F-Squared Investments, the largest marketer of index products using exchange-traded funds (ETFs), filed for Chapter 11 bankruptcy protection on Wednesday.
The company submitted its voluntary petitions for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware.
F-Squared agreed to sell its operating assets to Broadmeadow
F-Squared disclosed its agreement to sell its operating assets to Broadmeadow Capital, a wholly owned subsidiary of Cedar Capital.
Under the terms of the asset purchase agreement, Broadmeadow will acquire the intellectual property, investment strategies and all of the investment contracts of F-Squared. According to F-Squared, the sale will” ensure a smooth and quick transition of the business supported by a robust operating infrastructure.”
In a statement, F-Squared CEO Laura Dagan said, “This transaction will allow clients to continue receiving industry-leading service and provide them with access to complementary, broad investment strategies.”
Dagan added that Broadmeadow Capital shares the strategies of AlphaSector—a research-driven quantitative investment approach.
According to her, Broadmeadow Capital will preserve the continuity of certain F-Squared employees including investment, research and client relationship professionals.”
F-Squared is seeking authorization from the court to pursue the sale process on an expedited basis. The company contemplates a Court-supervised auction process on the proposed agreement with Broadmeadow Capital. F-Squared noted that an auction process is designed to achieve the highest or the best offer for its assets.
Its agreement with Broadmeadow Capital sets the floor or a minimum acceptable bid. The deal is subject to certain other conditions and the approval of the Bankruptcy Court.
F-Squared is expecting a final hearing for the approval of the sale of its assets to Broadmeadow Capital shortly after the auction. The company also anticipates that the completion of the deal will depend on the approval of the court and the consent of its clients. The company will continue its operations throughout the sale process.
F-Squared settled SEC charges for $35 million
Last December, F-Squared agreed to pay $35 million penalty to settle the charges filed by the Securities and Exchange Commission (SEC). The company allegedly committed fraud by making false performance claims to investors.
F-Square advertised the seven-year track record of its AlphaSector investment strategy as successful. According to the SEC, the company’s claims were false citing the reason that the company used hypothetical data, which resulted in a substantial performance calculation error.