Securities Lawyers Blog
The investment attorneys at Gana Weinstein LLP are investigating the potential unsuitable sales of securities sponsored by APX Energy. APX Energy claims on its website that it is an independent oil and gas exploration company focusing on the Illinois Basin and other areas in the southern United States. The firm claims over 25 years of experience in the oil and gas industry. The company sponsors several oil and gas private placements.
Our firm has represented many clients in these types of products. All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. Alternative investments are only appropriate for a narrow band of investors under certain conditions due to their high costs, illiquidity, and huge redemption charges – if they can be redeemed. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
Investors often do not understand the substantial risks of oil and gas limited partnerships and private placements. As recently reported in Reuters, when offerings by Atlas Energy LP, another issuer of oil and gas private placements were analyzed, investors only get to see 65-70% of their capital actually put to work on oil and gas projects. Further, the returns on these projects had more in common with running profitable casinos than investments. Reuters found that slightly more than half of 43 private placements Atlas issued over the past three decades investors lost money or just broke even. While investors lost in more than half of the deals in 29 or 67% of those deals, Atlas actually out-performed their own investors.