NYPPe Closes Acquisition of Offroad Capital, Inc.

Business/Technology Editors

GREENWICH, Conn.--(BUSINESS WIRE)--Oct. 12, 2001

NYPPe LLC, the first electronic communication network (ECN) for the restricted stock market has acquired Offroad Capital, Inc., the first investment bank to offer and transact new issues of private equity online, for an undisclosed price.

"Together with NYPPe's expertise in structuring and trading restricted stock of public and private companies and restricted interests of private funds, such as venture capital, LBO, and hedge funds, we are well positioned to be the leader in the online market to issue and trade private equity," according to Laurence Allen, CEO, NYPPe. "We also intend to license our online technologies and platform to other financial institutions and private and public companies so they can issue and provide liquidity in restricted securities to their clients or shareholders. This can be accomplished under their own brand name, with NYPPe's standard forms and procedures, using NYPPe as their back-end component processing the private transactions. We can have a bank, brokerage, or market-maker in the online business for issuing and trading private equity in 30 days."

About Offroad Capital

In 2000, Business Week and Forbes named Offroad the best online destination for investing in private equity. Offroad Capital is headquartered in San Francisco. "Offroad probably has the industry's best online technology platform for transacting new issues of private equity," according to Scott Appleby, CEO of Appleby Capital, and previously, the senior research analyst at Robertson Stephens for the online financial services sector. "NYPPe's business model is compelling."

"NYPPe's management team has a demonstrated ability to innovate, adapt, and compete under a variety of market conditions," states Richard G. Couch, CEO, Offroad, Inc. "We were looking for the right firm to continue to provide a high level of innovation and high quality of services that our affluent individual customer members have come to expect from Offroad. We believe NYPPe is that firm."

"Offroad Capital and NYPPe each have created financial history. Offroad Capital, by offering and executing the first new issue private equity placement online. NYPPe, by executing the first electronic secondary transaction of a restricted interest in a venture capital fund as well as the first securitization of a secondary private placement of restricted warrants issued by a privately-held company," according to Laurence Allen, CEO, NYPPe.

About NYPPe

"NYPPe is the best kept secret on Wall Street," states Will Rosemann, Co-CEO, Linux Global Partners, Ltd. "Linux Global Partners received the private capital to acquire Corel's Linux division in approximately 30 days during July 2001 from NYPPe during difficult market conditions. A time when most venture capital firms did not want to discuss making new investments."

NYPPe offers its members a rare combination of financial services to sophisticated investors that participate in both the private capital markets and the public securities markets. Services include safekeeping restricted stock certificates at the Bank of New York, NYPPe's clearing and custodian firm, and providing research reports on private investments, and providing fair market valuations on private investments.

NYPPe is introducing in November 2001 its new Offroad Fund Source(TM), which offers investment opportunities online to accredited investors in a variety of private funds, pre-screened to meet certain investor safeguard standards. The private funds typically include an allocation to alternative assets such as venture capital, leveraged buyouts, or hedge funds along with an allocation to public stocks and bonds.

NYPPe has substantial purchasing power. NYPPe has over 9,000 accredited individual investor members alone, worldwide, having a stated average net worth of approximately $6.9 million and average liquid assets of over $1.3 million or purchasing power for providing liquidity or raising private capital, in excess of $11 billion (9,000 x $1.3 million). NYPPe's members have a stated preference and a demonstrated track record for obtaining their financial services online, which includes investing online in alternative assets. NYPPe members have invested online over $100 million in restricted stock of public companies, restricted interests in venture capital funds, or private equity in private companies.

Shareholders of NYPPe have been well rewarded, having seen shareholder value increase by 364% in 2000 and 400% in 1999, based on the Company's revised valuation when they have accepted investment capital.

NYPPe, headquartered in Greenwich, CT, an Alternative Trading System under the SEC's new Regulation ATS, provides specialized execution services for private investments in public and privately-held companies and funds for over 13,000 accredited individuals, institutions, broker-dealers, and market-makers worldwide.

Much like ECNs revolutionized the public equity markets in the prior five years by empowering self-directed investors to make informed secure trades online, and today have approximately a 40% market share of NASDAQ's dollar traded volume, NYPPe provides a centralized private global network for accredited buyers, sellers, and issuers of restricted stock of public and privately-held companies and restricted interests of venture capital, leveraged buyout, and hedge funds. Private investments are restricted as to re-sales in the public markets for a period of time.

