Baraban Securities ponders going public by purchasing smaller firm.

Long Beach-based brokerage Baraban Securities Inc. is contemplating going public by acquiring an already public shell company and then selling stock through a new merged company, Baraban Capital Corp.

This approach is sometimes called "going public through the back door," as opposed to going public through an initial public offering. The shell company has issued proxy statements to its public shareholders asking them to approve the merger plan, said Baraban Chairman Stuart Greenberg, who was limited on what he could say because of the Securities and Exchange Commission imposed quiet period.

The proxy statements do not have to be filed with the SEC because the shell company is a non-reporting SEC-registered company with less than 500 shareholders and less than $3 million in assets.

If approved, Baraban Capital Corp. will register with the SEC and market a stock offering of a still unestimated amount to enable the brokerage to buy other Los Angeles County-based brokerage firms, Greenberg said.

"The good news about going public is that it gives you a medium, stock, with which to acquire other companies and reward employees," said Greenberg. "The bad news is that you have to submit all these documents to the SEC. But we think the trade-off is worth it."

Baraban is Los Angeles' fourth-largest full-service securities brokerage firm, with more than 1,200 investment executives and eight offices in California. Baraban's business consists of about 400 full-time brokers and a much larger group of part-time brokers. A sister corporation called Learn & Earn operates a training school for brokers.

Going public by acquiring an already public company "isn't done very often," said Harold Harrigian, a partner in corporate finance with Crowell, Weedon & Co., an L.A.-based brokerage firm. He said firms choose this method sometimes because it is cheaper than a stock offering and because they have a small asset size.

He said companies that go public in a non-traditional way sometimes have trouble gaining credibility when they try to sell stock.

"Somehow the Street doesn't think as well of them," he said, speaking in general and not specifically about Baraban.

If Baraban Capital Corp. does sell stock, it will enter the market just as analysts are predicting a downward slide in brokerage stocks prices after a strong first quarter.

"When you've got some of the premier brokerage firms trading at one and a half times book value, it's difficult for a brokerage firm coming into this market to expect more than that," said Dean Eberling, senior analyst at Lehman Brothers in New York.

Eberling predicted that any initial offering by a brokerage firm would come to the market at a "hefty discount."

Baraban has established its reputation primarily as a training school, but with the stock offering hopes to highlight and concentrate on the qualities of its brokerage division.

The company is working on its first underwriting, a small private placement financing for an Oceanside company.

While the company will continue training and supporting its stockbrokers, Greenberg hopes to expand Baraban into more underwritings and the financial advisory arena, offering such services as pensions and mutual funds through its newly created Baraban Financial Planning and Insurance Division. The company also plans to open two new offices.

"We want to be a little Merrill Lynch," said Greenberg. "We do everything they do, expect on a smaller basis."

The company, which was formed in 1978, was bought in October 1992 by Greenberg, once with Merrill Lynch & Co., and Robert Wilson, a real estate executive. The two joined forces to create Baraban Holdings Corp. in Los Angeles.

Greenberg has 32 years of experience in the investment and securities industry, including work with E.I. duPont & Co., duPont Glore Forgan and Robinson & Co.

The company's Learn & Earn program attracts retired federal judges, former defense workers, doctors, attorneys and accountants who want to change careers and become full service brokers.

"It allows them to trade accounts for family and friends and really take control over their lives," said Greenberg. "A lot of people look down their noses, but we're very proud. We bring Main Street to Wall Street."

Mike Holtrey, 31, is a classic example of a successful Baraban employee.

Formerly a broker-dealer with Dean Witter, Reynolds & Co., Holtrey said he is happier as a branch manager and broker with Baraban because he can sell the mutual funds and stocks he wants to sell.

"There is no pressure here to sell certain products. Firms like Dean Witter and major wire houses put a lot of pressure on you to perform and sell certain products, usually their 'Product of the Month,'" he said.

Holtrey said he doesn't miss the perceived prestige of being with a Wall Street firm.

"If you really knew what goes on at Wall Street and wire service houses, it's not so prestigious. Baraban allows you to be more honest."