Steve Brown’s company’s stock offering scrapped amid image problems

Crain’s New York Business

October 27, 1986

Consumer complaints mar image;
Mail-order firm may scrap stock offering

By BILL STERNBERG
CRAIN’S NEW YORK BUSINESS

Investors apparently won’t get their once-in-a-lifetime opportunity to buy stock in Direct Marketing Enterprises Ltd., the Long Island mail-order company known for its low-priced, hyperbolically promoted merchandise.

A planned $36 million initial public offering for the company, in the works since last year, has been postponed indefinitely, according to lawyers and underwriters involved in the deal.

“An awful lot has to do with market conditions,” says Arnold Chase of Botein, Hays & Sklar, the company’s legal counsel. “The market for IPOs has gotten quite soft.”

Direct Marketing Enterprises had hoped to go public last year, while the market was still hot (Crain’s, July 15, 1985). But it was forced to delay its offering to include in its preliminary prospectus additional information about a U.S. Postal Service probe of the company and certain financial data. An updated registration statement was filed with the Securities and Exchange Commission four months ago.

Direct Marketing Enterprises — which has sold such products as jewelry, perfume, dolls, telephones, watches and cheese through several affiliates — has suffered a spate of bad publicity lately because of consumer complaints.

Just last week, the Federal Trade Commission announced that the Westbury-based company has agreed to pay $150,000 in civil penalties to settle charges that it didn’t ship products on time or offer refunds. The consent decree also sets out record-keeping procedures the company must use.

Company attorney Neil J. Moritt says the settlement, in which no wrongdoing was admitted, was “purely an economic decision” to avoid costly litigation, and the amount of the penalty is “not a problem for us.”

According to the updated preliminary prospectus, the company had pro forma earnings of $12 million on sales of $160.2 million last year.

The proposed stock offering, through D.H. Blair & Co., would have netted $18 million for the company’s two principals, Chairman Jerry Williams, 30 years old, and President Stephen Brown, 48. That would have left $18 million for general corporate purposes.

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