Ladenburg Thalmann Financial Services has repurchased $130.25 million in stock and options from billionaire Dr. Phillip Frost, who was charged in September with being involved in a years-long lucrative pump and dump scheme, the company announced Monday.
Frost, who owned about 33 percent of Ladenburg Thalmann and was its largest shareholder, retired from his position as chairman of the firm after the charges were filed by the Securities and Exchange Commission. Miami-based Ladenburg Thalmann is a diversified financial services company whose subsidiaries include independent broker-dealer firms Securities America Inc., Triad Advisors LLC, Securities Service Network Inc., Investacorp Inc. and KMS Financial Services Inc.
Ladenburg Thalmann has repurchased 50.9 million shares of its common stock from Frost and his affiliates. All of Frost’s stock options were canceled in exchange for a payment of $3 million. The stock was purchased at a price of $2.50 per share. The consideration for the transactions consisted of $53.9 million in cash and $76.35 million in newly issued 7.25 percent senior notes due 2028 issued to Frost and his affiliates.
Richard Lampen, chairman and CEO of Ladenburg Thalmann, said, “This purchase of the substantial majority of shares owned by Dr. Frost is in the best interest of our shareholders and is consistent with our stock repurchase efforts. We believe this step is also consistent with our objective of driving value for our shareholders, financial advisors and strategic partners.”
The SEC filed charges against Frost and Miami-based Opko Health, where Frost is chairman and CEO, plus nine other individuals and various companies owned by the people charged. The complaint says the individuals conspired to manipulate penny stock prices in a “classic pump and dump scheme.”
Frost, a well-known investor in health and medical devices firms, denied the charges when he announced his retirement as chairman. The defendants have until February 28 to answer the charges or to file a motion to dismiss them.
The SEC is seeking civil penalties and the disgorgement of $27 million in ill-gotten gains against the defendants. It also will seek an order preventing the defendants from participating in future penny-stock offerings.