Not All Energy Companies Find Quick Profits in Crisis.

GIVEN recent power crunches, one might think a promising energy company could "go public" -- complete an initial public offering of stock -- even in this choppy market. But not so, if the fortunes of Rancho Dominguez-based HBT Technologies Inc. are any indicator.

It has shelved a planned IPO, probably until June at best.

"You have seen the Nasdaq; it just seems to be worse news everyday," said David Moard, chief executive at HBT. "It's a time of downward instability. ... Other fuel cell companies, such as Ballard (Ballard Power Systems Inc.), are trading for half of their highs. You question whether you want to race to the IPO market now."

Still, HBT looks like a company that could kick in the teeth of a Wall Street grizzly. HBT manufactures processors that convert fuels, such as natural gas or even gasoline, into hydrogen. It is hydrogen that powers fuel cells, thought by many to be the power source of the future for small factories, office buildings and motor vehicles. Among other advantages, fuel cells burn very cleanly.

Some expect factories or office buildings will turn to fuel cells if electricity from the grid becomes too expensive, or erratic. And a clean-burning vehicle -- the Holy Grail of smog fighters -- is possible, if fuel-cell powered.

"(HBT's) goal is to be the world's leading developer and producer of hydrogen fuel processors used in fuel-cell systems and onsite hydrogen generators used in industrial applications," according to the prospectus it filed with the Securities and Exchange Commission.

When HBT first filed its S-1 statement in September, it expected to raise as much as $100 million, putting a $400 million market capitalization on the company. But as a cold, and energy-starved winter (at least in California) turns to spring, HBT is still frozen out of the equity markets.

"We think we probably have to wait until mid-year at least," said Moard, discussing the IPO.

"(In the meantime), we are looking at a private placement or strategic partner," he said.

(In a private placement, money is raised from one or several large investors, either as equity or debt.)

HBT, as a startup, is beginning to make sales, but revenues are still insignificant. Nor can one blame weak investment bankers for HBT's moribund IPO. The underwriting crew that HBT had assembled -- Salomon Smith Barney, CIBC World Markets and Lehman Bros. -- wasn't exactly shabby. It should be noted that David Freeman, general manager of the Los Angeles Department of Water & Power, sits on the HBT board.

Moard insisted that Wall Street's ursine depressions are not a reflection on the fuel-cell trade, or HBT. "It will take time for fuel cell prices to come down, and that will depend on volume," he said. "But I think it is just a couple of years away. Wall Street is just going down right now."

Strouds Sinking

Veteran merchant banker Marshall Geller, chairman and founder of Beverly Hills-based Geller and Friend Capital Partners, says that his plans to resurrect Strouds Inc., the linen retailer, are on hold.

A former board member of the City of Industry-based and publicly held Strouds, Geller had been casting about for investors and a plan to bring the 50-store chain out of bankruptcy. But the weakening economy, investor skittishness and more bad news from within Strouds put the kibosh on rescue plans, said Geller last week.

"It seemed every time we would get close (to affecting a plan for Strouds), we would find out that things had gotten a little bit worse," he said. "Strouds may be sold as a liquidation, not as a public company."

Still, Geller is not one to just stand on the sidelines. With investors pulling in their horns and the economy looking shaky, that means business values are down -- and a good time to buy, if one has a cast-iron stomach and can look ahead for a couple of years.

"We are aggressively looking at deals which were expensive a year ago but which are cheap today," said Geller.

In particular, Geller likes retailers that can affect an Internet strategy. "We look at companies that have an Internet strategy, as part of a larger picture. We don't look at just Internet companies," he said.

In other news, Geller recently endowed his alma mater Cal State Los Angeles with $100,000, so that students of Frank Wu, assistant professor, can get a hands-on feel of investing in their class, Securities Analysis (Finance 437).

Geller plans to add to the pot on regular intervals, and also use some profits to finance scholarships.

Still Attractive

The venture capital game has become tougher, especially for those who committed money in the e-mania days. But the appeal of funding startups and hitting those 10-to-1 returns is compelling, as witnessed by the recent formation of West Los Angeles-based Shelter Capital Partners, led by Art Bilger, former Drexel Burnham Lambert banker, and then a founding principle of Apollo Adviser LP in Beverly Hills, the private equity shop.

Joining Bilger at Shelter are several local investment and tech scene heavyweights, including Michael Woronoff, for 15 years a securities and M&A lawyer with Skadden Arps Slate Meagher & Flom in downtown Los Angeles.

It may seem a bit late to jump on the tech-venture bandwagon, but Woronoff said that being a Johnny-come-lately has its advantages. "You look at the VC funds now, and they are spending an awful lot of time working through (fixing problems in) their portfolios," he said. "We don't have that problem."

Operating with the benefit of hindsight, Shelter is not financing Internet startups, but rather companies that have a real technology to sell -- such as Irvine-bused TransDimension Inc., which makes chips that allow computer peripherals to talk directly to each other, without going through a computer. "If you have a digital camera with this chip, it can be plugged directly into the printer," explained Woronoff.

Shelter is looking to make investments in the $5 million-to-$25 million range, said Woronoff.

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal.