County Council approves use of bonds for ‘crowd funding’ stock exchange

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David Grimaldi at a University of Delaware event. (University of Delaware photo)
David Grimaldi at a University of Delaware event. (University of Delaware photo)

An entity known as Delaware Board of Trade Holdings Inc.is on is way to getting  $15 million in county bonds for a first-of-its-kind  “crowd- funding”  stock exchange operation in Wilmington.

New Castle County Council unanimously approved the use of the bonds.

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The start-up operation  is part of a trend toward alternative stock exchanges. The exchanges take advantage of new Securities and Exchange Commission rules on funding start-up companies.

Principals, according to the story, include former officials of the New York and Philadelphia stock exchanges, as well as a former chairman of financial services giant UBS.

The operation would get funds from private investors and proceeds from   revenue  bonds that are issued in the name of the county, but  do not involve any financial risk to the governmental unit.

“This project may be the biggest thing to happen to Delaware since the Banking Act. Our State will not only be the best choice to incorporate a new business, but also to raise the money necessary to fund it,” said County Executive Tom Gordon.

According to a county release, members and affiliates of The Delaware Board of Trade include former NYSE CEO Richard Grasso; former UBS Financial Services CEO Joseph Grano; former Philadelphia Stock Exchange CEO John Wallace;  former Cincinnati Stock Exchange CEO Richard “Nick” Niehoff; and former US Postal Service Governor and top aide to Vice President Joe Biden, Dennis Toner.

A key figure in the funding request is David Grimaldi, the county’s chief administrative officer. Grimaldi said in a telephone interview a successful stock exchange would boost the state’s status as a financial services center in the U.S.

Grimaldi said in a telephone interview that  the county was approached by the principals who also looked at Texas as a possible location for the exchange, but now see Delaware as a good venue.

Grimaldi, a former Morgan Stanley broker, said the exchange would provide a way to raise capital of up to $50 million for start-ups, without the rules that govern traditionally initial stock offerings. The Jobs Act of 2012 had provisions that allowed the use of exchanges that according to Grimaldi are akin to the trend toward “crowd funding” of  new ventures.

“We continue to talks to businesses that  do not have access to capital,” Grimaldi said, adding  that Delaware does not have sufficient venture capital resources for start-ups.

Grimaldi says, “DBOT can offer new businesses a more attractive alternative to traditional venture capital funding. Overnight, one of our biggest economic challenges, access to capital, can become a core competitive advantage. This is big.”

Grimaldi has been an  architect of  the county’s economic development strategy that has included an ambitious plan for a Delaware River port. Those plans have operated outside the traditional economic development strategy of using the Delaware Economic Development Office.

He also led an effort to refinance debt for the county, shortly after Gordon took office, using UBS as the investment banker.

The approached saved money for taxpayers, but drew fire taking place without approval from the County Council. A legal opinion later indicated the transfer was proper.

County Executive Tom Gordon ordered an economic development strategy for the county, which has suffered from the loss of thousands of manufacturing jobs with the closing of both auto plans in 2008 and 2009.

Gordon has even left open the possibility of buying the former GM Boxwood plant

The strategy has worked outside the traditional channel of the Delaware Economic Development Office.

Gordon has also been mentioned as a candidate for governor, although he has not announced his intentions.

Unlike many start-ups that usually launch a website and social media presence, the exchange has no visible online presence. Stock exchanges are heavily regulated in terms of the release of information.

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