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TABLE OF CONTENTS 2

Table of Contents

As filed with the Securities and Exchange Commission on December 7, 2009.

Registration No. 333-163372



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



COWEN GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  6211
(Primary Standard Industrial
Classification Code Number)
  27-0423711
(I.R.S. Employer
Identification No.)

599 Lexington Avenue
New York, New York 10022
(212) 845-7900
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

J. Kevin McCarthy
General Counsel
Cowen Group, Inc.
599 Lexington Avenue
New York, New York 10022
(212) 845-7900
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:
David K. Boston, Esq.
Laura L. Delanoy, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
  Michael T. Kohler, Esq.
Bartholomew A. Sheehan, III, Esq.
Sidley Austin LLP
787 Seventh Avenue
New York, New York 10019
(212) 839-5300



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.



          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.    o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o



CALCULATION OF REGISTRATION FEE

           
 
Title of Securities to be Registered
  Shares to be Registered
  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee(3)

 

Class A common stock, par value $0.01

  17,480,000   $114,098,400   $6,368(4)

 

(1)
Estimated solely for purposes of determining the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. The proposed maximum offering price is based (x) on a per share price of $6.53, with respect to 17,250,000 shares, and (y) on a per share price of $6.33, with respect to 230,000 shares, the averages of the high and low prices of our common stock on November 20, 2009 and December 3, 2009, respectively, as reported on the Nasdaq Global Market.
(2)
Includes shares of Class A common stock that the underwriters have an option to purchase solely to cover over-allotments.
(3)
Determined in accordance with Section 6(b) of the Securities Act of 1933, as amended, at a rate equal to $55.80 per $1 million of the proposed maximum aggregate offering price.
(4)
$6,286 has previously been paid.



          The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.




Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS (Subject to Completion)   Dated December 7, 2009
 

15,200,000 Shares

LOGO

COWEN GROUP, INC.
Class A common stock

This is a public offering of shares of Class A common stock of Cowen Group, Inc. Cowen Group, Inc. is offering 15,000,000 shares of Class A common stock. The selling stockholder identified in this prospectus is offering an additional 200,000 shares of Class A common stock. Cowen Group, Inc. will not receive any of the proceeds from the sale of the shares being sold by the selling stockholder.

Our Class A common stock is presently traded on the NASDAQ Global Market under the symbol "COWN." On December 4, 2009, the last reported sale price of our Class A common stock was $6.32 per share.

An investment in our Class A common stock involves a high degree of risk. See "Risk Factors" beginning on page 11 of this prospectus to read about factors you should consider before buying shares of our Class A common stock.

Neither the Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


 
  Per Share   Total  

Public offering price

  $               $              

Underwriting discount

  $               $              

Proceeds, before expenses, to Cowen Group, Inc.

  $               $              

Proceeds, before expenses, to the selling stockholder

  $               $              

We have granted the underwriters an option to purchase up to an additional 2,280,000 shares of our Class A common stock to cover any over-allotments, at the public offering price less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on December     , 2009.


Cowen and Company        
    BofA Merrill Lynch    
        Credit Suisse
Sandler O'Neill + Partners, L.P.


Keefe, Bruyette & Woods

December     , 2009



TABLE OF CONTENTS

Prospectus Summary

  1

Risk Factors

  11

Cautionary Statement Regarding Forward-Looking Statements

  37

Use of Proceeds

  38

Capitalization

  39

Market Price of Class A Common Stock

  39

Dividend Policy

  39

Unaudited Pro Forma Condensed Combined Financial Statements

  40

Selected Consolidated Historical Financial Data of the Company

  53

Supplemental Quarterly Consolidated Financial Information

  55

Selected Consolidated Historical Financial Data of Cowen Holdings

  56

Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company

  58

Management's Discussion and Analysis of Financial Condition and Results of Operations of Cowen Holdings

  109

Business

  134

Board and Management of Cowen Group

  154

Corporate Governance

  159

Certain Relationships and Related Transactions

  162

Compensation Discussion and Analysis

  164

Description of Capital Stock

  179

Security Ownership of Certain Beneficial Owners, the Selling Stockholder and Management

  183

Shares Eligible for Future Sale

  186

Material United States Tax Consequences

  191

Underwriting (Conflicts of Interest)

  195

Legal Matters

  201

Experts

  201

Where You Can Find More Information

  201

Index to Financial Statements

  F-1

        You should rely only on the information contained in this prospectus. Neither we or the selling stockholder nor the underwriters have authorized anyone to provide you with information different from or in addition to that contained in this prospectus. If anyone provides you with additional or different information, you should not rely on it. We, the selling stockholder and the underwriters are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, unless the information specifically indicates that another date applies, regardless of the time of delivery of this prospectus or of any sale of our Class A common stock.

i



BASIS OF PRESENTATION

        In this prospectus, references to "the Company," "Cowen Group," "we," "our" and "us" are to Cowen Group, Inc. and, except as the context otherwise requires, its consolidated subsidiaries. In this prospectus, references to "Ramius" refer to Ramius LLC, a wholly owned subsidiary of the Company, references to "Cowen Holdings" refer to Cowen Holdings, Inc., a wholly owned subsidiary of the Company, and references to "RCG" refer to RCG Holdings LLC, an entity which holds approximately 66.56% of our Class A common stock, in each case unless the context indicates otherwise. References to "Cowen and Company" refer to Cowen and Company, LLC, a wholly owned subsidiary of Cowen Holdings and the Company's primary broker-dealer, and to the Company's investment banking operations generally.

        On November 2, 2009, the transactions (which we refer to collectively with the fund of funds asset exchange, described in the section titled "Prospectus Summary" below, as the Transactions) contemplated by the Transaction Agreement and Agreement and Plan of Merger, dated as of June 3, 2009 (which we refer to as the Transaction Agreement), by and among the Company, Ramius, Cowen Holdings, RCG and Lexington Merger Corp., were consummated including (1) the merger of Lexington Merger Corp. with and into Cowen Holdings, pursuant to which each outstanding share of common stock of Cowen Holdings was converted into one share of Class A common stock of the Company and (2) the transfer by RCG of substantially all of its assets and liabilities to Ramius in exchange for the Company's issuance to RCG of 37,536,826 shares of Class A common stock of the Company.

        Prior to the consummation of the Transactions, the Company did not conduct any material activities other than those incidental to its formation and the matters contemplated by the Transaction Agreement. All financial statements and related financial information of the Company presented in this prospectus relate to the historical information of Ramius (the business of which was operated by RCG, the Company's accounting predecessor, prior to the consummation of the Transactions), unless the context indicates otherwise.

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you and is qualified in its entirety by, and should be read in conjunction with, the more detailed information contained elsewhere in this prospectus and our financial statements and the related notes appearing elsewhere in this prospectus before you decide to invest in our Class A common stock. This prospectus contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in "Risk Factors" and other sections of this prospectus.

Our Business

        Cowen Group is a diversified financial services firm providing alternative investment management, investment banking, research, and sales and trading services through its business units, Ramius and Cowen and Company. Its alternative investment management products include hedge funds, fund of funds, real estate, healthcare royalty funds and cash management services, offered primarily under the Ramius name. Cowen and Company offers industry focused investment banking services for growth-oriented companies, domain knowledge-driven research and a sales and trading platform for institutional investors.

        Cowen Group, a Delaware corporation, is a new holding company, formed in connection with the business combination of Ramius and Cowen Holdings. On November 2, 2009, the Transactions were consummated in which RCG received approximately 66.56% of our Class A common stock in exchange for the Ramius business and former Cowen Holdings shareholders received approximately 28.63% of our Class A common stock in exchange for the Cowen Holdings business. Following the consummation of the Transactions, each of Ramius and Cowen Holdings became a wholly owned subsidiary of the Company.

Industry Overview

        The financial market dislocation, which began in the fourth quarter of 2007 and accelerated into 2008, has created new opportunities for firms that are able to adapt to the changing landscape. In the past 24 months, many financial institutions in the United States either failed outright or were acquired by other financial institutions in distressed sales. Many of those that survived the dislocation found that their operating strategies had become greatly altered by the federal government, which became a major stakeholder in a number of financial institutions through various guarantee and support programs.

        We believe the firms that have navigated this dislocation and are unencumbered by government obligations will have advantages going forward. Such firms should have opportunities to develop new client relationships and to build and improve their talent base and product offerings.

Competitive Strengths

        We believe that the recent combination of Ramius's and Cowen and Company's businesses creates a firm with the breadth and depth to take advantage of the current market dislocation. The Company's global alternative investment management business (hedge funds, fund of funds, real estate, healthcare royalty funds and cash management services) complements the Company's established financial services practice (investment banking, research and sales and trading) in the following ways:

        Diversified Platform of Complementary Businesses.    The combination of our alternative investment management and investment banking businesses adds significant diversity to our sources of revenue. We believe that revenue diversification provides us with greater financial stability through market cycles when compared to other firms with a narrower product, sector or regionally-focused business model.

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        Top-Tier Management Team.    We have a team of senior professionals led by seasoned executives with decades of experience building and managing financial services organizations and a track record of generating positive risk-adjusted returns. Additionally, the reputation of our senior management and their global network of relationships provides us with competitive advantages in identifying transactions and securing investment opportunities.

        Strong Balance Sheet with a Long-Term, Proprietary Track Record of Outperformance.    On a pro forma basis as of September 30, 2009, we had $408.6 million of total equity, a significant portion of which is invested or available for new investment opportunities. Since Ramius began investing its own capital on a proprietary basis in 1999, we generated a compounded annualized return on our invested capital through September 30, 2009 that significantly exceeds the S&P 500 return for the same period.

        Team-Oriented Culture.    Our senior management encourages collaboration and fosters a partnership culture in which highly-motivated team members can seek to build successful businesses together. We believe this enables us to identify and respond to new opportunities as they emerge and ultimately helps us to better identify, attract and retain talented, results-oriented people.

        Alignment of Interests.    One of our fundamental philosophies is to align the interests of our management and employees with those of our shareholders and investors. Employees, our executive officers and members of our board of directors own over 30% of our outstanding Class A common stock, including through their ownership of RCG. The equity held by certain Ramius principals through RCG is subject to transfer restrictions for at least 30 months from November 2, 2009. In addition, the Company's own capital is invested alongside our investors in many of our investment products.

        Institutionalized Operational Processes and Infrastructure.    We have developed highly institutionalized products, risk management, operational and information technology processes and controls. We believe that this infrastructure is scalable and important in attracting institutional investors, third-party distribution platforms and brokerage clients who demand portfolio transparency and deep insight into investment processes, as well as high quality research, execution and advisory services.

Opportunities for Growth

        The business combination of Ramius and Cowen and Company brought together two like-minded, collaborative cultures. We believe the open exchange of ideas and the leveraging of relationships across both organizations will lead to greater revenue opportunities in our existing business lines. Moreover, our balance sheet should allow us to pursue opportunistic expansion either organically, through the hiring of talented individuals or teams, or through acquisitions, investments and strategic partnerships for both our alternative investment management and investment banking businesses.

        Additional business line initiatives include:

        Extend strong investment track record.    Historically, our hedge fund and fund of funds platforms have sought to deliver consistent, risk-adjusted returns to our investors throughout market cycles. In these platforms, we seek positive performance with minimal correlation to directional market indices. As we seek to increase our assets under management, our focus remains to provide our clients with strong investment performance through our current strategies.

        Grow assets under management by expanding our global distribution network.    We are focused on developing a more significant global presence and intend to expand our client relationships and distribution capabilities in key regions of the world through new distribution channels and joint ventures. In addition, we are seeking to become a preferred alternative investment service provider to

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financial intermediaries who will distribute our alternative investment management products through their distribution platforms.

        Expand investment products and strategies.    We are an alternative investment solutions provider that focuses on evolving client needs. We have consistently developed and added new products and strategies to our business and will continue to selectively expand our products, strategies and service offerings through acquisition, strategic partnership or the addition of new investment talent.

        Enhance our investment banking relationships.    We believe that the combination of Ramius's network of investors and partners and Cowen and Company's corporate and institutional relationships coupled with our capital markets capabilities should enable us to be retained for more and a wider variety of investment banking transactions.

        Leverage our sales and trading distribution into broader firm relationships.    The institutional knowledge and expertise of our sales and trading teams are highly valued by our clients. We will seek to leverage this knowledge and expertise into increased levels of dialogue with our clients to generate value added capital markets and portfolio management ideas that we can execute on their behalf.

        Hire additional senior professionals and add new industry verticals.    We anticipate adding financial professionals and coverage of new sectors on an opportunistic basis. We have recently hired individuals in two new industry verticals—financial institutions and REITs—that have the potential for strong transaction activity.

Our Alternative Investment Management Business

        We operate our alternative investment management business primarily through Ramius LLC, our wholly owned subsidiary. Our alternative investment management business had approximately $7.9 billion of assets under management as of October 1, 2009, after giving pro forma effect to the consummation of the Transactions. The predecessor to this business was founded in 1994 and, through one of its subsidiaries, has been a registered investment adviser under the Investment Advisers Act since 1997. Our alternative investment management products and services include hedge funds, fund of funds, real estate, healthcare royalty funds and cash management services. Our institutional investors include pension funds, insurance companies, banks, foundations and endowments, wealth management organizations and family offices.

Our Investment Banking Business

        We operate our investment banking business primarily through Cowen and Company, LLC, our primary broker-dealer. Cowen and Company, LLC is an international investment bank dedicated to providing superior research, brokerage and investment banking services to companies and institutional investor clients primarily in the healthcare, technology, media and telecommunications, consumer, aerospace and defense, financial institutions, REITs and alternative energy sectors. We provide research and brokerage services to over 1,000 domestic and international clients seeking to trade equity and equity-linked securities, principally in our target sectors. We focus our investment banking efforts, principally equity and equity-linked capital raising and strategic advisory services, on growth-oriented public companies as well as private companies.

Risk Factors

        Investing in our Class A common stock involves substantial risk. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set

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forth under "Risk Factors" in deciding whether to invest in our Class A common stock. Some of the most important risks are summarized below.

Recent Developments

        On November 2, 2009, the Transactions were consummated including (1) the conversion of each outstanding share of Cowen Holdings's common stock of into one share of our Class A common stock

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and (2) RCG's transfer of substantially all of its assets and liabilities to Ramius, our wholly owned subsidiary, in exchange for 37,536,826 shares of our Class A common stock.

        On November 2, 2009, as part of the Transactions, Cowen Holdings purchased from HVB the 50% interest in the Ramius fund of funds business, which is known as Ramius Alternative Solutions LLC (which we refer to as Ramius Alternative Solutions) that HVB owned in exchange for (1) the Company's issuance to HVB of 2,713,882 shares of our Class A common stock and (2) approximately $10.4 million in cash. This exchange resulted in Ramius Alternative Solutions becoming an indirect wholly owned subsidiary of the Company.

        The diagram below shows the structure of the Company as of November 2, 2009 following completion of the Transactions:

CHART


(1)
Members of our senior management control the managing member of RCG. RCG members also include BA Alpine Holdings, Inc., an affiliate of HVB.

(2)
Of the 37,536,826 shares of our Class A common stock held by RCG prior to this offering, (i) 8,518,685 shares are attributable to BA Alpine Holdings, Inc. and (ii) 9,527,596 are attributable to our directors and executive officers. RCG is selling 200,000 shares of Class A common stock in

5


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        On November 2, 2009, the Company entered into a Secured Revolving Credit Agreement (which we refer to as the HVB Credit Facility) with Bayerische Hypo- und Vereinsbank AG, which we refer to as HVB AG, as Administrative Agent, and another lender. The credit agreement provides for a secured revolving loan facility of up to $50 million (which automatically reduces to $25 million on January 4, 2010), with a maturity date of September 29, 2011.

Principal Executive Offices

        Our principal executive offices are located at 599 Lexington Avenue, New York, New York 10022, and our telephone number is (212) 845-7900. Our website address is http://www.cowen.com/. Our website and the information contained on, or that can be accessed through, the website are not part of this prospectus.

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THE OFFERING

Class A common stock offered by us

  15,000,000 shares

Class A common stock offered by the selling stockholder

 

200,000 shares. These shares are held by RCG and are attributable to certain of its non-affiliate members who are withdrawing one-third of their capital in RCG as of December 31, 2009. RCG is selling these shares and will distribute the net proceeds to those members to satisfy such withdrawals.

Over-allotment option granted by us to the underwriters

 

2,280,000 shares

Common stock to be outstanding after this offering

 

72,437,136 shares

Use of proceeds

 

We estimate that we will receive net proceeds from this offering of approximately $             million, after deducting the underwriting discounts and other estimated offering expenses payable by us.

 

We anticipate that we will use approximately $25 million of the net proceeds received by us from this offering to repay indebtedness and the remainder for working capital and general corporate purposes.

 

We will not receive any proceeds from the sale of any shares in this offering by the selling stockholder.

 

See "Use of Proceeds."

Listing

 

Our Class A common stock is currently listed on the NASDAQ Global Market under the symbol "COWN."

Dividend Policy

 

We have never declared or paid any cash dividends on the Class A common stock and have no intent to do so for the foreseeable future. Any payment of cash dividends on Class A common stock in the future will be at the discretion of our board of directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, applicable law, contractual restrictions and other factors deemed relevant by our board of directors. See "Dividend Policy."



