Company Man Draws Blank

The market for "blank check" IPOs is getting spooky.

The latest start-up that's seeking to raise cash so it can buy a business that it hasn't found yet is a two-week-old company that lists former Central Intelligence Agency Director George Tenet as one of its five board members. Granahan McCourt Acquisition Corp., officially incorporated on July 10 by telecom magnate David McCourt, hopes to raise $125 million in an upcoming initial public offering.

The money raised in the IPO, according to the prospectus, will be used to finance the acquisition of "operating businesses in the telecommunications and media industries.'' The stock deal is being underwritten by Deutsche Bank(DB), which suddenly has become a big player in bringing blank-check IPOs to market.

Over the past three years, there has been a wave of blank-check IPOs, with most of the six dozen or so deals underwritten by a cadre of small investment firms such as Maxim, Ladenburg Thalmann(LTS) and Morgan Joseph. But in recent months, big Wall Street firms such as Deutsche, Citigroup(C) and Merrill Lynch(MER) have fallen in love with blank-checks IPOs and are beginning to churn out deals like automobiles on an assembly line.

Critics say the Wall Street firms are warming up to the blank-check market at just the wrong time and that many of the deals they are peddling could prove to be lemons.

"The way the Wall Street money machine works is the big investment bankers will go wherever the money is. But they are getting in late,'' says Paul Sonkin, a hedge fund manager with Hummingbird Management, who has invested in several blank-check IPOs. "We are not buying any deals now because they are all trading down in the aftermarket.''

But the poor reception several blank-check deals have received of late isn't deterring Wall Street.