Direct Stock Market Inc. has successfully raised $3 million in its third round of financing, and is targeting another $30 million to $50 million in growth equity, according to founder Clay Womack.

In fact, Womack was at his new branch office in New York last week. Between arranging furniture and learning new office phone numbers, he said he was “pounding the pavement and shaking my tin cup to raise more money. It’s coming along pretty well.”

Santa Monica-based DSM is a Web site devoted to helping microcap companies raise money by connecting directly to online investors, thus largely bypassing the brokerage community.

Womack, chairman and CEO, said the recently raised $3 million will be used to upgrade the company’s Web site and to expand services and marketing programs for clients.

But the next, big slug of money the $30 million or more will be used to set up DSM as a registered broker-dealer with enough capital to meet regulatory requirements for serious marketing and to hire talent, said Womack.

Recently investing $3 million in DSM were San Francisco-based brokerage First Security Van Kasper, brokerage holding company E*Capital Corp., and investors with Storie Partners LLC and Womack Partners LLC.

Additionally, said Womack, the San Diego-based money manager and famed Reagan-era supply-side economist, Arthur Laffer, has invested in DSM and taken a seat on the board.

Womack, an early proponent of the Internet as a capital-raising tool, said that with other brokerages launching online stock services, or even selling initial public offerings over the Web, venture capitalists are becoming far more accepting of his site, and willing to provide the next big round of financing.

“We barely have our office open here… and we have already raised several million for our next round of financing,” said Womack. “The time has come.”

By the way, E*Capital Corp., despite its name, is actually the parent company of Wedbush Morgan Securities in downtown Los Angeles. Last week Wedbush announced it had opened its Web site, and would be selling as many as seven initial public offerings through the online portal in 1999, as well as through its traditional broker-dealer network.

Mood swings

How quickly market sentiments change in the ’90s.

Some literature from the Century City-based Oakwood Capital Management LLP money management shop arrived last week, which it had issued in April.

Reading it was like taking a trip back in time (even though the report is less than three months old). “Not only is inflation completely absent from the picture, commodity indices are at 25-year lows, indicating that deflation is permeating the domestic economy,” wrote Bruce Mandel, president and chief executive of Oakwood, which has about $200 million under management. “Worldwide competition and oversupply limit pricing in capital goods and deflation is widespread in consumer goods and services.”

The point of mentioning the April report is not to beat up on Mandel his sentiments were hardly out of the mainstream less than 90 days ago. The point is to highlight the mercurial nature of modern-day investor sentiment.

The argument that inflation is caged remains still strong, Mandel said last week, citing a steady producer price index and the fact that oil prices have crested, though higher than a year ago. The productivity of American workers is increasing, keeping labor costs in check. The worldwide economy is mediocre.

“You always have pricing pressure in the first and second quarters as companies try to push through price increases,” said Mandel. “But we are almost in the second half now… and we still have good supplies in commodities markets.”

For those who follow gold prices as an indicator or hedge against inflation, last week the yellow metal traded in the $265-an-ounce range, well down from about $288 an ounce at the start of the year.

IndyMac.com?

IndyMac Mortgage Holdings Inc. has unveiled plans to convert from a publicly traded real estate investment trust to corporate status, in line with plans to become an Internet-driven low-cost provider of mortgages and mortgage securitization.

As a REIT, Pasadena-based IndyMac must flush through 90 percent of profits to shareholders in the form of dividends, in order to retain tax-free treatment of REIT profits.

IndyMac head Michael Perry wants to keep the money in-house, to finance growth plans. “Right now, we have a tremendous opportunity to take advantage of our unique combination of superior technology and expertise in consumer lending and securitization, but our inability to retain earnings as a mortgage REIT is keeping us from achieving our full potential,” said Perry.

IndyMac plans to become one of the state’s largest lenders by using a bricks-and-mortar thrift branch system in California, and the Internet nationwide, to finance home buyers. The idea is to then sell the mortgages in bulk (called securitization) to institutional buyers, or through brokerages. Additionally, there are plans to acquire a thrift, which will allow other kinds of consumer loans, such as home equity loans and credit cards.

IndyMac is one the nation’s largest mortgage brokers, but also lends on other real estate activities through various affiliates. Wall Street yawned at IndyMac conversion plans last week, leaving the stock mostly unchanged in the $15-a-share range.

It hit an all-time high of more than $26 in early 1998, but got whacked by the summer of 1998 credit squeeze and flight to quality. IndyMac had to pay higher interest rates to borrow money, but the market was less receptive to its securitized mortgages. The stock sank to a low of $7.38. Since then it has rallied.

Big institutional money manager Capital Guardian, based in downtown Los Angeles, filed papers with the SEC in February indicating it controlled 7.7 percent of IndyMac’s common stock, acquired sometime in the previous year.

Contributing Reporter Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].