        References in this prospectus to the number of shares of our Class A common stock to be outstanding after this offering are based on 57,437,136 shares of Class A common stock outstanding on December 4, 2009 and exclude:

        Except as otherwise noted, all information in this prospectus assumes no exercise of the underwriters' over-allotment option.

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SUMMARY HISTORICAL AND PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following summarizes our historical and pro forma consolidated financial information. We derived the historical financial information from our accounting predecessor's audited consolidated financial statements for the years ended December 31, 2008, 2007 and 2006 and the unaudited consolidated financial statements for the nine months ended September 30, 2009 and 2008 included elsewhere in this prospectus. The unaudited pro forma consolidated statement of operations data and pro forma consolidated statements of financial condition data give effect to the Transactions as if they were completed on January 1, 2008 and include all adjustments which give effect to the events that are directly attributable to the Transactions, as long as the impact of such events are expected to continue and are factually supportable.

        This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company," "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cowen Holdings," "Unaudited Pro Forma Condensed Combined Financial Statements" and the financial statements and related notes of RCG and Cowen Holdings appearing elsewhere in this prospectus.

 
  Pro Forma    
   
   
   
   
 
 
  Nine Months Ended    
   
   
   
   
   
 
 
  Year Ended   Nine Months Ended September 30,    
   
   
 
 
  Year Ended December 31,  
 
  September 30,
2009
  December 31,
2008
 
 
  2009   2008   2008   2007   2006  
 
  (in thousands)
 

Consolidated Statements of Operations Data:

                                           

Revenues

                                           
 

Management fees

  $ 38,125   $ 83,391   $ 31,408   $ 56,443   $ 70,818   $ 73,950   $ 65,635  
 

Incentive income

    177         177             60,491     81,319  
 

Interest and dividends

    592     5,355     225     1,443     1,993     16,356     17,189  
 

Reimbursement from affiliates

    7,832     16,330     7,832     11,675     16,330     7,086     4,070  
 

Investment banking

    28,917     50,937                      
 

Brokerage

    103,773     149,901                      
 

Other Revenues

    4,173     7,404     2,265     4,737     6,853     5,086     8,038  
 

Consolidated Ramius Funds and certain real estate entities revenues

    12,312     31,739     12,312     26,165     31,739     25,253     35,897  
                               
   

Total revenues

    195,901     345,057     54,219     100,463     127,733     188,222     212,148  

Expenses

                                           
 

Employee compensation and benefits

    158,474     228,910     50,869     67,703     84,769     123,511     112,433  
 

Non-compensation expense (excluding goodwill impairment)

    103,760     152,640     38,070     37,929     54,856     79,020     54,277  
 

Goodwill impairment

        10,200             10,200          
 

Consolidated Ramius Funds and certain real estate entities expenses

    11,831     34,268     11,831     27,040     34,268     21,014     39,300  
                               
   

Total expenses

    274,065     426,018     100,770     132,672     184,093     223,545     206,010  

Other income (loss)

                                           
 

Net gain (loss) on securities, derivatives and other investments

    (2,702 )   (2,006 )   (2,702 )   800     (2,006 )   94,078     54,765  
 

Gain on exchange memberships

        751                      
 

Consolidated Ramius Funds and certain real estate entities net gains (losses)

    25,268     (198,485 )   25,268     (85,523 )   (198,485 )   84,846     78,656  
                               
   

Total other income (loss)

    22,566     (199,740 )   22,566     (84,723 )   (200,491 )   178,924     133,421  
   

Income (loss) before income taxes

    (55,598 )   (280,701 )   (23,985 )   (116,932 )   (256,851 )   143,601     139,559  
 

Income tax provision (benefit)

    (5,413 )   10,486     (5,978 )   738     (1,301 )   1,397     4,814  
                               
   

Net income (loss)

    (50,185 )   (291,187 )   (18,007 )   (117,670 )   (255,550 )   142,204     134,745  
 

Net Income (loss) attributable to non-controlling interests

    13,247     (108,537 )   13,888     (52,176 )   (113,786 )   66,343     74,189  
   

Special allocation to the Managing Member

                        26,551     21,195  
                               
   

Net income (loss) available to all Redeemable Members

  $ (63,432 ) $ (182,650 ) $ (31,895 ) $ (65,494 )   (141,764 )   49,310     39,361  
                               

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SUMMARY HISTORICAL AND PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (Continued)

 
  As of September 30,   As of December 31,  
 
  2009   2008   2007   2006  
 
  (in thousands)
 

Consolidated Statements of Financial Condition Data:

                         

Total assets

  $ 681,895   $ 797,831   $ 2,113,532   $ 2,468,195  

Total liabilities

    113,025     182,003     1,430,029     1,657,992  

Redeemable non-controlling interests in consolidated subsidiaries

    267,242     284,936     203,523     514,761  
                   

Total redeemable members' capital

  $ 301,628   $ 330,892   $ 479,980   $ 295,442  
                   

 

 
  Pro Forma  
 
  As of
September 30,
2009
 

Consolidated Statements of Financial Condition Data:

       

Total assets

  $ 869,977  

Total liabilities

    207,996  

Total redeemable group equity

    253,359  
       

Total equity

  $ 408,622  
       

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CONFLICTS OF INTEREST

        Cowen and Company, LLC, a wholly owned subsidiary of Cowen Group, is a member of the Financial Industry Regulatory Authority, Inc. (formerly known as the National Association of Security Dealers, Inc., or the NASD), or FINRA, and will participate in the distribution of the shares of our Class A common stock. We control Cowen and Company and this relationship is defined as a "conflict of interest" under Conduct Rule 2720 of the NASD. RCG also indirectly controls Cowen and Company and will sell shares of our Class A common stock in the offering. This relationship would also be defined as a "conflict of interest" under Conduct Rule 2720 of the NASD. BA Alpine Holdings, Inc., an affiliate of HVB, is a member of RCG and therefore considered an affiliate of Cowen and Company. In excess of 5% of the net offering proceeds are intended to be paid to HVB to repay amounts outstanding under the HVB Credit Facility. This is also defined as a "conflict of interest" under Conduct Rule 2720 of the NASD. Because of those relationships, the offering will be conducted in accordance with NASD Rule 2720. This rule requires, among other things, that a qualified independent underwriter has participated in the preparation of, and has exercised the usual standards of "due diligence" in respect to, the registration statement and this prospectus. Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to act as qualified independent underwriter for the offering and to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act of 1933, as amended (or the "Securities Act"), specifically including those inherent in Section 11 of the Securities Act. We have agreed to indemnify Merrill Lynch, Pierce, Fenner & Smith Incorporated against liabilities in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act.

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RISK FACTORS

        An investment in our Class A common stock involves a high degree of risk. You should carefully consider the following information, together with the other information in this prospectus, prior to making a decision to purchase shares of our Class A common stock. This prospectus contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed herein. If any of the following risks occur or if any additional risks and uncertainties not presently known to us or not currently believed to be material occur, our business, results of operations, financial condition or prospects could be materially adversely affected.


Risks Related to the Company's Businesses and Industry

        For purposes of the following risk factors, references made to Ramius's funds include hedge funds and other alternative investment management products offered by the Company and funds in the Ramius fund of funds business and real estate funds.

The Company

Difficult market conditions, market disruptions and volatility have adversely affected and may in the future continue to adversely affect the Company's businesses, results of operations and financial condition.

        The Company's businesses, by their nature, do not produce predictable earnings, and all of the Company's businesses may be materially affected by conditions in the global financial markets and by global economic conditions, such as interest rates, the availability of credit, inflation rates, economic uncertainty, changes in laws, commodity prices, asset prices (including real estate), currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or security operations). Recently, global credit and other financial markets have suffered and continue to suffer substantial stress, volatility, illiquidity and disruption. Market turbulence reached unprecedented levels during the third and fourth quarters of 2008, as loss of investor confidence in the financial system resulted in an historically unprecedented lack of liquidity, decline in asset values (including real estate assets), and the bankruptcy or acquisition of, or government assistance to, several major domestic and international financial institutions. These factors, combined with volatile commodity prices and foreign exchange rates, have contributed to recessionary economic conditions globally and a deterioration in consumer and corporate confidence and could further exacerbate the overall market disruptions and risks to market participants, including the Ramius funds and managed accounts. These market conditions may affect the level and volatility of securities prices and the liquidity and the value of investments in the Ramius funds (including Ramius Enterprise L.P. (which we refer to as Enterprise) in which the Company has an investment of approximately $276 million of its own capital as of September 30, 2009) and managed accounts, and the Company may not be able to effectively manage its alternative investment management business's exposure to these market conditions. Losses in Enterprise could adversely affect our results of operations.

        In addition, industry-wide declines in the size and number of underwritings and mergers and acquisitions have had an adverse effect on revenues of Cowen and Company due to the decrease in equity underwritings and the decline in both announced and completed mergers and acquisitions. Continued weakness in equity markets and diminished trading volume of securities could further adversely impact Cowen and Company's brokerage business, from which Cowen Holdings historically generated a significant portion of its revenues. In addition, reductions in the trading prices for equity securities also tend to reduce the dollar value of investment banking transactions, such as underwriting and merger and acquisition transactions, which in turn would likely reduce the fees that Cowen and Company earns from these transactions. As the Company may be unable to reduce expenses correspondingly, its profits and profit margins of its investment banking business may decline. During 2008, the adverse market conditions impacted Cowen and Company's investment banking business, and

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there can be no assurance that these conditions will improve in the near term. Until they do, the Company expects its results of operations to be negatively impacted.

The Company is expected to incur substantial expenses related to the integration of Ramius and Cowen Holdings.

        The Company expects to continue to incur substantial expenses in connection with the integration of the business, policies, procedures, operations, technologies and systems of Ramius and Cowen Holdings. There are a large number of functions that must be integrated, including but not limited to information technology, finance, human resources, audit, corporate communications, risk management and legal and compliance. Furthermore, the Company expects to move its employees in New York to a single office location, which will likely result in the Company incurring additional costs for rent and capital expenditures. While the Company has calculated an estimate of expenses, there are a number of factors beyond the Company's control that could affect the total amount or the timing of all of the expected integration expenses. Moreover, many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. These expenses could, particularly in the near term, exceed the savings that the Company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale, cost savings and revenue synergies related to the integration of the businesses as a result of the Transactions.

Although the Company expects that the combination of the businesses of Ramius and Cowen and Company will result in benefits to the Company, the Company may not realize those benefits because of integration difficulties and other challenges.

        The success of the combination of the businesses of Ramius and Cowen and Company will depend in large part on the success of the management of the Company in integrating the operations, strategies, technologies and personnel of the two predecessor companies. The Company may fail to realize some or all of the anticipated benefits of the Transactions if the integration process takes longer or is more costly than expected. The failure of the Company to meet the challenges involved in successfully integrating the operations of Ramius and Cowen and Company or to otherwise realize any of the anticipated benefits of the Transactions, including additional revenue opportunities, could impair the operations of the Company. In addition, the Company anticipates that the overall integration of the companies will be a complex, time-consuming and expensive process that, without proper planning and effective and timely implementation, could significantly disrupt the business of Ramius and Cowen and Company.

        Potential difficulties the Company may encounter in the integration process include the following:

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        The anticipated benefits and synergies include the combination of offices in various locations and the elimination of numerous technology systems, duplicative personnel and duplicative market and other data sources. However, these anticipated benefits and synergies assume a successful integration and are based on projections and other assumptions, which are inherently uncertain. Furthermore, the combination of the Company's offices in New York will likely result in the Company initially incurring additional costs for rent and capital expenditures.

        Ramius and Cowen and Company operate in different business segments. Ramius's business is alternative investment management. Ramius's investment products and services include hedge funds, fund of funds, real estate funds, healthcare royalty funds and cash management services. Cowen and Company has a financial services practice, including investment banking, equity research, sales and trading and alternative investment management services. Although the management of the Company includes executives from both Ramius and Cowen and Company, the Company cannot guarantee that it will integrate and operate the business lines of Ramius and Cowen and Company to achieve the cost savings and other benefits that are anticipated to result from the Transactions. Even if integration is successful, anticipated benefits and synergies may not be achieved.

The Company's alternative investment management and investment banking businesses have incurred losses in recent periods and may incur losses in the future.

        The Company's alternative investment management and investment banking businesses have incurred losses in several recent periods and also recorded net losses in certain quarters within other fiscal years. The Company may incur losses in any of its future periods. Future losses may have a significant effect on the Company's liquidity as well as our ability to operate.

        In addition, we may incur significant expenses in connection with any expansion, strategic acquisition or investment with respect to our businesses. Accordingly, the Company will need to increase its revenues at a rate greater than its expenses to achieve and maintain profitability. If the Company's revenues do not increase sufficiently, or even if its revenues increase but it is unable to manage its expenses, the Company will not achieve and maintain profitability in future periods. As an alternative to increasing its revenues, the Company may seek additional capital the sale of additional common stock or through other forms of financing. Particularly in light of current market conditions, the Company cannot be certain that it would have access to such financing on acceptable terms.

The Company depends on its key senior personnel and the loss of their services would have a material adverse effect on the Company's businesses and results of operations, financial condition and prospects.

        The Company depends on the efforts, skill, reputations and business contacts of its principals, Peter A. Cohen, David M. Malcolm, Jeffrey M. Solomon, Morgan B. Stark and Thomas W. Strauss and other key senior personnel, the information and investment activity these individuals generate during the normal course of their activities and the synergies among the diverse fields of expertise and knowledge held by the Company's senior professionals. Accordingly, the Company's continued success will depend on the continued service of these individuals. Key senior personnel may leave the Company in the future, and we cannot predict the impact that the departure of any key senior personnel will have on our ability to achieve our investment and business objectives. The loss of the services of any of them could have a material adverse effect on the Company's revenues, net income and cash flows and could harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the future. Ramius historically relied in part on the interests of certain of these professionals in a special allocation to Ramius's managing member to discourage them from leaving Ramius's employ. However, in connection with the Transactions, the special allocation was terminated

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and will no longer act as incentive for them to continue to be employed at the Company. Our senior and other key personnel possess substantial experience and expertise and have strong business relationships with investors in its funds, clients and other members of the business community. As a result, the loss of these personnel could have a material adverse effect on the Company's businesses and results of operations, financial condition and prospects.

The Company's ability to retain its senior professionals is critical to the success of its businesses, and its failure to do so may materially affect the Company's reputation, business and results of operations.

        Our people are our most valuable resource. Our success depends upon the reputation, judgment, business generation capabilities and project execution skills of our senior professionals. The Company's employees' reputations and relationships with our clients are critical elements in obtaining and executing client engagements. Ramius and Cowen and Company encounter intense competition for qualified employees from other companies inside and outside of their industries. From time to time, Ramius and Cowen and Company have experienced departures of professionals. Losses of key personnel have occurred and may occur in the future. In addition, if any of our client-facing employees or executive officers were to join an existing competitor or form a competing company, some of our clients could choose to use the services of that competitor instead of the services of Ramius and Cowen and Company. The consummation of the Transactions caused all unvested RCG equity and Cowen Holdings equity held by our employees prior to the Transactions to vest. There is no guarantee that the compensation arrangements and share lock-up agreements we may have entered into with our senior professionals are sufficiently broad or effective to prevent them from resigning to join our competitors.

        The success of our businesses is based largely on the quality of our employees and we must continually monitor the market for their services and seek to offer competitive compensation. In challenging market conditions, such as have occurred over the past two years, it may be difficult to pay competitive compensation without the ratio of our compensation and benefits expense to revenues becoming higher.

Volatility in the value of the Company's investments and securities portfolios or other assets and liabilities could adversely affect the financial condition or operations of the Company.

        The Company is subject to the provisions of Accounting Standards Codification (ASC) Topic 820 (which we refer to as ASC 820) which RCG, as the accounting predecessor of the Company, adopted on January 1, 2008. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a framework for measuring fair value and a valuation hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Changes in fair value are reflected in the statement of operations at each measurement period. Therefore, continued volatility in the value of the Company's investments and securities portfolios or other assets and liabilities, including funds, will result in volatility of the Company's results. As a result, the changes in value may have an adverse effect on the Company's financial condition or operations in the future.

Limitations on the access to capital by the Company and its subsidiaries could impair its liquidity and its ability to conduct its businesses.

        Liquidity, or ready access to funds, is essential to financial services firms. Failures of financial institutions have often been attributable in large part to insufficient liquidity. Liquidity is of particular importance to Cowen and Company's trading business and perceived liquidity issues may affect the Company's investment banking clients' and counterparties' willingness to engage in brokerage transactions with Cowen and Company. Cowen and Company's liquidity could be impaired due to circumstances that the Company may be unable to control, such as a general market disruption or an operational problem that affects Cowen and Company's trading clients, third parties or Cowen and

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Company. Further, Cowen and Company's ability to sell assets may be impaired if other market participants are seeking to sell similar assets at the same time.

        The Company is a holding company and primarily depends on dividends from its subsidiaries to funds its operations. Cowen and Company is subject to the net capital requirements of the SEC and various self-regulatory organizations of which it is a member. These requirements typically specify the minimum level of net capital a broker-dealer must maintain and also mandate that a significant part of its assets be kept in relatively liquid form. Cowen International Limited (which we refer to as CIL), the Company's U.K. registered broker-dealer subsidiary, is subject to the capital requirements of the Financial Services Authority of the United Kingdom (which we refer to as the FSA). Cowen Latitude Advisors Limited (which we refer to as CLAL) is subject to the financial resources requirements of the Securities and Futures Commission of Hong Kong (which we refer to as the SFC). Any failure to comply with these capital requirements could impair the Company's ability to conduct its investment banking business.

