Officials: No firm date for stock exchange start

In the spring of 2015, New Castle County Executive Thomas P. Gordon said an upstart stock exchange could be operational by the end of that year if it got a little help from county taxpayers.

It has now been a year since the county loaned the stock exchange group $3 million, and the only thing those behind the venture will say is it will open in the "near future."

In fact, they declined to provide any specifics. On Tuesday, stock exchange officials said they are done setting target dates and would not answer questions about how much backing the company has other than the county loan.

"I can't put any more dates on stuff," said Dennis Toner, a director of the upstart Delaware Board of Trade, after briefing County Council on the project Tuesday. "We are just trying to be good, provide as much information as we can and make this thing work."

That's not enough for some on council who are starting to worry about the county's investment.

"We think it is doomed," said Councilwoman Janet Kilpatrick. "They have missed every opening date."

Toner sought to allay those fears Tuesday, telling council members that the venture has the necessary funding and licenses to proceed.

"After Dec. 16, we could begin trading if we chose," Toner said. "But with the clients we have, we need to make sure their system talks to our system."

He said the company is taking time to work on the trading platform and declined to elaborate on who its clients are or how many there are.

The exchange was pitched to council as an all-electronic trading network for small- and medium-sized businesses. The chief executive officer is John F. Wallace, a former chief executive of the Philadelphia Stock Exchange. Toner was a top aide to Joe Biden when he was in the U.S. Senate.

In justifying the investment of county money, officials projected the exchange would hire up to 50 workers that would be paid an average of $136,000 annually in the first year. Eventually, it would employ up to 125 making an average of $86,000, officials have said.

When that might come to fruition became an issue in the recent New Castle County Executive election. Outgoing County Executive Gordon and city officials have said the project could help spur growth in Wilmington's financial services sector. But those involved have given various potential starting dates for the venture as they sought support for the county's involvement.

At one point, Gordon, who championed the controversial loan, said it would be open last fall. In June, officials set a July target date. During Gordon's unsuccessful campaign for a fourth term as county executive, he said if the exchange wasn't operational by the Sept. 13 primary, voters could "unelect" him.

County Executive-elect Matt Meyer has criticized the county's loan to the company as a politically motivated move for Gordon to garner support in Wilmington.

Meyer said he has not met with stock exchange officials. He declined to speculate on how his handling of the situation may differ from Gordon's until his administration is able to scrutinize the agreements between the county and board of trade.

While mystery about the exchange remains, County Councilman George Smiley said the county recently received a $180,000 check as an interest payment from the company for the loan.

"It did clear, I'm pleased to say," Smiley said.

The loan agreement is for 5 years and county government is to receive 6 percent interest annually. The loan is backed by the exchange's proprietary software platform. 

When the loan was initially made, council members questioned and criticized the use of software technology as collateral.

The loan debate was a long-winding saga that saw attorneys for County Council and the executive branch disagree on the legality of the move. County Council did not vote to support to the county's investment in the project, though members said they want the business to be a success.

Ultimately, county involvement in the project was pitched as both a way to get the company starting capital and attract other investors. As of now, it is unclear how much money has been married with the government's investment.

Councilman Bob Weiner said his colleagues have unsuccessfully requested more information about investments in the company. Kilpatrick said that is troubling.

"It would be nice to see that we are not the only ones backing this," Kilpatrick said. "We gave them the seed money and we should see how it is growing."

Toner said the venture has completed its first round of fundraising. He added the company is close to receiving backing from another investor, which he said would give it funding to operate for at least two-and-a-half years.

In declining to say how much has been raised beyond the county's investment, he did deny the county's money makes up the bulk of the project's backing.

A document filed with federal regulators shows two investors have committed a total of $600,000 in return for a share of the company. The document does not disclose their names. The document was filed in September and states the proceeds are to be used for launching the company.

It notes $500,000 of the investment is being used to pay “certain officers and directors” for their roles in the company. Both Toner and Wallace are listed among three others as directors in the document. One of the company's directors also received a $100,000 finder's fee for the funding, the document indicates.

The investors also have the option to purchase another $600,000 in company stock, according to the filing.

Toner said the filing is not inclusive of all the funding behind the exchange and declined to divulge how the money is being used by the startup.

"That is private information," Toner said.

After the meeting, Councilwoman Lisa Diller said she is concerned the money raised is just going to salaries and the venture may not be able to repay the $3 million.

"It is a gamble," Weiner said.

Toner said concerns about the exchange's future are off the mark. He said the company recently moved into the Hercules Plaza office tower in the Midtown Brandywine neighborhood and the company has about 15 to 20 people on its payroll. Toner said he briefed council to put previous controversies behind them.

"We wanted to put everything that has happened in the past and go forward and make sure we are on good ground with everyone," he said.