different focuses and others with a lot of transactions. There has been a lot of partnering with these deals between different investment banks and other private equity firms, with a concomitant co-generation of ideas unique to this market. Similar to the more distressed market, everybody seems to be waiting to see who will be first to really jump in. We can’t predict when it will happen, but we believe it is inevitable. The new green technology will bring an influx of investments that we expect to be a part of.

Corey Ribotsky, managing member of the NIR Group wholeheartedly support the great work being done by the Lymphoma & Leukemia Society. One of the more innovative programs of the LLS is the Team in Training (TNT) which is the largest and oldest charity sports training program in the world.

Athletes at all levels, from extreme beginners to extreme super-athletes, train with the team to compete in such sporting events as marathons, triathlons, 100-mile century bike rides and even hiking adventures.

The hiking adventures can take place in such amazing destinations as Yosemite National Park, Lake Tahoe, Honolulu and Anchorage, Alaska, to name just a few.

The team trains and competes for honorary team members who are facing the struggle and challenges of blood cancer, thereby inspiring and motivating the athletes to push themselves to the max knowing that their struggle is minor compared to that of the honorary team member.

The Heather on Earth Music Foundation is a non-profit organization that enjoys support from the NIR Group of Roslyn, New York, which is managed by Corey Ribotsky. Established in memory of Heather Samone Fessler, the Heather on Earth Foundation makes available a variety of different options in which music is used in a therapeutic manner to help inspire, relax and distract the pediatric patient to better cope with his/her illness.

It is well-known that music boosts the immune system; helps alleviate pain, anxiety and increases cooperation and interaction between patients and health care workers. It is a joy to bring the pleasure of music to patients who are ill and suffering in ways those who are healthy perhaps can’t imagine.

The reason the Heather on Earth Foundation exists is to bring joy into the hearts of sick children and their families, to help them heal.