Ramius and its funds and/or Cowen and Company may become subject to additional regulations which could increase the costs and burdens of compliance or impose additional restrictions which could have a material adverse effect on the Company's businesses and the performance of the funds in its alternative investment management business.

        Firms in the financial services industry have been subject to an increasingly regulated environment. The industry has experienced increased scrutiny from a variety of regulators, including the United States Securities and Exchange Commission (which we refer to as the SEC), the Financial Industry Regulatory Authority (which we refer to as FINRA), the New York Stock Exchange (which we refer to as NYSE), and state attorneys general. Penalties and fines sought by regulatory authorities have increased substantially over the last several years. In light of current conditions in the global financial markets and the global economy, regulators have increased their focus on the regulation of the financial services industry. The Company may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. The Company also may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other United States or foreign governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. Among other things, the Company could be fined, prohibited from engaging in some of its business activities or subjected to limitations or conditions on its business activities. In addition, the Company could incur significant expense associated with compliance with any such legislation or regulations or the regulatory and enforcement environment generally. Substantial legal liability or significant regulatory action against the Company could have material adverse financial effects or cause significant reputational harm to the Company, which could seriously affect its business prospects.

        The Company may need to modify the strategies or operations of its alternative investment management business, face increased constraints or incur additional costs in order to satisfy new regulatory requirements or to compete in a changed business environment. The Company's alternative investment management business is subject to regulation by various regulatory authorities that are charged with protecting the interests of investors. The activities of certain of the Company's subsidiaries are regulated primarily by the SEC, FINRA, and the National Futures Association, as well as various state agencies, within the United States and are also subject to regulation in the various other jurisdictions in which they operate, including the FSA, the Financial Services Agency of Japan, the SFC, the German Federal Financial Supervisory Authority and the Commission of the Surveillance of the Financial Sector in Luxembourg. The activities of Ramius LLC, Ramius Securities LLC, Ramius Advisors, LLC, Ramius Asia, LLC, Ramius Alternative Solutions, Ramius Structured Credit Group LLC and RCG Starboard Advisors, LLC are all regulated by the SEC due to their registrations as U.S. investment advisers. In addition, the funds in the Company's alternative investment

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management business are subject to regulation in the jurisdictions in which they are organized. These and other regulators in these jurisdictions have broad regulatory powers dealing with all aspects of financial services including, among other things, the authority to make inquiries of companies regarding compliance with applicable regulations, to grant permits and to regulate marketing and sales practices and the maintenance of adequate financial resources. The Company is also subject to applicable anti-money laundering regulations and net capital requirements in the jurisdictions in which it operates. Additionally, the regulatory environment in which the Company operates frequently changes and has seen significant increased regulation in recent years and it is possible that this trend may continue. The Company may be materially adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. Such additional regulation could, among other things, increase compliance costs or limit our ability to pursue investment opportunities and strategies.

        The regulatory environment continues to be turbulent as regulators globally respond to the recent financial crisis. There is an extraordinary volume of regulatory discussion papers, draft directives and proposals being issued globally and these initiatives are not always coordinated. The European Commission has issued a draft Directive on Alternative Investment Fund Managers, recommendations on directors' pay and pay for the financial services sector and proposals on packaged retail investment products. In addition, the Financial Services Authority of the United Kingdom has issued a discussion paper entitled "A Regulatory Response to the Global Banking Crisis" as well as undertaken an exercise to collect data to assess the systemic risk that hedge funds may or may not pose. The Bank of England is also collecting data on the systemic risk of hedge funds. Recent rulemaking by the SEC and other regulatory authorities outside the United States have imposed trading restrictions and reporting requirements on short selling, which have impacted certain of the investment strategies of the Company's investment funds and managed accounts, and continued restrictions on or further regulations of short sales could negatively impact the performance of the investment funds and managed accounts.

        In addition, financial services firms are subject to numerous perceived or actual conflicts of interest, which have drawn scrutiny from the SEC and other federal and state regulators. For example, the research areas of investment banks have been and remain the subject of heightened regulatory scrutiny, which has led to increased restrictions on the interaction between equity research analysts and investment banking personnel at securities firms. While the Company maintains various policies, controls and procedures to address or limit actual or perceived conflicts and regularly seeks to review and update such policies, controls and procedures, appropriately dealing with conflicts of interest is complex and difficult, and our reputation could be damaged if it fails to do so. Such policies and procedures to address or limit actual or perceived conflicts may also result in increased costs, additional operational personnel and increased regulatory risk. Failure to adhere to these policies and procedures may result in regulatory sanctions or client litigation.

Cowen and Company, Ramius and the Company are subject to third party litigation risk and regulatory risk which could result in significant liabilities and reputational harm which, in turn, could materially adversely affect their business, results of operations and financial condition.

        As an investment banking firm, Cowen and Company depends to a large extent on its reputation for integrity and high-caliber professional services to attract and retain clients. As a result, if a client is not satisfied with Cowen and Company's services, it may be more damaging in its business than in other businesses. Moreover, Cowen and Company's role as advisor to clients on important underwriting or merger and acquisition transactions involves complex analysis and the exercise of professional judgment, including rendering "fairness opinions" in connection with mergers and other transactions. Such activities may subject the Company to the risk of significant legal liabilities to clients and aggrieved third parties, including stockholders of clients who could commence litigation against Cowen

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and Company and/or the Company. Although Cowen and Company's investment banking engagements typically include broad indemnities from its clients and provisions to limit exposure to legal claims relating to such services, these provisions may not protect the Company or may not be enforceable in all cases. As a result, the Company may incur significant legal and other expenses in defending against litigation and may be required to pay substantial damages for settlements and/or adverse judgments. Substantial legal liability or significant regulatory action against the Company could have a material adverse effect on our results of operations or cause significant reputational harm, which could seriously harm our business and prospects.

        In connection with Cowen Holdings' initial public offering in July 2006 (which we refer to as the Cowen Holdings' IPO), Cowen Holdings entered into an Indemnification Agreement with Société Générale (which we refer to as SG), wherein, among other things, SG agreed to indemnify Cowen Holdings for all liability arising out of all known, pending or threatened litigation (including the cost of such litigation) and arbitrations and certain known regulatory matters, in each case, that existed prior to the date of Cowen Holdings' IPO. SG, however, will not indemnify Cowen Holdings, and Cowen Holdings will instead indemnify SG, for most litigation, arbitration and regulatory matters that may occur in the future but were unknown at the time of Cowen Holdings' IPO and certain known regulatory matters.

        In general, the Company is exposed to risk of litigation by investors in its alternative investment management business if the management of any of its funds is alleged to constitute negligence or dishonesty. Investors could sue to recover amounts lost by the Company's funds due to any alleged misconduct, up to the entire amount of the loss. We may also be exposed to litigation by investors in the Ramius fund of funds platform for losses resulting from similar conduct at an underlying fund. Furthermore, the Company may be subject to litigation arising from investor dissatisfaction with the performance of the Ramius funds and the funds invested in by the Ramius fund of funds platform. In addition, the Company is exposed to risks of litigation or investigation relating to transactions which presented conflicts of interest that were not properly addressed. In the majority of such actions the Company would be obligated to bear legal, settlement and other costs, which may be in excess of any available insurance coverage. In addition, although the Company is indemnified by the Ramius funds, our rights to indemnification may be challenged. If the Company is required to incur all or a portion of the costs arising out of litigation or investigations as a result of inadequate insurance proceeds, if any, or fails to obtain indemnification from its funds, our business, results of operations and financial condition could be materially adversely affected. In its alternative investment management business, the Company is exposed to the risk of litigation if a fund suffer catastrophic losses due to the failure of a particular investment strategy or due to the trading activity of an employee who has violated market rules or regulations. Any litigation arising in such circumstances is likely to be protracted, expensive and surrounded by circumstances which are materially damaging to Ramius's and the Company's reputations and businesses. In addition, the Company faces the risk of litigation from investors in the Ramius funds if restrictions applicable to such funds are violated.

As a result of the Transactions, there exists the potential for conflicts of interest, and a failure to appropriately identify and deal with conflicts of interest could adversely affect our businesses.

        With the combination of our alternative investment management and investment banking businesses, we will likely face an increasing potential for conflicts of interest, including situations where our services to a particular client, investor or our own interests in our investments conflict with the interests of another client. Such conflicts may also arise if our investment banking business has access to material non-public information that may not be shared with our alternative investment management business or vice versa. Additionally, our regulators have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions.

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        We have developed and implemented procedures and controls that are designed to identify and address conflicts of interest, including those designed to prevent the improper sharing of information among our businesses. However, appropriately identifying and dealing with conflicts of interest is complex and difficult, and the willingness of clients to enter into transactions or engagements in which such a conflict might arise may be affected if we fail to identify and deal appropriately with potential conflicts of interest. In addition, potential or perceived conflicts could give rise to litigation or enforcement actions.

Employee misconduct could harm Ramius, Cowen and Company and the Company by, among other things, impairing the Company's ability to attract and retain investors and subjecting the Company to significant legal liability, reputational harm and the loss of revenue from its own invested capital.

        It is not always possible to detect and deter employee misconduct. The precautions that the Company takes to detect and prevent this activity may not be effective in all cases, and we may suffer significant reputational harm and financial loss for any misconduct by our employees. The potential harm to the Company's reputation and to our business caused by such misconduct is impossible to quantify.

        There is a risk that the Company's employees or partners, or the managers of funds invested in by the Ramius fund of funds platform, could engage in misconduct that materially adversely affects the Company's business, including a decrease in returns on its own invested capital. The Company is subject to a number of obligations and standards arising from its alternative investment management business. The violation of these obligations and standards by any of the Company's employees could materially adversely affect the Company and its investors. For instance, the Company's businesses require that the Company properly deal with confidential information. If the Company's employees were improperly to use or disclose confidential information, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to detect or deter misconduct, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases. If one of the Company's employees were to engage in misconduct or were to be accused of such misconduct, the business and reputation of the Company could be materially adversely affected.

Required reductions in the available credit under the Company's secured revolving loan facility may limit our ability to maintain sufficient liquidity and any additional financing that we may need may not be available on favorable terms, or at all.

        Under the terms of the Company's secured revolving loan facility the amount of capital available is to be reduced to $25 million from $50 million on January 4, 2010, requiring us to reduce the outstanding balance to $25 million as of or prior to such date. The total amount outstanding as of the date hereof was approximately $43.0 million plus an outstanding letter of credit of approximately $7 million. As discussed under "Use of Proceeds", we intend to use a portion of the net proceeds of the offering to repay amounts outstanding under the secured revolving loan facility so that the remaining balance plus outstanding letters of credit will not exceed $25 million. Such reduction in our available liquidity could have a material adverse impact on our future financial position and results of operations and we may be required to obtain additional financing from other sources. There can be no assurance that we can find such financing in the amounts required or that the terms, covenants and the cost of such financing will be as favorable as those which were available under our existing secured revolving loan facility. If we are unable to obtain additional capital, we may have to change our business and capital expenditure plans, which would have a materially adverse effect on our future results of operations.

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The Company may be unable to successfully identify, manage and assimilate future acquisitions, investments and strategic alliances, which could adversely affect our results of operations.

        We intend to continually evaluate potential acquisitions, investments and strategic opportunities to expand our alternative investment management and investment banking businesses. In the future, we may seek additional acquisitions, investments, strategic alliances or similar arrangements, which may expose us to risks such as:

        Furthermore, any future acquisitions of businesses could entail a number of risks, including:

        There can be no assurance that we would successfully overcome these risks or any other problems encountered with these acquisitions, investments, strategic alliances or similar arrangements.

As a result of RCG's majority ownership interest in the Company, RCG controls matters requiring stockholder approval and its ownership could affect the liquidity in the market for our Class A common stock.

        RCG's majority ownership stake in the Company gives it control over matters requiring approval by the Company's stockholders, including the election of directors and approval of significant corporate transactions. Furthermore, RCG's managing member is controlled by certain members of our senior management, including Peter A. Cohen, our Chairman and Chief Executive Officer. Corporate action may be taken even if other stockholders, including those who purchase shares in this offering, oppose such action. RCG's concentration of ownership and ability to determine the composition of the Company's board of directors may discourage a third party from proposing a change of control or other strategic transaction concerning the Company or otherwise have the effect of delaying or preventing a change of control of the Company that other stockholders may view as beneficial. As a result, the Company's Class A common stock could trade at prices that do not reflect a "control premium" to the same extent as do the stocks of similarly situated companies that do not have any single stockholder with an ownership interest as large as RCG's ownership interest.

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The Company is a "controlled company" within the meaning of the NASDAQ rules and, as a result, will qualify for, and rely on, exemptions from certain corporate governance standards, which may limit the presence of independent directors on the board of directors or board committees of the Company.

        RCG beneficially owns shares of the Company's capital stock which represent approximately 65.4% of the outstanding voting power of the Company's capital stock (or approximately 51.5% after giving effect to this offering, assuming no exercise of the underwriters' over-allotment option and approximately 49.97% assuming the underwriters' over-allotment option is exercised in full). Accordingly, the Company is a majority-owned subsidiary of RCG and RCG has the ability to elect the Company's board of directors and thereby control the management and affairs of the Company. Therefore, the Company is deemed to be a "controlled company" for purposes of NASDAQ Rule 5615(c)(2). Under this rule, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a "controlled company" and is exempt from certain corporate governance requirements, including requirements that (1) a majority of the board of directors consist of independent directors, (2) compensation of officers be determined or recommended to the board of directors by a majority of its independent directors or by a compensation committee that is composed entirely of independent directors and (3) director nominees be selected or recommended for selection by a majority of the independent directors or by a nominating committee composed solely of independent directors. Accordingly, the Company's stockholders may not have the same protections afforded to stockholders of other companies that are required to fully comply with the NASDAQ rules. Solely for the purpose of including the director designated by BA Alpine Holdings, Inc. as a member of each of the compensation committee and the nominating and governance committee, the Company has elected to be treated as a "controlled company" for purposes of NASDAQ Rule 5615(c)(2). Even though the Company is treated as a "controlled company," a majority of the Company's board of directors consists of independent directors and each member of each of the compensation committee and the nominating and governance committee other than the director designated by BA Alpine Holdings, Inc. is independent. If the underwriters' over-allotment option is exercised in full, RCG will own approximately 49.97% of the outstanding voting power of the Company's capital stock and the Company would no longer be treated as a "controlled company" for purposes of NASDAQ Rule 5615(c)(2).

The market price of the Company's Class A common stock may decline in the future as a result of the Transactions.

        The market price of the Company's Class A common stock may decline in the future as a result of the Transactions for a number of reasons, including:

The unaudited pro forma financial data for the Company included in this prospectus are preliminary, and the Company's actual financial position and operations may differ materially from the unaudited pro forma financial data included in this document.

        The unaudited pro forma financial data for the Company in this prospectus are presented for illustrative purposes only and are not necessarily indicative of what the Company's actual financial position or operations would have been had the Transactions been completed on the dates indicated.

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The Company's future results will suffer if the Company does not effectively manage its expanded operations following the Transactions.

        The Company may continue to expand its operations through new product and service offerings and through additional strategic investments, acquisitions or joint ventures, some of which may involve complex technical and operational challenges. The Company's future success depends, in part, upon its ability to manage its expansion opportunities, which pose numerous risks and uncertainties, including the need to integrate new operations into its existing business in an efficient and timely manner, to combine accounting and data processing systems and management controls and to integrate relationships with customers and business partners. In addition, future acquisitions or joint ventures may involve the issuance of additional shares of common stock of the Company, which may dilute the ownership of the Company's stockholders.

        In 2008, Cowen Holdings expanded its investment banking business in China with the acquisition of Cowen Latitude Capital Group. The continued expansion of the Company's investment banking business in China may require significant resources and/or may result in significant unanticipated losses, costs or liabilities. In addition, geographic and other expansion, acquisitions or joint ventures may require significant managerial attention, which may be diverted from other operations. These capital, equity and managerial commitments may impair the operation of the Company's businesses.

BA Alpine Holdings, Inc., its designee on the Company's board of directors and RCG may have interests that conflict with your interests.

        BA Alpine Holdings, Inc., its designee on the Company's board of directors and RCG may have interests that conflict with, or are different from, the Company's and your own. Conflicts of interest between BA Alpine Holdings, Inc. and/or RCG and the Company may arise, and such conflicts of interest may not be resolved in a manner favorable to the Company, including potential competitive business activities (in the case of BA Alpine Holdings, Inc.), corporate opportunities, indemnity arrangements, registration rights and sales or distributions by RCG, BA Alpine Holdings, Inc. or their respective affiliates of Class A common stock. The Company's amended and restated certificate of incorporation and by-laws do not contain any provisions designed to facilitate resolution of actual or potential conflicts of interest, or to ensure that potential business opportunities that may become available to BA Alpine Holdings, Inc. and the Company will be reserved for or made available to the Company. Pertinent provisions of law will govern any such matters if they arise. In addition, RCG, as the holder of the majority of the Company's issued and outstanding shares of Class A common stock, could delay or prevent an acquisition or merger even if such a transaction would benefit other stockholders.

The Company's failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on the Company's financial condition, results of operations, business and price of our Class A common stock.

