Los Angeles-based Cloudbreak Capital will begin trading in the first quarter of 2008 a fund that will focus on restricted securities issued by small-cap companies.
Cloudbreak founder Bill Fitzhugh says purchasing restricted securities issued by small-cap companies is often less expensive than buying the firms' publicly traded debt or equity. Commonly, it is the only way to invest in illiquid companies. Moreover, those securities that fall under the Securities and Exchange Commission's Rule 144 are gaining liquidity in specialized markets, such as New York's Restricted Securities Trading Network. "The ability to negotiate prices and buy a block of