Shareholders of tiny Walnut Financial Services of Vienna must have felt overwhelmed this summer when they received a 350-page invitation to a special shareholders meeting to vote on a seven separate steps to restructure the underachieving small-business investment company.

Walnut asked shareholders to approve issuing new stock, converting debts into shares, changing the company's business plan and rewriting its charter.

Translation: Walnut was being taken over by some guys from New York and transformed into an Internet investment firm that both finances and facilitates new Net ventures.

Short of adding ".com" to the company name, there's no quicker way to juice up a stock than to move into the business of bankrolling and nursing Internet fledglings.

Walnut's stock has exploded even though no investment analysts follow it. It had been tootling along in the $2-a-share range since April but started moving up a couple of weeks before the stockholders meeting Nov. 1.

The very next day, with the company name changed to THCG Inc., the stock jumped from $3.75 to $4.62 1/2 and then took off. Yesterday it closed at $14.62 1/3 1/2, its highest price in three years--if you consider it the same stock.

It is the same for longtime investors who bought their shares back when the company was Walnut. And it's the same stock that a group of new investors bought for $3 a share recently when they pumped new equity into the firm.

But THCG really is a much different company. The headquarters is now in New York instead of Vienna, a whole new management team is in place, and former top executives of Walnut have stayed only as board members, consultants and stockholders.

The company now encompasses an investment banking operation called Tower Hill Securities, which once was the orphan U.S. offspring of two European financial giants. First a part of Hambros PLC, a big British investment bank, the operation was sold in 1998 to the French bank Societe Generale.

It didn't fit into that family either and was spun off 18 months ago to top managers Adi Raviv and Joseph D. Mark, who now serve as co-chief executive officers.

Raviv describes the company as "a business creation service for Internet and Net-related companies and traditional companies transitioning to the digital economy."

While Walnut was a traditional small-business investment company, making loans and dispensing advice, THCG gets directly involved in its partner companies. Along with cash, THCG will provide "as much of the management team as needed," Raviv said. It's more than a venture-capital firm but not an "incubator" that finances research and development.

"What we've seen happening over the last few years is that the time frame which an entrepreneur has to develop his business has compressed to one year or less," Raviv explained.

That's all the time a new company has to develop a business plan, hire management and staff, create its marketing, find financing, strike strategic alliances, and get online.

Previously entrepreneurs could move one step at a time, over a period of years, he added. "Now it's all being done in parallel, not series. We are multitasking to the extreme."

Raviv said the company still holds Walnut Financial's portfolio of small-business investments but will be disposing of its stakes in companies that don't fit the new Internet model. The Net portfolio includes stakes in more than a dozen companies. They're identified on the company's Web site (, which also lets potential partners fill out a financing application online.


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