        The Sarbanes-Oxley Act and the related rules require our management to conduct annual assessment of the effectiveness of our internal control over financial reporting and require a report by our independent registered public accounting firm addressing our internal control over financial reporting. To comply with Section 404 of the Sarbanes-Oxley Act, we have documented formal policies, processes and practices related to financial reporting that are necessary to comply with Section 404. Such policies, processes and practices are important to ensure the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within our organization.

        If we fail for any reason to comply with the requirements of Section 404 in a timely manner, our independent registered public accounting firm may issue an adverse report regarding the effectiveness

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of our internal control over financial reporting. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Any such event could adversely affect our financial condition, results of operations and business, and lead to a decline in the price of our Class A common stock.

Risks Related to the Company's Alternative Investment Management Business

Ramius's profitability and, thus, the Company's profitability may be adversely affected by decreases in revenue relating to changes in market and economic conditions.

        The adverse market conditions of the second half of 2008 continued in the early part of 2009 and while conditions have recently improved slightly, global market conditions have been and remain inherently unpredictable and outside of the Company's control. If these conditions continue, they may result in further reductions in Ramius's revenue and results of operations by causing a continued decline in assets under management, resulting in lower management fees and incentive income, an increase in the cost of financial instruments, lower investment returns, reduced demand for assets held by the Ramius funds, which would negatively affect the funds' ability to realize value from such assets and continued investor redemptions, resulting in lower fees and increased difficulty in raising new capital.

        These factors may reduce Ramius's revenue, revenue growth and income and may slow or reduce the growth of the alternative investment management business or may contract the alternative investment management business. In particular, negative fund performance reduces assets under management, which decreases the management fees and incentive income that Ramius earns. Negative performance of the Ramius Enterprise Master Fund Ltd (which we refer to as the Enterprise Fund) also decreases revenue derived from the Company's returns on investment of its own capital.

The net asset values of many Ramius funds are beneath their "high-water marks," which will limit the Company's ability to earn incentive income from such funds.

        Incentive income, which has historically comprised a substantial portion of Ramius's annual revenues, is subject to "high-water marks" whereby incentive income is earned by Ramius only to the extent that the net asset value of a fund at the end of a measurement period exceeds the highest net asset value as of the end of a preceding measurement period for which Ramius earned incentive income. Ramius's incentive allocations are also subject, in some cases, to performance hurdles. As a result of negative investment performance in 2008, Ramius entered 2009 with high-water marks in many hedge funds, which require the Ramius funds to recover cumulative losses before Ramius can begin to earn incentive income in 2009 and beyond with respect to the investments of fund investors who suffered losses last year. In order for Ramius to begin earning incentive fees from investors who had incurred losses in 2008, the respective funds they are invested in need to recoup the losses they incurred in 2008. For example, the net asset value of Ramius Multi-Strategy Fund Ltd decreased by 26.76% net of management fees in 2008 (assuming no further recovery from the 80% discount that Ramius has valued the net equity claim for assets held at Lehman Brothers International (Europe) (which we refer to as LBIE)). In order for Ramius to earn an incentive fee with respect to an investor who had participated fully in this loss, the fund will have to increase net asset value by 36.5%, net of management fees. Such analysis applies to each fund which incurred 2008 losses and current market conditions make it difficult to predict when Ramius will be eligible to earn incentive income from such funds.

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        Certain of the Ramius funds face particular retention issues with respect to investment professionals whose compensation is tied, often in large part, to performance thresholds, or "high water marks." This retention risk is heightened during periods similar to those we are currently experiencing where market conditions make it more difficult to generate positive investment returns. For example, several investment professionals receive performance-based compensation at the end of each year based upon their annual investment performance, and this performance-based compensation represents substantially all of the compensation the professional is entitled to receive during the year. If the investment professional's annual performance is negative, the professional will not be entitled to receive any performance-based compensation for the year. If the investment professional or fund, as the case may be, does not produce investment results sufficient to merit performance-based compensation, any affected investment professional may be incentivized to join a competitor because doing so would allow the professional to eliminate the burden of having to satisfy the high water mark before earning performance-based compensation.

Investors in the Ramius funds and investors with managed accounts can generally redeem investments with prior notice. The rate of redemptions has recently accelerated and could continue to further accelerate. Redemptions have, and may continue to, create difficulties in managing the liquidity of the Ramius funds and managed accounts, reduce assets under management and adversely affect the Company's revenues.

        Investors in the Ramius funds and investors with managed accounts may generally redeem their investments with prior notice, subject to certain initial holding periods. Investors may reduce the aggregate amount of their investments, or transfer their investments to other funds or asset managers with different fee rate arrangements, for any number of reasons, including investment performance, changes in prevailing interest rates and financial market performance. Furthermore, investors in the Ramius funds may be investors in products managed by other alternative asset managers where redemptions have been restricted or suspended. Such investors may redeem capital from Ramius funds, even if the Ramius funds' performance is superior, due to an inability to redeem capital from other managers. Investors have less confidence now and their allocation process is more selective and deliberate. Increased volatility in global markets could accelerate the pace of fund and managed account redemptions. Redemptions of investments in the Ramius funds could also take place more quickly than assets may be sold by those funds to meet the price of such redemptions, which could result in the relevant funds and/or Ramius being in breach of applicable legal, regulatory and contractual requirements in relation to such redemptions, resulting in possible regulatory and investor actions against Ramius, the Ramius funds and/or the Company. If the Ramius funds or managed accounts underperform, existing investors may decide to reduce or redeem their investments or transfer asset management responsibility to other asset managers and the Company may be unable to obtain new alternative investment management business. Any such action would potentially cause further redemptions and/or make it more difficult to attract new investors.

        The redemption of investments in the Ramius funds or in managed accounts could also adversely affect the revenues of the Company's alternative investment management business, which are substantially dependent upon the assets under management in the Ramius funds. If redemptions of investments cause revenues to decline, they would likely have a material adverse effect on our business, results of operations or financial condition. As a result of recent market developments and the potential for increased and continuing disruptions and the resulting uncertainty during the second half of 2008 and early 2009, Ramius has recently experienced an increase in the level of redemptions from the Ramius funds and managed accounts. Furthermore, redemption rates may stay elevated within the industry while market conditions remain unsettled. If the level of redemption activity persists at above historic levels, it could become more difficult to manage the liquidity requirements of the Ramius funds, making it more difficult or more costly for the Ramius funds to liquidate positions rapidly to meet redemption requests or otherwise. This in turn may negatively impact the Company's returns on its own invested capital.

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        In addition to the impact on the market value of assets under management, the illiquidity and volatility of the global financial markets have negatively affected Ramius's ability to manage inflows and outflows from the Ramius funds. The Company's ability to attract new capital to existing Ramius funds or to develop new investment platforms may be negatively impacted during this period. Several alternative investment managers, including Ramius, have recently exercised and may in the future exercise their rights to limit, and in some cases, suspend, redemptions from the funds they manage. Ramius has also and may in the future negotiate with investors in an attempt to limit redemptions or create a variety of other investor structures to bring fund assets and liquidity requirements into a more manageable balance. To the extent that Ramius has negotiated with investors to limit redemptions, it may be likely that such investors will continue to seek further redemptions in the future. Such actions may have an adverse effect on the ability of the Ramius funds to attract additional assets under management. The Ramius fund of funds platform may also be adversely impacted as the hedge funds in which it invests themselves face similar investor redemptions or if such hedge funds exercise their rights to limit or suspend Ramius's redemptions from such funds. Poor performance relative to other asset management firms may result in reduced investments in the Ramius funds and managed accounts and increased redemptions from the Ramius funds and managed accounts. As a result, investment underperformance would likely have a material adverse effect on the Company's results of operations and financial condition.

Hedge fund investments, including the investments of the Company's own capital in the Enterprise Fund, are subject to other additional risks.

        Investments by the Ramius funds (including the Enterprise Fund in which the Company's own capital is invested) are subject to certain risks that may result in losses. Decreases to assets under management as a result of investment losses or client redemptions may have a material adverse effect on the Company's revenues, net income and cash flows and could harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the future. Additional risks include the following:

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If a Ramius fund's counterparty for any of its derivative or non-derivative contracts defaults on the performance of those contracts, the Company may not be able to cover its exposure under the relevant contract.

        The Ramius funds enter into numerous types of financing arrangements with a wide array of counterparties around the world, including loans, hedge contracts, swaps, repurchase agreements and other derivative and non-derivative contracts. The terms of these contracts are generally complex and often customized and often are not currently subject to regulatory oversight. The Company is subject to the risk that the counterparty to one or more of these contracts may default, either voluntarily or involuntarily, on its performance under the contract. Any such default may occur at any time without notice. Additionally, Ramius may not be able to take action to cover its exposure if a counterparty defaults under such a contract, either because of a lack of the contractual ability or because market conditions make it difficult to take effective action. The impact of market stress or counterparty financial condition may not be accurately foreseen or evaluated and, as a result, Ramius may not take sufficient action to reduce its risks effectively.

        Counterparty risk is accentuated where the fund has concentrated its transactions with a single or small group of counterparties. Generally, hedge funds are not restricted from concentrating any or all of their transactions with one counterparty. Moreover, the funds' internal review of the creditworthiness

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of their counterparties may prove inaccurate. The absence of a regulated market to facilitate settlement and the evaluation of creditworthiness may increase the potential for losses.

The Company may suffer losses in connection with the insolvency of prime brokers, custodians, administrators and other agents whose services the Company uses and who may hold assets of Ramius funds.

        All of the Ramius funds use the services of prime brokers, custodians, administrators or other agents to carry out certain securities transactions and to conduct certain business of the Ramius funds. In the event of the insolvency of a prime broker and/or custodian, the Ramius funds might not be able to recover equivalent assets in full as they may rank among the prime broker's and custodian's unsecured creditors in relation to assets which the prime broker or custodian borrows, lends or otherwise uses. In addition, the Ramius funds' cash held with a prime broker or custodian (if any) may not be segregated from the prime broker's or custodian's own cash, and the funds will therefore rank as unsecured creditors in relation thereto. Specifically, certain Ramius funds used an affiliate of Lehman Brothers as one of their prime brokers and some of these funds also held assets through accounts at Lehman Brothers. Other affiliates of Lehman Brothers that are now in insolvency proceedings were also trading counterparties for some of the hedge funds managed by Ramius. The total net equity claim of the Ramius funds with respect to Lehman Brothers was approximately $251.2 million. The Company estimates the total recoverable claim of the Ramius funds against Lehman Brothers and its affiliates to be approximately $58.6 million. See the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company—Assets Under Management and Fund Performance—2008 Fund Performance—Lehman Brothers" for more information.

Operational risks relating to the failure of data processing systems and other information systems and technology may disrupt our alternative investment management business, result in losses or limit the business's operations and growth.

        Ramius and its funds rely heavily on financial, accounting, trading and other data processing systems to, among other things, execute, confirm, settle and record transactions across markets and geographic locations in a time-sensitive, efficient and accurate manner. If any of these systems do not operate properly or are disabled, the Company could suffer financial loss, a disruption of its business, liability to the Ramius funds, regulatory intervention or reputational damage. In addition, Ramius is highly dependent on information systems and technology. The cost of maintaining such systems may increase from its current level. Such a failure to accommodate Ramius's operational needs, or an increase in costs related to such information systems, could have a material adverse effect on the Company, both with respect to a decrease in the operational performance of its alternative investment management business and an increase in costs that may be necessary to improve such systems.

        The Company depends on its headquarters in New York, New York, where most of the Company's alternative investment management personnel are located, for the continued operation of its business. We have taken precautions to limit the impact that a disruption to operations at our New York headquarters could cause (for example, by ensuring that offices in other geographic locations can operate independently of other offices). Although these precautions have been taken, a disaster or a disruption in the infrastructure that supports our alternative investment management business, including a disruption involving electronic communications or other services used by Ramius or third parties with whom Ramius does conduct business (including the funds invested in by the Ramius fund of funds platform), or directly affecting the New York, New York, headquarters, could have a material adverse impact on the Company's ability to continue to operate its alternative investment management business without interruption. Ramius's disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all. Finally, the Company relies on third party service providers for certain aspects of its business, including for certain information systems and technology

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and administration of the Ramius funds. Severe interruptions or deteriorations in the performance of these third parties or failures of their information systems and technology could impair the quality of Ramius's operations and could impact the Company's reputation and materially adversely affect our alternative investment management business.

Certain of the Ramius funds may invest in relatively high-risk, illiquid assets, and Ramius may fail to realize any profits from these activities for a considerable period of time or lose some or all of the principal amounts of these investments.

        Certain of the Ramius funds (including the Enterprise Fund in which the Company has approximately $276 million of its own capital invested as of September 30, 2009) invest all or a portion of their assets in securities that are not publicly traded and funds invested in by the Ramius fund of funds platform may do the same. In many cases, such funds may be prohibited by contract or by applicable securities laws from selling such securities for a period of time or there may not be a public market for such securities. Even if the securities are publicly traded, large holdings of securities can often be disposed of only over a substantial length of time, exposing the investment returns to risks of downward movement in market prices during the disposition period. Accordingly, under certain conditions, the Ramius funds, or funds invested in by the Ramius fund of funds platform, may be forced to either sell securities at lower prices than they had expected to realize or defer, potentially for a considerable period of time, sales that they had planned to make. Investing in these types of investments is risky, and the Ramius funds (including the Enterprise Fund) may lose some or all of the principal amount of such investments, including our own invested capital.

Risk management activities may materially adversely affect the return on the Ramius funds' investments if such activities do not effectively limit a fund's exposure to decreases in investment values or if such exposure is overestimated.

        When managing the Ramius funds' exposure to market risks, the relevant fund (or one of the funds invested in by the Ramius fund of funds platform) may use forward contracts, options, swaps, caps, collars and floors or pursue other strategies or use other forms of derivative financial instruments to limit its exposure to changes in the relative values of investments that may result from market developments, including changes in interest rates, currency exchange rates and asset prices. The success of such derivative transactions generally will depend on Ramius's (or the underlying fund manager's) ability to accurately predict market changes in a timely fashion, the degree of correlation between price movements of a derivative instrument, the position being hedged, the creditworthiness of the counterparty and other factors. As a result, these transactions may result in poorer overall investment performance than if they had not been executed. Such transactions may also limit the opportunity for gain if the value of a hedged position increases. In addition, the degree of correlation between price movements of the instruments used in connection with hedging activities and price movements in a position being hedged may vary. For a variety of reasons, a perfect correlation between the instruments used in a hedging or other derivative transaction and the position being hedged may not be attained. An imperfect correlation could give rise to a loss. Also, it may not be possible to fully or perfectly limit exposure against all changes in the value of an investment because the value of an investment is likely to fluctuate as a result of a number of factors, some of which will be beyond Ramius's control or ability to hedge.

Fluctuations in currency exchange rates could materially affect the Company's alternative investment management business and its results of operations and financial condition.

        The Company uses U.S. dollars as its reporting currency. Investments in Ramius funds and managed accounts are made in different currencies, including Euros, Pounds Sterling and Yen. In addition, Ramius funds and managed accounts hold investments denominated in many foreign

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currencies. To the extent that the Company's revenues from its alternative investment management business are based on assets under management denominated in such foreign currencies, our reported revenues may be significantly affected by the exchange rate of the U.S. dollar against these currencies. Typically, an increase in the exchange rate between U.S. dollars and these currencies will reduce the impact of revenues denominated in these currencies in the financial results of our alternative investment management business. For example, management fee revenues derived from each Euro of assets under management denominated in Euros will decline in U.S. dollar terms if the value of the U.S. dollar appreciates against the Euro. In addition, the calculation of the amount of assets under management is affected by exchange rate movements as assets under management denominated in foreign currencies are converted to U.S. dollars. Ramius also incurs a portion of its expenditures in currencies other than U.S. dollars. As a result, our alternative investment management business is subject to the effects of exchange rate fluctuations with respect to any currency conversions and Ramius's ability to hedge these risks and the cost of such hedging or Ramius's decision not to hedge could impact the performance of the Ramius funds and our alternative investment management business and its results of operations and financial condition.

The due diligence process that Ramius undertakes in connection with investments by the Ramius funds may not reveal all facts that may be relevant in connection with making an investment.

        Before making investments, particularly investments in securities that are not publicly traded, Ramius endeavors to conduct a due diligence review of such investment that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, Ramius is often required to evaluate critical and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants, investment bankers and financial analysts may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence and making an assessment regarding an investment, Ramius is limited to the resources available, including information provided by the target of the investment and, in some circumstances, third party investigations. The due diligence investigation that Ramius will carry out with respect to any investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the investment being successful, which may adversely affect the performance of the Ramius funds and managed accounts and the Company's ability to generate returns on its own invested capital from any such investment.

The Ramius real estate funds are subject to the risks inherent in the ownership and operation of real estate and the construction and development of real estate.

