SAN DIEGO — Its capital drained and its goal of becoming San Diego's first full-service investment house shattered, McKewon & Timmins announced Thursday that it was ceasing operations and would soon declare bankruptcy.
The announcement by M&T principal Ray McKewon came at a hastily called press conference after the firm lost a last-ditch bid to stay in business by being acquired by Morgan, Olmstead, Kennedy & Gardner, Los Angeles brokers. M&T began laying off its 30 employees Wednesday, a process that will be finished today, McKewon said.
M&T informed the National Assn. of Securities Dealers on Wednesday that its net capital was below minimum regulatory limits and on the same day ceased all securities trades except transfers and closings, McKewon said. All of M&T's 2,000 client accounts are insured by Bear Stearns & Co. of New York and are not in any jeopardy as a result of M&T's impending bankruptcy, he said.
Not so fortunate are about 65 M&T stockholders, many of them prominent local businessmen, who have bought $2.5 million worth of M&T shares since the company began operations in 1984. Stockholders are not likely to recover any of their investment in an M&T liquidation, McKewon said.
Hybritech Inc. President David Hale, one of several current and former Hybritech executives who have invested in M&T, was philosophic Thursday about his probable loss: "When you invest in a start-up company, there is risk." Hale declined to say how many dollars he has invested in M&T.
The announcement put an end to M&T's ambitious game plan to become a dominant San Diego-based investment banker, broker and underwriter. The firm, which lost about $760,000 on $1.2 million in revenues in 1986, had hoped to generate significantly higher revenues through stock underwriting fees. But in three years, M&T was able to co-underwrite only one initial public offering, that of Precision Aerotech Inc. of San Diego last November.
"We spent more than we took in," said McKewon, 39, who co-founded the firm with James Timmins, 31, a former Salomon Bros. employee. "We're personally and professionally embarrassed by the outcome."
Plagued by capital problems for the last two years, the company's most pressing debts are its rental payments to landlord Trammell Crow Co. and to a furniture leasing partnership consisting of several present and former M&T employees that financed the purchase of $400,000 in office furniture. M&T will be in default on the furniture lease in a matter of days, McKewon said.
M&T's money problems became public last October when two former brokers filed complaints with the NASD alleging that M&T owed them each more than $30,000 in back pay. McKewon then said a $1-million capital infusion by Durham Resources of Omaha, Neb., the month before had relieved the firm's financial crunch. But problems became acute in December when an additional $1-million investment from Durham was withdrawn after M&T failed to meet "performance requirements."
George Fox, a retired Piper Jaffray & Hopwood Inc. executive brought into M&T by Durham to help straighten it out, was let go early this February for "cost reduction factors," McKewon said.