Capt. Crab, Inc.

Capt. Crab, Inc.
Item# 3447

Capt. Crab, Inc.
This company's history dates to 1976, when Edward Scharps (whose printed signature appears on this piece) and Leonard Rappaport bought a Miami Beach restaurant and called it the Crab House.

By 1984, the Crab House and a second restaurant, called Capt. Crab's Take-Away, comprised a public company called Capt. Crab Inc., based in Miami. It reported sales of more than $3.5 million.

The company bought a $2.2 million processing plant in Tallahassee and embarked upon a major expansion program. Plans called for opening 140 restaurants in eight years. A year later, the company had grown to four Crab House restaurants and 1 take-away outlets. But despite sales of $5.3 million, Capt. Crab lost $3.67 million in fiscal 1985.

To try to get back on course, the company phased out its franchising program, buying out most franchise owners with stock. This shrank the company to two crab houses and two take-aways. The company also slashed executive salaries. Scharps, then chief executive, waived his six-figure pay.

But the company had another substantial problem to deal with In June 1986, the Securities and Exchange Commission accused Scharps and stock traders of manipulating the price of the company's shares and of using misleading and false information to illegally make more than $5.54 million from the sale of stock from October 1982 to September 1983. Capt. Crab's stock price had climbed to $8.37 in September 1983, from $1.62 in October 1982. Capt. Crab immediately denied any wrongdoing, but accepted a consent order whereby it agreed not to violate securities law in the future.

Scharps stepped down as chief executive, passing the helm in 1988 to William D. Korenbaum (whose printed signature also appears on this piece), vice president and chief financial officer, with the company since 1982. Korenbaum also was named president. Scharps remained a director. In 1989, a federal judge in Miami ordered Scharps to forfeit $1 million in profits that he had allegedly gotten in the scheme.

In a subsequent interview, Scharps would neither confirm nor deny the SEC's allegations. He said he agreed to a settlement because "it was in the best interest of the company" and costed less than fighting the allegations. "It became a public relations nightmare," Korenbaum said. Although the company itself was not charged by the SEC, its reputation had suffered.

Nevertheless, under Korenbaum's leadership, Capt. Crab by 1990 had grown from two crab houses and two take-aways to seven full-service restaurants and five take-away restaurants. But growth did not translate into profits. Capt. Crab lost $2.3 million in 1991. "We couldn't have kept running," Korenbaum said. "We were in such a hole, we couldn't get out of it unless we found financing. The banks wouldn't talk to us."

That's when Bayport Partners stepped in, buying a controlling interest. They paid $2.07 million for a combination of stock and debt. They also bought Scharps' 1.75 million shares of common stock for an undisclosed price. Scharps stepped down as a director.

The group moved quickly to revamp the company's image, a crucial step to regain Wall Street's favor. A new name, Bayport Restaurant Group, was chosen, partly to distance the company from its past.

Certificate: Common Stock, issued in the 1980s

Printer: Security-Columbian / United States Bank Note Company

Dimensions: 8 (h) x 12 (w)

State: FL-Florida

Subject Matter: Restaurants and Fast Food

Vignette Topic(s): Male Subject | Stylized Modern

Condition: Vertical fold lines, punch hole and machine cancels in signature areas and body, and stray staple holes and markings.

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