        Investments in the Ramius real estate funds are subject to the risks inherent in the ownership and operation of real estate and real estate-related businesses and assets. These risks include those associated with general and local economic conditions, changes in supply of and demand for competing properties in an area, changes in environmental and other laws, various uninsured or uninsurable risks, natural disasters, changes in real property tax rates, changes in interest rates, the reduced availability of mortgage financing which may render the sale or refinancing of properties difficult or impracticable, environmental liabilities, contingent liabilities on disposition of assets, terrorist attacks, war and other factors that are beyond our control. During 2008 and continuing in 2009, commercial real estate markets in the United States and Japan generally experienced major disruptions due to the unprecedented lack of available capital, in the form of either debt or equity, and declines in value as a result of the overall economic decline. As a result, transaction volume has dropped precipitously, negatively impacting the valuation and performance of the Ramius real estate funds significantly. Additionally, if the Ramius real estate funds acquire direct or indirect interests in undeveloped land or underdeveloped real property, which may often be non-income producing, they will be subject to the risks normally associated with such assets and development activities, including risks relating to the availability and timely receipt of zoning and other regulatory or environmental approvals, the cost, potential for cost overruns and timely completion of construction (including risks beyond the control of Ramius fund, such as weather or labor conditions or material shortages) and the availability of both construction and permanent financing on favorable terms.

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The alternative investment management industry is intensely competitive which may adversely affect the Company's ability to attract and retain investors and investment professionals.

        The alternative investment management industry is extremely competitive. Competition includes numerous international, national, regional and local asset management firms and broker-dealers, commercial bank and thrift institutions, and other financial institutions. Many of these institutions offer products and services that are similar to, or compete with, those offered by us and have substantially more personnel and greater financial resources than Ramius does. The key areas for competition include historical investment performance, the ability to identify investment opportunities, the ability to attract and retain the best investment professionals and the quality of service provided to investors. The Company's ability to compete may be adversely affected if it underperforms in comparison to relevant benchmarks, peer groups or competing asset managers. The competitive market environment may result in increased downward pressure on fees, for example, by reduced management fee and incentive allocation percentages. The future results of operations of the Company's alternative investment management business are dependent in part on its ability to maintain current fee levels for its products and services. In the current economic environment, many competing asset managers have experienced substantial declines in investment performance, increased redemptions, or counterparty exposures which impair their businesses. Some of these asset managers have reduced their fees in an attempt to avoid additional redemptions. Competition within the alternative investment management industry could lead to pressure on the Company to reduce the fees that it charges its clients for alternative investment management products and services. A failure to compete effectively in this environment may result in the loss of existing clients and business, and of opportunities to generate new business and grow assets under management, each of which could have a material adverse effect on the Company's alternative investment management business and results of operations, financial condition and prospects. Furthermore, consolidation in the alternative investment management industry may accelerate, as many asset managers are unable to withstand the substantial declines in investment performance, increased redemptions, and other pressures impacting their businesses, including increased regulatory, compliance and control requirements. Some competitors may acquire or combine with other competitors. The combined business may have greater resources than the Company does and may be able to compete more effectively against Ramius and rapidly acquire significant market share.

If Ramius or the Company were deemed an "investment company" under the U.S. Investment Company Act, applicable restrictions could make it impractical for Ramius and the Company to continue their respective businesses as contemplated and could have a material adverse effect on Ramius's and the Company's businesses and prospects.

        A person will generally be deemed to be an "investment company" for purposes of the U.S. Investment Company Act of 1940, if:

        The Company believes it is engaged primarily in the business of providing asset management and financial advisory services and not in the business of investing, reinvesting or trading in securities. The Company also believes that the primary source of income from its business is properly characterized as income earned in exchange for the provision of services. Ramius is an alternative investment management company and the Company does not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, the Company does not believe that Ramius is an "orthodox" investment company as defined in Section 3(a)(1)(A) of the Investment Company Act and described in the first bullet point above. Additionally, neither Ramius nor the Company is (and neither anticipates being, after giving effect to the offering) an inadvertent investment company by

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virtue of the 40% test in Section 3(a)(1)(C) of the Investment Company Act as described in the second bullet point above.

        The Investment Company Act and the rules thereunder contain detailed requirements for the organization and operation of investment companies. Among other things, the Investment Company Act and the rules thereunder limit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. The Company intends to conduct its alternative investment management operations so that neither the Company nor Ramius will be deemed to be an investment company under the Investment Company Act. If anything were to happen which would cause Ramius or the Company to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on their respective capital structures, ability to transact business with affiliates (including subsidiaries) and ability to compensate key employees, could make it impractical for either Ramius or the Company to continue their respective businesses as currently conducted, impair the agreements and arrangements between and among them, their subsidiaries and their senior personnel, or any combination thereof, and materially adversely affect their business, financial condition and results of operations. Accordingly, Ramius or the Company may be required to limit the amount of investments that it makes as a principal or otherwise conduct its business in a manner that does not subject Ramius or the Company to the registration and other requirements of the Investment Company Act.

        Recently, legislation was proposed in the U.S. that would impose recordkeeping, disclosure, and reporting requirements upon investment funds advised by a firm that is registered with the SEC under the Advisers Act. Should this or similar legislation be adopted, the Ramius funds may become subject to additional registration, reporting and other requirements. As a result, compliance costs and burdens upon the Ramius business may increase and the additional requirements may constrain Ramius's ability to conduct its business as currently conducted, which may adversely affect Ramius's and the Company's business, results of operations or financial condition.

Increased regulatory focus could result in regulation that may limit the manner in which the Company and the Ramius funds invest and the types of investors that may invest in the Ramius funds, materially impacting the Company's business.

        The Company's alternative investment management business may be adversely affected if new or revised legislation or regulations are enacted, or by changes in the interpretation or enforcement of existing rules and regulations imposed by the SEC, other U.S. or foreign governmental regulatory authorities or self-regulatory organizations that supervise the financial markets and their participants. Such changes could place limitations on the type of investor that can invest in alternative investment funds or on the conditions under which such investors may invest. Further, such changes may limit the scope of investing activities that may be undertaken by alternative investment managers as well as their funds. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. Compliance with any new laws or regulations could be difficult and expensive and affect the manner in which Ramius conducts business, which may adversely impact its results of operations, financial condition and prospects.

        Additionally, as a result of recent highly publicized financial scandals, investors, regulators and the general public have exhibited concerns over the integrity of both the U.S. financial markets and the regulatory oversight of these markets. As a result, the business environment in which Ramius operates is subject to heightened regulation. With respect to alternative investment management funds, in recent years, there has been debate in both U.S. and foreign governments about new rules or regulations, including increased oversight or taxation, in addition to the recently proposed Private Fund Transparency Act. As calls for additional regulation have increased, there may be a related increase in regulatory investigations of the trading and other investment activities of alternative investment management funds, including Ramius funds. Such investigations may impose additional expenses on the

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Company, may require the attention of senior management and may result in fines if any of the Ramius funds are deemed to have violated any regulations.

The Company's alternative investment management business may suffer as a result of loss of business from key investors.

        The Company generates a significant proportion of its alternative investment management revenue from a small number of its largest clients. As of September 30, 2009, affiliates of HVB and BA Alpine Holdings, Inc. constituted Ramius's largest institutional investor representing approximately 10.34% of assets under management, with the five largest investors collectively contributing approximately 21.94% of assets under management. The loss of all or a substantial portion of the business provided by one or more of these investors would have a material impact on income derived from management fees and incentive allocations and consequently have a material adverse effect on our alternative investment management business and results of operations or financial condition. Those affiliates of HVB and BA Alpine Holdings, Inc. have indicated that they intend to withdraw a portion of their investments to the extent permitted under their respective amended investment agreements, as discussed in "Business—Recent Developments—Amendment to Investment Agreement with Alpine Cayman Islands Limited" and "Business—Recent Developments—Amendment to Investment Agreement with HVB AG."

Risks Related to the Company's Investment Banking Business

The Company's investment banking business focuses principally on specific sectors of the economy, and deterioration in the business environment in these sectors or a decline in the market for securities of companies within these sectors could materially affect our investment banking business.

        Cowen and Company focuses principally on the healthcare, technology, media and telecommunications, consumer, aerospace and defense, and alternative energy sectors of the economy. Therefore, volatility in the business environment in these sectors or in the market for securities of companies within these sectors could substantially affect the Company's financial results and, thus, the market value of the Class A common stock. The business environment for companies in these sectors has been subject to substantial volatility, and Cowen and Company's financial results have consequently been subject to significant variations from year to year. The market for securities in each of Cowen and Company's target sectors may also be subject to industry-specific risks. For example, changes in policies of the United States Food and Drug Administration, along with changes in Medicare and government reimbursement policies, may affect the market for securities of healthcare companies.

        As an investment bank focused principally on specific growth sectors of the economy, Cowen and Company also depends significantly on private company transactions for sources of revenues and potential business opportunities. Most of these private company clients are initially funded and controlled by private equity firms. To the extent the pace of these private company transactions slows or the average size declines due to a decrease in private equity financings, difficult market conditions in Cowen and Company's target sectors or other factors, the Company's business and results of operations may be adversely affected.

The financial results of the Company's investment banking business may fluctuate substantially from period to period, which may impair the stock price of the Class A common stock.

        Cowen and Company has experienced, and we expect to experience in the future, significant periodic variations in its revenues and results of operations. These variations may be attributed in part to the fact that its investment banking revenues are typically earned upon the successful completion of a transaction, the timing of which is uncertain and beyond its control. In most cases, Cowen and Company receives little or no payment for investment banking engagements that do not result in the successful completion of a transaction. As a result, our investment banking business is highly dependent on market conditions as well as the decisions and actions of its clients and interested third parties. For example, a client's acquisition transaction may be delayed or terminated because of a failure to agree

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upon final terms with the counterparty, failure to obtain necessary regulatory consents or board or stockholder approvals, failure to secure necessary financing, adverse market conditions or unexpected financial or other problems in the client's or counterparty's business. If the parties fail to complete a transaction on which Cowen and Company is advising or an offering in which Cowen and Company is participating, we will earn little or no revenue from the transaction, and we may incur significant expenses that may not be recouped. This risk may be intensified by Cowen and Company's focus on growth companies in the healthcare, technology, media and telecommunications, consumer, aerospace and defense, and alternative energy sectors as the market for securities of these companies has experienced significant variations in the number and size of equity offerings. Many companies initiating the process of an IPO are simultaneously exploring merger and acquisition exit opportunities. The Company's investment banking revenues would be adversely affected in the event that an IPO for which it is acting as an underwriter is preempted by the company's sale if Cowen and Company is not also engaged as a strategic advisor in such sale. As a result, our investment banking business is unlikely to achieve steady and predictable earnings on a quarterly basis, which could in turn adversely affect the stock price of the Class A common stock.

Pricing and other competitive pressures may impair the revenues of the Company's brokerage business.

        Cowen Holdings historically derived a significant portion of its revenues from the brokerage business of Cowen and Company, which accounted for approximately 69% of Cowen Holdings' revenues in 2008. Along with other firms, Cowen and Company has experienced intense price competition in this business in recent years. In particular, the ability to execute trades electronically and through alternative trading systems has increased the pressure on trading commissions and spreads. The Company expects pricing pressures in the business to continue. Decimalization in securities trading has also reduced revenues and lowered margins within the equity brokerage divisions of many firms, including Cowen and Company. We expect to continue to experience competitive pressures in these and other areas in the future as some of our competitors in the investment banking industry seek to obtain market share by competing on the basis of price or use their own capital to facilitate client trading activities. In addition, the Company faces pressure from Cowen and Company's larger competitors, who may be better able to offer a broader range of complementary products and services to clients in order to win their trading business. As we is committed to maintaining and improving Cowen and Company's comprehensive research coverage in its target sectors to support its brokerage business, the Company may be required to make substantial investments in Cowen and Company research capabilities. If Cowen and Company is unable to compete effectively in these areas, the revenues of its brokerage business may decline, and the Company's business and results of operations may be adversely affected.

Cowen and Company faces strong competition from larger firms.

        The research, brokerage and investment banking industries are intensely competitive, and the Company expects them to remain so. Cowen and Company competes on the basis of a number of factors, including client relationships, reputation, the abilities of Cowen and Company's professionals, market focus and the relative quality and price of Cowen and Company's services and products. Cowen and Company has experienced intense price competition in some of its businesses, including trading commissions and spreads in its brokerage business. In addition, pricing and other competitive pressures in investment banking, including the trends toward multiple book runners, co-managers and financial advisors, could adversely affect the Company's revenues from its investment banking business.

        Cowen and Company is a relatively small investment bank. Many of Cowen and Company's competitors in the research, brokerage and investment banking industries have a broader range of products and services, greater financial resources, larger customer bases, greater name recognition and marketing resources, a larger number of senior professionals to serve their clients' needs, greater global reach and more established relationships with clients than Cowen and Company has. These larger competitors may be better able to respond to changes in the research, brokerage and investment

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banking industries, to compete for skilled professionals, to finance acquisitions, to fund internal growth and to compete for market share generally.

        The scale of our competitors in the investment banking industry has increased in recent years as a result of substantial consolidation among companies in the research, brokerage and investment banking industries. In addition, a number of large commercial banks and other broad-based financial services firms have established or acquired underwriting or financial advisory practices and broker-dealers or have merged with other financial institutions. These firms have the ability to offer a wider range of products than Cowen and Company does which may enhance their competitive position. They also have the ability to support their investment banking and advisory groups with commercial banking and other financial services in an effort to gain market share, which has resulted, and could further result, in pricing pressure in Cowen Holdings' businesses. If we are unable to compete effectively with our competitors in the investment banking industry, the Company's business and results of operations will be adversely affected.

The Company's capital markets and strategic advisory engagements are singular in nature and do not generally provide for subsequent engagements.

        The Company's investment banking clients generally retain Cowen and Company on a short-term, engagement-by-engagement basis in connection with specific capital markets or mergers and acquisitions transactions, rather than on a recurring basis under long-term contracts. As these transactions are typically singular in nature and Cowen and Company's engagements with these clients may not recur, Cowen and Company must seek out new engagements when its current engagements are successfully completed or are terminated. As a result, high activity levels in any period are not necessarily indicative of continued high levels of activity in any subsequent period. If Cowen and Company is unable to generate a substantial number of new engagements that generate fees from new or existing clients, the Company's investment banking business and results of operations would likely be adversely affected.

Larger and more frequent capital commitments in the Company's trading and underwriting businesses increase the potential for significant losses.

        There has been a trend toward larger and more frequent commitments of capital by financial services firms in many of their activities. For example, in order to compete for certain transactions, investment banks may commit to purchase large blocks of stock from publicly traded issuers or significant stockholders, instead of the more traditional marketed underwriting process in which marketing is completed before an investment bank commits to purchase securities for resale. The Company anticipates participating in this trend and, as a result, Cowen and Company will be subject to increased risk as it commits capital to facilitate business. Furthermore, Cowen and Company may suffer losses as a result of the positions taken in these transactions even when economic and market conditions are generally favorable for others in the industry.

        Cowen and Company may enter into large transactions in which it commits its own capital as part of its trading business to facilitate client trading activities. The number and size of these large transactions may materially affect Cowen and Company's results of operations in a given period. Market fluctuations may also cause Cowen and Company to incur significant losses from its trading activities. To the extent that Cowen and Company owns assets (i.e., has long positions), a downturn in the value of those assets or in the markets in which those assets are traded could result in losses. Conversely, to the extent that Cowen and Company has sold assets it does not own (i.e., has short positions), in any of those markets, an upturn in the value of those assets or in markets in which those assets are traded could expose the Company's investment banking business to potentially large losses as it attempts to cover short positions by acquiring assets in a rising market.

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Operational risks relating to the failure of data processing systems and other information systems and technology or other infrastructure may disrupt the Company's investment banking business, result in losses or limit the our operations and growth in the industry.

        Cowen and Company's investment banking business is highly dependent on its ability to process, on a daily basis, a large number of transactions across diverse markets, and the transactions that Cowen and Company processes have become increasingly complex. The inability of Cowen and Company's systems to accommodate an increasing volume of transactions could also constrain the Company's ability to expand its investment banking business. If any of these systems do not operate properly or are disabled, or if there are other shortcomings or failures in Cowen and Company's internal processes, people or systems, the Company could suffer impairments, financial loss, a disruption of its investment banking business, liability to clients, regulatory intervention or reputational damage.

        Cowen and Company has outsourced certain aspects of its technology infrastructure including data centers and wide area networks, as well as some trading applications. Cowen and Company is dependent on its technology providers to manage and monitor those functions. A disruption of any of the outsourced services would be out of the Company's control and could negatively impact our investment banking business. Cowen and Company has experienced disruptions on occasion, none of which has been material to Cowen and Company's operations and results. However, there can be no guarantee that future material disruptions with these providers will not occur.

        The Company also faces the risk of operational failure of or termination of relations with any of the clearing agents, exchanges, clearing houses or other financial intermediaries that Cowen and Company uses to facilitate its securities transactions. Any such failure or termination could adversely affect Cowen and Company's ability to effect transactions and to manage its exposure to risk.

        In addition, the Company's ability to conduct its investment banking business may be adversely impacted by a disruption in the infrastructure that supports Cowen and Company and the communities in which we are located. This may affect, among other things, the Company's financial, accounting or other data processing systems. This may include a disruption involving electrical, communications, transportation or other services used by us or third parties with which Cowen and Company conducts business, whether due to fire, other natural disaster, power or communications failure, act of terrorism or war or otherwise. Nearly all of our investment banking employees in our primary locations in New York, Boston, San Francisco and London work in close proximity to each other. Although Cowen and Company has a formal disaster recovery plan in place, if a disruption occurs in one location and our investment banking employees in that location are unable to communicate with or travel to other locations, Cowen and Company's ability to service and interact with its clients may suffer, and the Company may not be able to implement successfully contingency plans that depend on communication or travel.