NYPPe was founded in May 1999 by 3 professionals from Bear Stearns, and today with 31 employees in trading, banking, research, and sales; and primary office locations in Greenwich, New York, San Francisco, and Palm Beach, is among the largest private equity placement groups on Wall Street. NYPPe has executed 26 new issue and numerous secondary private transactions.

The firm has built a global business based on six core values: independence and neutrality, fair and ethical standards, highly personalized and specialized advisory services, trading anonymity, equal and direct access, and customer empowerment.

NYPPe has significant strategic relationships with Knight Trading Group, the world's largest market maker for NASDAQ stocks, Bank of New York, IBM, Ernst and Young, and American Stock Transfer and Trust. The primary investors in NYPPe are Knight Trading Group, Ropart Ventures, Institutional Internet Ventures, and Greenberg Ventures. Officers and directors own in excess of 70% of the company.

In 2001, NYPPe has executed numerous block trades of restricted and unrestricted stock of public companies at 10-30% discounts on average to the public bid-offer price quote. Having the potential to realize a double-digit discount received when acquiring a restricted stock, at the time the restricted period expires where sales can be made into the public markets, is currently a popular trade for NYPPe's hedge fund, mutual fund, and affluent individual investor clients who in effect are getting paid to provide liquidity to motivated sellers.

The firm typically requires its professionals to have 10 years or more experience with a major financial firm, prior to being considered for employment. Group executives have come from Morgan Stanley, Bear Stearns, Merrill Lynch, Lehman, Salomon Smith Barney, GE Capital, Citigroup, UBS Warburg, CIBC Oppenheimer, and the Gartner Group.

Although NYPPe specializes in private transactions, it also does 144, 144a, and public transactions. Due to the specialized nature of NYPPe's business, they have created their own exam to train their professionals. Upon passing, an employee receives the designation, NYPPe Private Placement Specialist. NYPPe believes this is one example of how they are creating standards in the industry.

About Alternative Assets

The alternative asset class has historically achieved significant returns relative to the S+P 500 Index. During the period 1990-1999, the Cambridge Venture Capital Index averaged an annual net return of 43% versus 18.7% for the S+P 500 (See cambridge associates.com ). In addition, sophisticated investors today in alternative assets, are increasingly investing in secondary private equity, or non-issuer sales of private equity, which is considered to offer the opportunity for significant returns approaching venture capital returns but with less risk due to the fact that buyers can value companies based on their established track records and not on projections.

Types of sellers and their motivations include pension funds seeking to rebalance their portfolio's asset allocations, corporations and banks seeking to reduce their earnings risk exposure to potential write downs in the value of their strategic investment portfolios, and officer and directors seeking to diversify over concentrated positions in single companies, and venture capital funds trying to accommodate requests to sell by limited partners due to underperformance by the fund or to raise cash.

Looking Ahead

Looking ahead, NYPPe believes the securities markets will continue to have a serious need for liquidity, more so than the typical sophisticated investor realizes until the need to sell arises.

The private equity market is the fifth major asset class held today in sophisticated investor's portfolios after domestic stocks, international stocks, bonds, and real estate, and the only major asset class without an established secondary market providing liquidity. Due to the high degree of fragmentation and lack of pricing information, there are considered to be significant opportunities in secondary private equity for knowledgeable and savvy hedge funds, mutual funds, and affluent individual investors.

George Regnery, a Managing Director of the Greenwich Research Group, an affiliate of NYPPe, projects that "by 2005, the secondary market for trading private equity will approach $750 billion in dollar volume and revenue of $30 billion per year, assuming a 30% annual turnover rate on the $2.5 trillion private equity asset class. Over the next five years, there is a substantial opportunity to generate significant transaction fee revenue from trading private equity."

"Wall Street is becoming two distinct businesses. The public securities markets, which we believe, is already a commodized business; and the private capital markets, which we believe, offers substantial value added opportunities," states Mr. Allen.

NYPPe's secondary trading private equity business will continue to be done under the name NYPPe, and the new issue private equity business will be done under the new name Offroad Capital Markets. Client members can access either www.offroadcapital.com or www.nyppe.com.

For further information about NYPPe or Offroad Capital Markets please visit their web sites at: www.nyppe.com and www.offroadcapital.com.