        Our investment banking business also relies on the secure processing, storage and transmission of confidential and other information in its computer systems and networks. Although Cowen and Company takes protective measures and endeavors to modify them as circumstances warrant, Cowen and Company's computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could have a security impact. If one or more of such events occur, this could jeopardize our or our investment banking clients' or counterparties' confidential and other information processed and stored in, and transmitted through, Cowen and Company's computer systems and networks, or otherwise cause interruptions or malfunctions in our investment banking business', its clients', its counterparties' or third parties' operations. The Company may be required to expend significant additional resources to modify its protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications, and the Company may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by the Company.

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Risks Related to the Offering

If the Company is not the subject of securities analyst reports or if any securities analyst downgrades Class A common stock or the Company's sector, the price of Class A common stock could be negatively affected.

        Securities analysts may publish reports about the Company or the Company's industry containing information about the Company that may affect the trading price of Class A common stock. There are many publicly-traded companies active in the financial services industry, which may mean it will be less likely that the Company receives analysts' coverage, which in turn could affect the price of Class A common stock. In addition, if a securities or industry analyst downgrades the outlook for the Company stock or one of the Company's competitors' stocks, the trading price of the Class A common stock may also be negatively affected.

The ability of RCG and, subject to limitations, HVB and some of the Company's employees to sell Class A common stock could cause the stock price to decrease.

        RCG and HVB may sell the 40,250,708 aggregate shares of Class A common stock that they hold in the aggregate. All of these shares were issued in the Transactions and RCG is selling 200,000 of these shares in this offering for the purpose described below. However, the asset exchange agreement restricts the sale of shares by HVB under specified circumstances, and RCG's managing member agreed in RCG's operating agreement (as amended and restated at the closing of the Transactions) not to make any distributions of Class A common stock to the members of RCG (including BA Alpine Holdings, Inc.) for a period of time, up to 36 months, following the closing of the Transactions, which restriction may be waived by RCG's managing member in accordance with the terms of RCG's operating agreement. Approximately 1,655,726 shares of Class A common stock underlie the capital in RCG of those members of RCG who may withdraw one-third of their capital in RCG as of the end of each calendar year beginning on December 31, 2009. In connection with the withdrawal of capital by certain of these non-affiliate members of RCG as of December 31, 2009, RCG is selling 200,000 shares of Class A common stock attributable to these members in this offering and will use the net proceeds of such sales to satisfy the withdrawal requests of these members in cash. The restrictions on HVB and its affiliates (including BA Alpine Holdings, Inc. with respect to the 8,518,685 shares of Class A common stock held by RCG that are allocated to it) are subject to a number of exceptions and may be terminated upon the occurrence of certain events. The Company executed and delivered to RCG a registration rights agreement, as described below, which includes customary registration rights for RCG and HVB and its affiliates (including BA Alpine Holdings, Inc. with respect to the 8,518,685 shares of Class A common stock held by RCG that are allocated to BA Alpine Holdings, Inc.).

        The sale of a substantial number of shares of Class A common stock by RCG, HVB, the Company's employees or by other stockholders within a short period of time, or the possibility of such sales, may adversely affect the price of the Company's Class A common stock and impede the Company's ability to raise capital through the issuance of equity securities.

        Certain existing stockholders have entered into lock-up agreements pursuant to which they have agreed not to sell shares of Class A common stock in the public market for a period of 90 days following the completion of this public offering. The Company's amended and restated certificate of incorporation authorizes it to issue up to 250,000,000 shares of Class A common stock, of which following the completion of this offering 72,437,136 shares will be outstanding and 892,782 shares will be issuable upon the exercise of outstanding vested stock options. Of the 72,437,136 shares outstanding upon the completion of this offering, 31,502,718 shares will be freely tradeable without restriction and 32,386,428 shares will be freely tradeable following the expiration of the 90-day lock-up period. Certain shares are subject to additional transfer restrictions. See "Shares Eligible for Future Sale—Transfer Restrictions on Shares of our Common Stock Held by RCG and HVB." In addition, some of our stockholders have the right to require us to register our Class A common stock for resale in certain circumstances. See "Shares Eligible for Future Sale—Registration Rights Agreement."

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The Company will have broad discretion in how it uses the net proceeds of this offering and the Company may not use them effectively, which could affect the Company's results of operations and cause the Company's stock price to decline, or the Company may use the net proceeds in ways with which you disagree.

        The Company will have considerable discretion in applying the net proceeds of this offering. Beyond using approximately $25 million of the net proceeds of this offering to repay outstanding indebtedness, the Company currently has no specific plans for the use of the net proceeds of this offering. The Company anticipates that it will use the net proceeds from this offering to repay indebtedness and for working capital and general corporate purposes. Because of the number and variability of factors that determine the Company's use of proceeds from this offering, the Company cannot predict its use of the proceeds of this offering. Stockholders may not deem the uses desirable, and the Company's use of the net proceeds may not yield a significant return or any return at all for the Company's stockholders. In particular, the Company has indicated that it may invest the net proceeds in various marketable equity securities and certain other liquid investments. There can be no assurance that such investments will be profitable.

The Company does not intend to pay dividends on shares of its Class A common stock for the foreseeable future.

        The Company intends to use earnings in the future to fund and develop the Company's business and does not anticipate paying any cash dividends on Class A common stock. Your potential gain from your investment in Class A common stock, therefore, will be solely the capital appreciation, if any, of Class A common stock.

Under the amended and restated certificate of incorporation of the Company, the Company is able to issue more shares of common stock than are currently outstanding. As a result, such future issuances of common stock could have a dilutive effect on the earnings per share and voting power of the Company stockholders.

        The amended and restated certificate of incorporation of the Company authorizes a greater number of shares of common stock than are currently outstanding. If the board of directors of the Company elects to issue additional shares of common stock in the future, whether in public offerings, in connection with mergers and acquisitions or otherwise, such additional issuances could dilute the earnings per share and voting power of the Company stockholders.

Certain provisions of the Company's amended and restated certificate of incorporation, amended and restated bylaws and Delaware law may have the effect of delaying or preventing an acquisition by a third party.

        The Company's certificate of incorporation, as amended, and amended and restated bylaws contain several provisions that may make it more difficult for a third party to acquire control of the Company, even if such acquisition would be financially beneficial to the Company's stockholders. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in the Company's stockholders receiving a premium over the then-current trading price of Class A common stock. For example, the Company's amended and restated certificate of incorporation authorizes its board of directors to issue up to 10,000,000 shares of "blank check" preferred stock. Without stockholder approval, the board of directors has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred stockholders could make it more difficult for a third party to acquire the Company. In addition, the Company's amended and restated bylaws provide for an advance notice procedure with regard to the nomination of candidates for election as directors and with regard to business to be brought before a meeting of stockholders. The Company is also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, or DGCL. Under these provisions, if anyone becomes an "interested stockholder," the Company may not enter into a "business combination" with that person for three years without special approval, which could discourage a third party from making a takeover offer and could delay or prevent a change of control. For the purposes of Section 203, "interested stockholder" means, generally, someone owning 15% or more of the Company's outstanding voting stock or an affiliate of the Company that owned 15% or more of our outstanding voting stock during the past three years, subject to certain exceptions as described in Section 203.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains a number of forward-looking statements, including statements about the financial condition, results of operations, earnings outlook and prospects of the Company. You can find many of these statements by looking for words such as "plan," "believe," "expect," "intend," "seek," "anticipate," "estimate," "project," "potential," "possible," "would," "could," "should" or other similar expressions.

        The forward-looking statements involve particular risks and uncertainties. The ability of the Company to predict results or the actual effects of its plans and strategies is subject to inherent uncertainty. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include those set forth in the section titled "Risk Factors", as well as, among others, the following:

        Our forward-looking statements may include or relate to the following:

        Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this prospectus or such other date that may be specified herein. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change.

        All subsequent written and oral forward-looking statements concerning the offering or other matters addressed in this prospectus and attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this prospectus. Except to the extent required by applicable law or regulation, the Company does not undertake any obligation to update these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

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USE OF PROCEEDS

        We estimate that we will receive net proceeds from the sale of shares of our Class A common stock in this offering of approximately $             million, based on the public offering price of $            per share, and after deducting the underwriting discounts and other estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of our Class A common stock by the selling stockholder.

        We anticipate that we will use a portion of the net proceeds received by us from this offering to repay amounts outstanding under our $50 million credit facility with HVB so that the remaining balance plus outstanding letters of credit will not exceed $25 million. Additional net proceeds will be used for working capital and general corporate purposes.

        As of December 4, 2009 approximately $43.0 million was outstanding under the HVB Credit Facility, which matures on September 29, 2011 and has an annual interest rate of either, at our election, (i) the prime rate plus 1.5% (for a portion of the facility to be determined) or (ii) LIBOR plus 3.5% per annum. In addition, we had an outstanding letter of credit of approximately $7 million under the HVB Credit Facility. The amount available under the HVB Credit Facility automatically reduces to a $25 million on January 4, 2010. The HVB Credit Facility was used to repay the prior $50 million credit facility between RCG and HVB AG, among others.

        Pending the use of the remaining proceeds, we intend to invest these proceeds in liquid securities, which may include debt or equity.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our capitalization as of September 30, 2009:

        You should read this table together with the other information contained in this prospectus, including "Use of Proceeds", "Unaudited Pro Forma Financial Information", "Managements Discussion and Analysis of Financial and Results of Operations" and our historical financial statements and related notes included elsewhere in this prospectus.

 
  Historical    
   
 
 
  Ramius   Cowen
Holdings
  Pro Forma
Cowen Group
  Pro Forma
As Adjusted
 
 
  (in thousands)
 

Cash and cash equivalents

  $ 5,871   $ 89,827   $ 75,828   $    
                   

Lines of credit

    49,746         49,746        
                   

Redeemable members' capital

    301,628              

Redeemable noncontrolling interests

    267,242         253,359        

Stockholders' equity

        127,685     406,930        

Noncontrolling interests

        1,692     1,692        
                   

Total Capitalization

  $ 568,870   $ 129,377   $ 661,981   $    
                   


MARKET PRICE OF CLASS A COMMON STOCK

        Our Class A common stock is listed and trades on the NASDAQ Global Market under the symbol "COWN." On November 2, 2009, following the consummation of the Transactions, through November 30, 2009, our Class A common stock was listed and traded on the NASDAQ Global Market under the symbol "COWND." The most recent closing price for our Class A common stock as of December 4, 2009, was $6.32 and there were approximately 25 holders of record of our Class A common stock. From November 2, 2009 through December 4, 2009, the high and low sale prices were $9.00 and $6.08, respectively.

        Prior to November 2, 2009, the common stock of Cowen Holdings had traded under the symbol "COWN" since Cowen Holdings's initial public offering in July 2006. Prior to November 2, 2009, our common stock was held by RCG and Cowen Holdings as restricted shares and was not publicly tradable.


DIVIDEND POLICY

        We have never declared or paid any cash dividends on Class A common stock. Any payment of cash dividends on Class A common stock in the future will be at the discretion of our board of directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions and other factors deemed relevant by our board of directors. Our ability to pay cash dividends is restricted under the terms of the HVB Credit Facility. We currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any cash dividends in the foreseeable future.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

        The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2009, and for the fiscal year ended December 31, 2008, give effect to the Transactions as if they were completed on January 1, 2008, and include all adjustments which give effect to the events that are directly attributable to the Transactions, as long as the impact of such events are expected to continue and are factually supportable. The unaudited pro forma condensed combined statement of financial condition as of September 30, 2009 gives effect to the Transactions as if they had been completed on September 30, 2009 and includes all adjustments which give effect to the events that are directly attributable to the Transactions and that are factually supportable. The unaudited pro forma condensed combined financial data shown under this heading and the accompanying notes should be read together with:

        On November 2, 2009, the transactions contemplated by the Transaction Agreement, by and among the Company, Ramius, Cowen Holdings, RCG and Lexington Merger Corp., were consummated including (1) the merger of Lexington Merger Corp. with and into Cowen Holdings, pursuant to which each outstanding share of common stock of Cowen Holdings, Inc. was converted into one share of Class A common stock of the Company and (2) the transfer by RCG of substantially all of its assets and liabilities to Ramius in exchange for the Company's issuance to RCG of 37,536,826 shares of Class A common stock of the Company. Following the consummation of the Transactions, each of Ramius and Cowen Holdings became a wholly owned subsidiary of the Company.

        The Transactions were treated under the acquisition method for accounting purposes. In this case, the Transactions were accounted for as an acquisition by RCG (which prior to the consummation of the Transactions operated the Ramius business) of Cowen Holdings. As such, Cowen Holdings's assets acquired and liabilities assumed were recorded at their fair value. The fair value of Cowen Holdings's securities issued to Cowen Holdings stockholders is the purchase consideration in the transactions. The purchase consideration for Cowen Holdings under the acquisition method is based on the stock price of Cowen Holdings on the closing date of the Transactions multiplied by the number of shares issued by Cowen to the Cowen Holdings stockholders. The preliminary allocation of the purchase price is based on a Cowen Holdings stock price of $7.55 per share (based on the closing stock price on October 30, 2009) and that 14,883,968 shares of Cowen Holdings stock were outstanding at the date of the completion of the Transactions. Included in the 14,883,968 shares of Cowen Holdings stock are 12,071,646 freely tradable shares, 2,784,816 restricted shares and 27,506 shares underlying vested restricted stock units at the balance sheet date. The number of shares used to estimate the purchase price excludes 185,828 restricted shares at the balance sheet date that did not vest as part of the Transactions and were not effectively purchased. Restricted shares, restricted share units and stock options of Cowen Holdings common stock at the effective time of the merger were converted into restricted shares, restricted share units and stock options of our Class A common stock on a one-for-one basis.

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        On November 2, 2009, as part of the Transactions, Cowen Holdings purchased from HVB the 50% interest in Ramius Alternative Solutions, the Ramius fund of funds business, that HVB owned in exchange for (1) the Company's issuance to HVB of 2,713,882 shares of our Class A common stock and (2) approximately $10.4 million in cash, resulting in Ramius Alternative Solutions becoming an indirect wholly owned subsidiary of the Company. In accordance with the Financial Accounting Standards Board (which we refer to as FASB) accounting standards the acquisition of the additional interest in the Ramius fund of funds business was treated as a capital transaction and the difference between the fair value of the consideration paid and the carrying value of the non-controlling interest was recognized in equity.

        The unaudited pro forma condensed combined financial information has been presented for informational purposes only. The pro forma information is not necessarily indicative of what the combined company's financial position or results of operations actually would have been had the transactions been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.

        The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under existing U.S. generally accepted accounting principles (which we refer to as GAAP) which are subject to change and interpretation. RCG has been treated as the acquirer in the Transactions for accounting purposes. The acquisition accounting is dependent on certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for definitive measurement. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates, including the estimates of the purchase consideration and allocation of purchase price to Cowen Holdings' assets, including intangible assets, and the final acquisition accounting will occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company's future results of operations and financial position.

        The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that Cowen Group may achieve as a result of the Transactions, the costs to integrate the operations of Ramius and Cowen Holdings or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.

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Unaudited Pro Forma Condensed Combined Statement of Financial Condition

At September 30, 2009

 
  Historical    
   
 
 
  Ramius   Cowen
Holdings
  Acquisition
Pro Forma
Adjustments
  Pro Forma
Cowen Group
 
 
  (in thousands)
 

Assets

                         
   

Cash and cash equivalents

  $ 5,871   $ 89,827   $ (19,870 )a $ 75,828  
   

Cash collateral pledged

    6,746             6,746  
   

Restricted cash pursuant to escrow agreement

        501         501  
   

Securities owned, at fair value

    8,205     13,262         21,467  
   

Other investments

    14,754     16,802         31,556  
   

Receivable from brokers, dealers and clearing brokers

    16,814     35,743         52,557  
   

Fees receivable

    12,118     7,924         20,042  
   

Due from related parties

    19,723     2,007         21,730  
   

Fixed assets, net

    25,451     8,600         34,051  
   

Goodwill

    20,028     2,551     (2,551 )b   20,028  
   

Intangible assets, net

    195     214     16,786   c   17,195  
   

Other assets

    4,488     14,758     1,528   d   20,774  
   

Consolidated Ramius Funds assets:

                         
   

Cash and cash equivalents

    1,563             1,563  
   

Other investments, at fair value

    544,965             544,965  
   

Other assets

    974             974  
                   

Total assets

  $ 681,895   $ 192,189   $ (4,107 ) $ 869,977  
                   

Liabilities, Redeemable Group Equity and Equity

                         
   

Securities sold, not yet purchased

  $   $ 25,151   $   $ 25,151  
   

Payable to brokers, dealers and clearing brokers

    3,888     1,396         5,284  
   

Compensation payable

    29,758     22,396     5,592   e   57,746  
   

Lines of credit

    49,746             49,746  
   

Fees payable

    1,872             1,872  
   

Due to related parties

    8,776             8,776  
   

Accounts payable, accrued expenses and other liabilities

    18,505     12,985     26,567   f   58,057  
   

Bank overdraft

        884         884  
   

Consolidated Ramius Funds liabilities:

                         
   

Capital withdrawals payable

    86             86  
   

Accounts payable, accrued expenses and other liabilities

    394             394  
                   

Total liabilities

    113,025     62,812     32,159     207,996  
                   

Redeemable members' capital

    301,628         (301,628 )g    

Redeemable noncontrolling interests

    267,242         (13,883 )h   253,359  
                   
 

Total redeemable group equity

    568,870         (315,511 )   253,359  
                   

Equity

                         
 

Stockholders' equity

        127,685     279,245   i   406,930  
 

Noncontrolling interests

        1,692         1,692  
                   
 

Total equity

        129,377     279,245     408,622  
                   

Total liabilities, redeemable group equity and equity

  $ 681,895   $ 192,189   $ (4,107 ) $ 869,977  
                   

See accompanying notes to unaudited pro forma condensed combined financial statements.

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Unaudited Pro Forma Condensed Combined Statement of Operations

Nine Months Ended September 30, 2009

 
  Historical    
   
 
 
  Ramius   Cowen
Holdings
  Acquisition
Pro Forma
Adjustments
  Pro Forma
Cowen Group
 
 
  (in thousands, except per share data)
 

Revenues

                         
   

Management fees

  $ 31,408   $ 6,717   $   $ 38,125  
   

Incentive fees

    177             177  
   

Interest and dividends

    225     367         592  
   

Reimbursement from affiliates

    7,832             7,832  
   

Investment banking

        28,917         28,917  
   

Brokerage

        103,773         103,773  
   

Other

    2,265     1,908         4,173  
   

Consolidated Ramius Funds and other

    12,312             12,312  
                   

Total revenues

    54,219     141,682         195,901  
                   

Operating expenses

                         
   

Employee compensation and benefits

    50,869     98,920     8,685   j   158,474  
   

Interest and dividends

    1,122     222         1,344  
   

Professional, advisory and other fees

    13,633     6,062         19,695  
   

Communications

    755     9,095         9,850  
   

Occupancy and equipment

    7,519     11,426     (3,116 )k   15,829  
   

Floor brokerage and trade execution

        10,268         10,268  
   

Service fees

        13,426         13,426  
   

Depreciation and amortization

    3,563     2,299     2,368   l   8,230  
   

Client services, marketing and business development

    4,850     6,836         11,686  
   

Other

    6,628     6,654     150   m   13,432  
   

Consolidated Ramius Funds and other

    11,831             11,831  
                   

Total expenses

    100,770     165,208     8,087     274,065  
                   

Other income (loss)

                         
   

Net loss on securities, derivatives and other investments

    (2,702 )           (2,702 )
   

Consolidated Ramius Funds net realized and unrealized losses

    25,268             25,268  
                   

Total other income (loss)

    22,566             22,566  
                   

Loss before taxes

    (23,985 )   (23,526 )   (8,087 )   (55,598 )

Income tax (benefit) provision

    (5,978 )   565         (5,413 )
                   

Net loss

    (18,007 )   (24,091 )   (8,087 )   (50,185 )

Less: Net income (loss) attributable to noncontrolling interests

    13,888     189     (830 )h   13,247  
                   

Net loss attributable to stockholders and members

  $ (31,895 ) $ (24,280 ) $ (7,257 ) $ (63,432 )
                   

Pro forma Net Income (Loss) Per Share

                         
 

Basic

  $ (0.85 )o $ (2.07 )   NA   $ (1.15 )q
 

Diluted

  $ (0.85 )o $ (2.07 )   NA   $ (1.15 )q

Pro forma Weighted Average Common Shares

                         
 

Basic

    37,537   o   11,709     5,889   p   55,135   r
 

Diluted

    37,537   o   11,709     5,889   p   55,135   r

See accompanying notes to unaudited pro forma condensed combined financial statements.

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Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2008

 
  Historical    
   
 
 
  Ramius   Cowen
Holdings
  Acquisition
Pro Forma
Adjustments
  Pro Forma
Cowen Group
 
 
  (in thousands, except per share data)
 

Revenues

                         
   

Management fees

  $ 70,818   $ 12,573   $   $ 83,391  
   

Interest and dividends

    1,993     3,362         5,355  
   

Reimbursement from affiliates

    16,330             16,330  
   

Investment banking

        50,937         50,937  
   

Brokerage

        149,901         149,901  
   

Other

    6,853     551         7,404  
   

Consolidated Ramius Funds and other

    31,739             31,739  
                   

Total revenues

    127,733     217,324         345,057  
                   

Operating expenses

                         
   

Employee compensation and benefits

    84,769     133,891     10,250   j   228,910  
   

Interest and dividends

    1,820     189         2,009  
   

Professional, advisory and other fees

    13,803     12,108         25,911  
   

Communications

    1,574     14,797         16,371  
   

Occupancy and equipment

    11,401     15,243     (4,156 )k   22,488  
   

Floor brokerage and trade execution

        10,864         10,864  
   

Service fees

        17,920         17,920  
   

Depreciation and amortization

    4,611     2,882     3,483   l   10,976  
   

Client services, marketing and business development

    8,647     12,709         21,356  
   

Goodwill impairment

    10,200     50,000     (50,000 )s   10,200  
   

Other

    13,000     11,545     200   m   24,745  
   

Consolidated Ramius Funds and other

    34,268             34,268  
                   

Total expenses

    184,093     282,148     (40,223 )   426,018  
                   

Other (loss) income

                         
   

Net loss on securities, derivatives and other investments

    (2,006 )           (2,006 )
   

Gain on exchange memberships

        751         751  
   

Consolidated Ramius Funds net realized and unrealized losses

    (198,485 )           (198,485 )
                   

Total other (loss) income

    (200,491 )   751         (199,740 )
                   

(Loss) income before taxes

    (256,851 )   (64,073 )   40,223     (280,701 )

Income tax (benefit) provision

    (1,301 )   8,081     3,706   n   10,486  
                   

Net (loss) income

    (255,550 )   (72,154 )   36,517     (291,187 )

Less: Net (loss) gain attributable to noncontrolling interests

    (113,786 )       5,249   h   (108,537 )
                   

Net (loss) income attributable to stockholders and members

  $ (141,764 ) $ (72,154 ) $ 31,268   $ (182,650 )
                   

Pro forma Net Income (Loss) Per Share

                         
 

Basic

  $ (3.78 )o $ (6.41 )   NA   $ (3.31 )q
 

Diluted

  $ (3.78 )o $ (6.41 )   NA   $ (3.31 )q

Pro forma Weighted Average Common Shares

                         
 

Basic

    37,537   o   11,254     6,344   p   55,135   r
 

Diluted

    37,537   o   11,254     6,344   p   55,135   r

See accompanying notes to unaudited pro forma condensed combined financial statements.

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Notes to Unaudited Pro Forma Combined Financial Statements

Note 1—Basis of Presentation

        The unaudited pro forma condensed combined financial statements give effect to the business combination of Ramius and Cowen Holdings in a transaction accounted for using the acquisition method of accounting, with Ramius treated as the accounting acquirer, as if the acquisition of Cowen Holdings had been completed on January 1, 2008, for statement of operations purposes, and on September 30, 2009, for statement of financial condition purposes.

        The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Transactions had been completed during the period or as of the dates for which the pro forma data is presented, nor is it necessarily indicative of the future operating results or financial position of Cowen Group.

        Ramius's estimated purchase price for Cowen Holdings has been allocated to the assets acquired and the liabilities assumed based upon management's preliminary estimate of their respective fair values as of the date of acquisition. The purchase price allocation pro forma adjustments are preliminary, have been made solely for the purpose of providing unaudited pro forma condensed combined financial data and are subject to revision upon finalization of the acquisition accounting.

        The accompanying unaudited pro forma condensed combined statements of operations do not include the impact of the following non-recurring items directly related to the Transactions:

        Certain reclassifications have been made to the Cowen Holdings historical balances in the unaudited pro forma condensed combined financial statements to conform to Ramius's presentation.

Note 2—Purchase Price

        For the purpose of preparing the accompanying unaudited pro forma condensed combined statement of financial condition as of September 30, 2009, management made the following assumptions:

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Notes to Unaudited Pro Forma Combined Financial Statements (Continued)

Note 2—Purchase Price (Continued)

        The estimated fair value of our Class A common stock issued to Cowen Holdings stockholders in the Transactions represents the purchase consideration in the Transactions, which was computed as follows:

 
  (in thousands,
except per share data)
 

Number of Cowen Holdings common shares outstanding at closing:

       
 

Common float

    12,071 (1)
 

Restricted shares

    2,785 (2)
 

Restricted share units

    27 (3)
       
   

Total shares issued to Cowen Holdings stockholders

    14,884  

Estimated market price of Cowen Holdings common shares

  $ 7.55 (4)
       

Estimated purchase price of Cowen Holdings common shares

  $ 112,374  
       

Add: Fair value of unvested restricted shares and options issued

    1,697 (5)
       

Estimated purchase price

  $ 114,071  
       

(1)
Based on the trading float of Cowen Holdings's common shares on the closing date.

(2)
Based on Cowen Holdings's unvested restricted shares outstanding on the closing date. Excludes restricted shares that were not subject to accelerated vesting as a result of the transactions.

(3)
Based on Cowen Holdings's restricted share units outstanding on the closing date.

(4)
The $7.55 share price used in calculating the estimated purchase consideration represents the closing share price of Cowen Holdings common stock on October 30, 2009.

(5)
In connection with the Transactions, each outstanding Cowen Holdings stock option was exchanged for one stock option of the Company. Each newly issued stock option was fully vested upon issuance, and has a strike price and expiration date equal to that of the original stock option. Cowen Holdings had 892,782 stock options outstanding as of the closing date. The fair value of Cowen Holdings's stock option awards was estimated to be $0.7 million using an assumed fair value of Cowen Holdings's stock options based on a Black-Scholes valuation model. Also included in the $1.7 million is $1.0 million related to the fair value of pre-combination service on restricted shares that were not subject to accelerated vesting as a result of the Transactions.

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Notes to Unaudited Pro Forma Combined Financial Statements (Continued)

Note 2—Purchase Price (Continued)

        The following is a summary of the preliminary allocation of the purchase price as reflected in the unaudited pro forma combined statement of financial condition as of September 30, 2009:

 
  (in thousands)  

Cash and cash equivalents

  $ 89,827  

Restricted cash pursuant to escrow agreement

    501  

Securities owned, at fair value

    13,262  

Receivable from brokers, dealers and clearing brokers

    35,743  

Fees receivable

    7,924  

Due from related parties

    2,007  

Other investments

    16,802  

Fixed assets, net

    8,600  

Intangible assets, net

    17,000  

Other assets

    16,747  

Securities sold, not yet purchased

    (25,151 )

Payable to brokers, dealers and clearing brokers

    (1,396 )

Compensation payable

    (30,876 )

Accounts payable, accrued expenses and other liabilities

    (31,993 )

Bank overdraft

    (884 )

Noncontrolling interest

    (1,692 )
       
 

Total net assets acquired

    116,421  

Bargain purchase gain on transactions

    (2,350 )(1)
       
 

Total purchase price

  $ 114,071  
       

(1)
Represents the estimated bargain purchase gain on the transactions.

        We believe that all of the acquired receivables and contractual amounts receivable as reflected above in the preliminary allocation of the purchase price are recorded at fair value and are expected to be collected in full, except for $0.4 million which was expected to be uncollectible.

        The noncontrolling interest in Cowen Holdings at the balance sheet date represents the noncontrolling equity interests in Cowen Healthcare Royalty GP, LLC and CHRP Overflow Fund GP, LLC (collectively, the "CHRP GPs"), the general partners, respectively, to Cowen Healthcare Royalty Partners, L.P. and CHRP Overflow Fund, L.P. (the "CHRP Funds"), and are recorded at fair value. The CHRP GPs' only significant asset are their investments in CHRP Funds, which invest principally in commercial-stage biopharmaceutical products and companies through the purchase of royalty or synthetic royalty interests and structured debt and equity instruments. The CHRP Funds follow industry practices for valuation techniques including discounted cash flows, Black-Scholes valuation models and sale price of recent transactions in the same or similar securities and significant inputs such as estimated future cash flows, discount rates, volatility and dividend yield to measure the fair value of the investments in the CHRP Funds.

        Based on the September 30, 2009 estimated purchase price allocation, the fair value of the net identifiable assets acquired and liabilities assumed of $116.4 million exceeded the fair value of the estimated purchase price of $114.1 million. As a result, Cowen Group would have recognized a bargain purchase gain of $2.3 million if the transaction had closed at that date. Cowen Holdings's share price has traded below its book value for a substantial part of the last 52 weeks prior to the consummation of the Transactions, and as the purchase consideration is determined based on the stock price of Cowen

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Notes to Unaudited Pro Forma Combined Financial Statements (Continued)

Note 2—Purchase Price (Continued)


Holdings at the closing date of the Transactions, the preliminary purchase price allocations have resulted in a bargain purchase gain.

Note 3—Acquisition Pro Forma Adjustments

 
  (in thousands)  

Cash paid for Fund of Funds purchase

  $ (10,370 )(1)

Tax obligation distribution

    (9,000 )(2)

Excluded cash

    (500 )(3)
       
 

Total

  $ (19,870 )
       

(1)
Represents payment of $10.4 million related to the purchase of the remaining 50% interest in the Ramius fund of funds business

(2)
Represents $2.4 million of capital withdrawals made immediately prior to the closing of the Transactions in connection with the satisfaction of tax obligations associated with the vesting of various partnership interests as a result of the Transactions and an aggregate of $6.6 million of capital withdrawals made immediately prior to the closing by Messrs. Cohen and Stark and BA Alpine Holdings, Inc., each of which will result in a reduction of the members' equity of Ramius. See Note 3(j).

(3)
Represents the cash amount of Ramius's excluded assets, which RCG retained in order to pay ongoing operating expenses, such as audit fees.

 
  Estimated
Intangible Assets
Acquired
  Estimated
average
remaining
useful lives
 
 
  (in thousands)
  (years)
 

Intangible asset class

             

Trade name and trademarks

  $ 9,400     7.5  

Customer relationships

    6,800     4.0  

Customer backlog

    800     1.2  
             
 

Total intangible assets

  $ 17,000        
             

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Notes to Unaudited Pro Forma Combined Financial Statements (Continued)

Note 3—Acquisition Pro Forma Adjustments (Continued)

 
  (in thousands)  

Deferred taxes

  $ 1,633 (1)

Exchange memberships mark-down

    (105 )(2)
       
 

Total

  $ 1,528  
       

(1)
Represents a $1.6 million net increase related to (a) the adjustments in deferred tax assets and current taxes receivable stemming from the pro forma adjustments made to loss before taxes, (b) a net deferred tax asset established following the change in tax status of Ramius from a partnership to a corporation as a result of the Transactions and (c) a full valuation allowance recognized against the Ramius deferred tax assets.

(2)
Represents an adjustment to Cowen Holdings's exchange memberships included in other assets, which have historically been carried at cost. This adjustment represents the estimated $0.1 million mark-down to fair value on those memberships.

 
  (in thousands)  

Deferred cash awards acceleration

  $ 5,780 (1)

Payment to Mr. Malcolm

    1,500 (2)

Payment to certain Cowen employees

    1,200 (3)

Ramius partnership awards

    (2,888 )(4)
       
 

Total

  $ 5,592  
       

(1)
Reflects accelerated vesting of $5.8 million of deferred cash awards granted to certain of Cowen Holdings's employees due to change in control provisions in the relevant deferred cash award agreements that was triggered by the transactions. The actual payments under the deferred cash awards will occur on the vesting schedule in such agreements (one third on each of May 15, 2010, 2011 and 2012).

(2)
Represents a cash payment of $1.5 million made to Mr. Malcolm at closing. This payment was made pursuant to the terms of Mr. Malcolm's new employment agreement. The payment amount relates to Mr. Malcolm's waiver of certain change in control rights and potential payments under his existing employment agreement with Cowen Holdings.

(3)
Represents cash payments to certain Cowen Holdings employees, the entitlement to which was triggered by the change in control.

(4)
Represents the previously accrued portion of Ramius partnership awards that vested as a result of the transactions. Upon vesting of these partnership interests, the existing liability related to the unvested balances will be reclassified to members' capital, net of any cash payments made to the employee to satisfy tax obligations.

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Notes to Unaudited Pro Forma Combined Financial Statements (Continued)

Note 3—Acquisition Pro Forma Adjustments (Continued)

 
  (in thousands)  

Unfavorable lease liability

  $ 16,914 (1)

Contingent investment banking fees

    7,250 (2)

Deferred and non-income based taxes

    2,403 (3)
       
 

Total

  $ 26,567  
       

(1)
Represents an estimated net impact of an unfavorable lease liability of $17.8 million related to certain of Cowen Holdings's real estate leases that were at higher than market rates at the closing date, partially offset by the removal of a previously existing rent reserve of $0.9 million.

(2)
Represents Ramius's and Cowen Holdings's estimated contingent investment banking fees. The non-contingent portion of the transaction costs of approximately $10.4 million is being expensed as incurred.

(3)
Represents an increase to other liabilities related to the adjustment of deferred tax liabilities stemming from the pro forma adjustments made to loss before taxes and an adjustment for non-income based taxes.

 
  (in thousands)  

Estimated purchase consideration paid for Cowen Holdings

  $ 114,071 (1)

Historical stockholders' equity of Cowen Holdings

    (127,685 )(2)

Ramius's contributed equity

    301,628 (3)

Dividend to Ramius's members

    (9,000 )(4)

Ramius's change of control vesting

    2,888 (5)

Excluded cash

    (500 )(6)

Ramius Fund of Funds capital effect

    3,513 (7)

Estimated contingent investment banking fees

    (7,250 )(8)

Deferred tax adjustments

    (770 )(9)

Estimated bargain purchase gain ("negative goodwill") on transactions

    2,350 (10)
       
 

Total

  $ 279,245  
       

(1)
Represents the estimated purchase consideration paid to Cowen Holdings stockholders in the Transactions.

(2)
Represents the elimination of the historical equity of Cowen Holdings.

(3)
Represents Ramius's contribution of historical redeemable members' equity to the equity of Cowen Group.

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Notes to Unaudited Pro Forma Combined Financial Statements (Continued)

Note 3—Acquisition Pro Forma Adjustments (Continued)

(4)
Represents Ramius cash excluded from the Transactions (treated as a reduction of Ramius's historical members' capital contributed). Immediately prior to closing of the Transactions, $2.4 million of capital withdrawals was made in connection with the satisfaction of tax obligations associated with the vesting of various partnership interests as a result of the Transactions and an aggregate of $6.6 million of capital withdrawals by Messrs. Cohen and Stark and BA Alpine Holdings, Inc.

(5)
Represents the amount of compensation liability of Ramius associated with partnership interest awards that were reclassified to equity as a result of vesting caused by the Transactions.

(6)
Represents the cash amount of Ramius's excluded assets which RCG retained in order to pay ongoing operating expenses, such as audit fees.

(7)
Represents the issuance of common shares for the purchase of the remaining 50% of the fund of funds business, and the equity effect of that purchase accounted for under FASB accounting standards as follows:

 
  (in thousands)  

Fair value of shares issued for purchase

  $ 20,490 (a)

Equity effect of purchase

    (16,977 )(b)
       
 

Net impact on stockholders' equity

  $ 3,513  
       

(a)
Based on the estimated Cowen Holdings share price of $7.55 multiplied by the 2,713,882 issued to HVB.

(b)
Represents the excess of the estimated purchase consideration over the carrying value of the noncontrolling interest. This amount is treated as a capital transaction and debited to equity (as opposed to goodwill) in accordance with FASB accounting standards, as Ramius already owned a controlling interest in the fund of funds business. The calculation of the excess is as follows:

 
  (in thousands)  

Fair value of shares issued

  $ 20,490  

Cash consideration paid

    10,370  
       
 

Total purchase consideration

    30,860  

Less: Carrying value of 50% noncontrolling interest purchased

    (13,883 )
       

Excess of purchase consideration over carrying value of noncontrolling interest purchased

  $ 16,977  
       

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Notes to Unaudited Pro Forma Combined Financial Statements (Continued)

Note 3—Acquisition Pro Forma Adjustments (Continued)

52


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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
OF THE COMPANY

As the acquirer, for accounting purposes, in the Transactions, RCG (which prior to the consummation of the Transactions operated the Ramius business) is the Company's accounting predecessor and its financials are considered the historical financials for the Company. The following tables present the selected historical consolidated financial data of RCG regarding its business and should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company" and the consolidated financial statements and related footnotes of the Company, RCG and Cowen Holdings included elsewhere in this prospectus. The following selected consolidated statements of financial condition data as of December 31, 2008 and 2007 and the selected consolidated statements of operations data for each of the three years in the three-year period ended December 31, 2008 have been derived from the audited consolidated financial statements and related notes thereto of RCG, the Company's accounting predecessor, included elsewhere in this prospectus and should be read in conjunction with those consolidated financial statements and notes thereto. The selected consolidated statements of financial condition data as of December 31, 2006, 2005 and 2004 and the selected consolidated statements of operations data for the years ended December 31, 2005 and 2004 have been derived from audited consolidated financial statements of RCG not included in this prospectus. The selected consolidated statements of financial condition data as of September 30, 2009 and the selected consolidated statements of operations data for the nine-month periods ended September 30, 2009 and September 30, 2008 have been derived from the unaudited consolidated financial statements of RCG included elsewhere in this prospectus and should be read in conjunction with those unaudited consolidated financial statements and notes thereto.

 
  Nine Months
Ended
September 30,
  Year Ended December 31,  
 
  2009   2008   2008   2007   2006   2005   2004  
 
  (in thousands)
 

Consolidated Statements of Operations Data:

                                           

Revenues

                                           
 

Management fees

  $ 31,408   $ 56,443   $ 70,818   $ 73,950   $ 65,635   $ 65,592   $ 48,006  
 

Incentive income

    177             60,491     81,319     24,771     37,847  
 

Interest and dividends

    225     1,443     1,993     16,356     17,189     9,217     8,921  
 

Reimbursement from affiliates

    7,832     11,675     16,330     7,086     4,070          
 

Other Revenues

    2,265     4,737     6,853     5,086     8,038     8,201     4,879  
 

Consolidated Ramius Funds and certain real estate entities revenues

    12,312     26,165     31,739     25,253     35,897     15,325     (158 )
                               
   

Total revenues

  $ 54,219   $ 100,463   $ 127,733   $ 188,222   $ 212,148   $ 123,106   $ 99,495  

Expenses

                                           
 

Employee compensation and benefits

    50,869     67,703     84,769     123,511     112,433     76,971     69,866  
 

Non-compensation expense (excluding goodwill impairment)

    38,070     37,929     54,856     79,020     54,277     46,406     26,440  
 

Goodwill impairment

            10,200                  
 

Consolidated Ramius Funds and certain real estate entities expenses

    11,831     27,040     34,268     21,014     39,300     24,449     710  
                               
   

Total expenses

  $ 100,770   $ 132,672   $ 184,093   $ 223,545   $ 206,010   $ 147,826   $ 97,016  

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
OF THE COMPANY (Continued)

 
  Nine Months
Ended
September 30,
  Year Ended December 31,  
 
  2009   2008   2008   2007   2006   2005   2004  
 
  (in thousands)
 

Other income (loss)

                                           
 

Net gain (loss) on securities, derivatives and other investments

    (2,702 )   800     (2,006 )   94,078     54,765     67,000     47,419  
 

Consolidated Ramius Funds and certain real estate entities net gains (losses)

    25,268     (85,523 )   (198,485 )   84,846     78,656     61,019     1,961  
                               
   

Total other income (loss)

  $ 22,566   $ (84,723 ) $ (200,491 ) $ 178,924   $ 133,421   $ 128,019   $ 49,380  
                               
   

Income (loss) before income taxes

    (23,985 )   (116,932 )   (256,851 )   143,601     139,559     103,299     51,859  
 

Income tax expense (benefit)

    (5,978 )   738     (1,301 )   1,397     4,814     1,304     717  
                               
   

Net income (loss)

    (18,007 )   (117,670 )   (255,550 )   142,204     134,745     101,995     51,142  
 

Net Income (loss) attributable to non-controlling interests in consolidated subsidiaries

    13,888     (52,176 )   (113,786 )   66,343     74,189     53,439     900  
   

Special allocation to the Redeemable Managing Member

                26,551     21,195     15,961     18,523  
                               
   

Net income (loss) available to all Redeemable Members

  $ (31,895 ) $ (65,494 ) $ (141,764 ) $ 49,310   $ 39,361   $ 32,595   $ 31,719  
                               

 
   
  As of December 31,  
 
  As of
September 30,
2009
 
 
  2008   2007   2006   2005   2004  
 
  (in thousands)
 

Consolidated Statements of Financial Condition Data:

                                     

Total assets

  $ 681,895   $ 797,831   $ 2,113,532   $ 2,468,195   $ 1,833,789   $ 1,702,809  

Total liabilities

    113,025     182,003     1,430,029     1,657,992     1,095,805     1,477,469  

Redeemable non-controlling interests in consolidated subsidiaries

    267,242     284,936     203,523     514,761     482,801     19,119  
                           

Total redeemable members' capital

  $ 301,628   $ 330,892   $ 479,980   $ 295,442   $ 255,183   $ 206,221  
                           

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SUPPLEMENTAL QUARTERLY CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)

        The following table presents RCG's unaudited quarterly results of operations for 2009, 2008 and 2007. These quarterly results reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results. Revenues and net income (loss) can vary significantly from quarter to quarter due to the nature of the Ramius's business activities.

 
  Quarter Ended    
 
 
  Year Ended
December 31
 
 
  March 31   June 30   September 30   December 31  

2009 

                               

Total revenues

  $ 20,725   $ 17,032   $ 16,462              

Net Income (loss)

    (11,203 )   (10,818 )   4,014              

Net Income (loss) attibutable to non-controlling interests in consolidated subsidiaries

    (2,404 )   6,393     9,899              

Special allocation to the Redeemable Managing Member

                         

Net income (loss) available to all Redeemable Members

  $ (8,799 ) $ (17,211 ) $ (5,885 )            

EPS data based on net income (loss)

    N/A     N/A     N/A     N/A     N/A  

2008 

                               

Total revenues

  $ 29,813   $ 33,831   $ 36,819   $ 27,270   $ 127,733  

Net Income (loss)

    (35,434 )   28,740     (110,976 )   (137,880 )   (255,550 )

Net Income (loss) attibutable to non-controlling interests in consolidated subsidiaries

    (13,175 )   9,786     (48,787 )   (61,610 )   (113,786 )

Special allocation to the Redeemable Managing Member

                     

Net income (loss) available to all Redeemable Members

  $ (22,259 ) $ 18,954   $ (62,189 ) $ (76,270 ) $ (141,764 )

EPS data based on net income (loss)

    N/A     N/A     N/A     N/A     N/A  

2007 

                               

Total revenues

  $ 70,683   $ 79,081   $ 19,480   $ 18,978   $ 188,222  

Net Income (loss)

    68,305     76,713     4,178     (6,992 )   142,204  

Net Income (loss) attibutable to non-controlling interests in consolidated subsidiaries

    22,166     31,172     9,453     3,552     66,343  

Special allocation to the Redeemable Managing Member

    16,149     15,939     (1,846 )   (3,691 )   26,551  

Net income (loss) available to all Redeemable Members

  $ 29,990   $ 29,602   $ (3,429 ) $ (6,853 ) $ 49,310  

EPS data based on net income (loss)

    N/A     N/A     N/A     N/A     N/A  

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
OF COWEN HOLDINGS

        The following tables present the selected historical consolidated financial data of Cowen Holdings regarding its business and should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cowen Holdings" and the consolidated financial statements and related footnotes of the Company, RCG and Cowen Holdings included elsewhere in this prospectus. The following selected consolidated statements of financial condition data as of December 31, 2008 and 2007 and the selected consolidated statements of operations data for each of the three years in the three-year period ended December 31, 2008 have been derived from the audited consolidated financial statements and related notes thereto of Cowen Holdings included elsewhere in this prospectus and should be read in conjunction with those consolidated financial statements and notes thereto. The selected consolidated statements of financial condition data as of December 31, 2006, 2005 and 2004 and the selected consolidated statements of operations data for the years ended December 31, 2005 and 2004 have been derived from audited consolidated financial statements of Cowen Holdings not included in this prospectus. The selected consolidated statements of financial condition data as of September 30, 2009 and the selected consolidated statements of operations data for the nine-month periods ended September 30, 2009 and September 30, 2008 have been derived from the unaudited consolidated financial statements of Cowen Holdings included elsewhere in this prospectus and should be read in conjunction with those unaudited consolidated financial statements and notes thereto.

 
  Nine Months
Ended
September 30,
  Year Ended December 31,  
 
  2009   2008   2008   2007   2006   2005   2004  
 
  (in thousands, except per share data)
 

Consolidated Statements of Operations Data:

                                           

Revenues

                                           

Investment banking

  $ 28,917   $ 45,733   $ 50,937   $ 90,520   $ 164,342   $ 126,253   $ 113,795  

Brokerage

    103,773     116,607     149,901     158,720     159,879     145,700     164,188  

Interest and dividend income

    367     2,814     3,362     8,284     17,766     16,990     9,504  

Other

    8,625     10,543     13,181     4,045     2,980     5,348     5,574  
                               
 

Total revenues

    141,682     175,697     217,381     261,569     344,967     294,291     293,061  
                               

Expenses

                                           

Employee compensation and benefits

    98,920     106,835     133,891     177,948     215,707     172,128     170,546  

Goodwill impairment

        50,000     50,000                  

Non-compensation expense (excluding goodwill impairment)(1)

    66,288     74,792     98,257     103,226     112,644     109,848     63,533 (2)
                               
 

Total expenses

    165,208     231,627     282,148     281,174     328,351     281,976     234,079  
                               
 

Operating (loss) income

    (23,526 )   (55,930 )   (64,767 )   (19,605 )   16,616     12,315     58,982  

Gain (loss) on exchange memberships

        609     751     1,775     25,843     918     (1,993 )
                               
 

(Loss) income before income taxes

    (23,526 )   (55,321 )   (64,016 )   (17,830 )   42,459     13,233     56,898  

Provision (benefit) for income taxes

    565     6,441     8,081     (6,509 )   4,548     1,152     1,877  
                               
 

Net (loss) income

  $ (24,091 )   (61,762 ) $ (72,097 ) $ (11,321 ) $ 37,911   $ 12,081   $ 55,112  

Less: net income attributable to noncontrolling interests

    189         57                  
                               

Net (loss) income attributable to Cowen Holdings

  $ (24,280 ) $ (61,762 ) $ (72,154 ) $ (11,321 ) $ 37,911   $ 12,081   $ 55,112  
                               

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
OF COWEN HOLDINGS (Continued)

 
  Nine Months
Ended
September 30,
  Year Ended December 31,  
 
  2009   2008   2008   2007   2006   2005   2004  
 
  (in thousands, except per share data)
 

Earnings (loss) per share:

                                           

Weighted average common shares outstanding:

                                           
 

Basic

    11,709     11,251     11,254     12,805     12,903     12,900     12,900  
 

Diluted

    11,709     11,251     11,254     12,805     12,966     12,900     12,900  

Earnings (loss) per share:

                                           
 

Basic

  $ (2.07 ) $ (5.49 ) $ (6.41 ) $ (0.88 ) $ 2.94   $ 0.94   $ 4.27  
 

Diluted

  $ (2.07 ) $ (5.49 ) $ (6.41 ) $ (0.88 ) $ 2.92   $ 0.94   $ 4.27  

(1)
Includes floor brokerage and trade execution, net service fees, communications, occupancy and equipment, marketing and business development, depreciation and amortization and other expenses.

(2)
Includes a net benefit of $46.9 million related to accruals for insurance recoveries and the net reversal of previously accrued reserves.

 
   
  As of December 31,  
 
  September 30,
2009
 
 
  2008   2007   2006   2005   2004  

Consolidated Statements of Financial Condition Data:

                                     

Total assets

  $ 192,189   $ 207,498   $ 349,038   $ 684,438   $ 785,339   $ 820,350  

Total liabilities and minority interest

    64,504     65,383     140,383     466,310     411,388     466,872  
                           

Total stockholder's equity (2009-2006) and group equity (2005 and 2004)

  $ 127,685   $ 142,115   $ 208,655   $ 218,128   $ 373,951   $ 353,478  
                           

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE COMPANY

        This discussion contains forward looking statements, which involve numerous risks and uncertainties, including, but not limited to, those in the section titled "Risk Factors" beginning on page 11 of this prospectus. This Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company should be read in conjunction with the consolidated financial statements and related notes of RCG (the Company's accounting predecessor) and Cowen Holdings included elsewhere in this prospectus. Actual results may differ materially from those contained in any forward looking statements.

Recently Completed Transactions

        Cowen Group, Inc. is a new holding company formed in connection with the business combination of Ramius and Cowen Holdings. On November 2, 2009, the Transactions were consummated including (1) the merger of Lexington Merger Corp. with and into Cowen Holdings, pursuant to which each outstanding share of common stock of Cowen Holdings was converted into one share of Class A common stock of the Company and (2) the transfer by RCG of substantially all of its assets and liabilities to Ramius in exchange for the issuance by the Company to RCG of 37,536,826 shares of Class A common stock of the Company. Following the consummation of the Transactions, Cowen Group is the parent company of both Ramius and Cowen Holdings and RCG held approximately 66.56% of the Company's Class A common stock as of November 2, 2009. RCG's managing member is controlled by certain members of the Company's senior management team. Prior to the consummation of the Transactions, the Company did not conduct any material activities other than those incidental to its formation and the matters contemplated by the Transaction Agreement. Concurrently with the completion of the transactions described above, HVB received 2,713,882 shares of Class A common stock of the Company and approximately $10.4 million in cash in exchange for transferring to Cowen Holdings the 50% interest in Ramius Alternative Solutions, Ramius's fund of funds business, not already owned by Ramius.

        The business combination between Ramius and Cowen Holdings was accounted for as an "acquisition" by Ramius of Cowen Holdings, as that term is used under GAAP for accounting and financial reporting purposes. As a result, the historical financial statements of Ramius (the business of which was operated by RCG, the Company's accounting predecessor, prior to the consummation of the Transactions) have become the historical financial statements of Cowen Group. Accordingly, the financial statements of Cowen Group included in this prospectus are Ramius's historical financial statements and do not reflect the historical financial position or results of operations of Cowen Holdings. Similarly, the discussion in this "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company" relate to Ramius's financial condition and results of operations and do not reflect the financial condition or results of operations of Cowen Holdings. The historical financial statements of Cowen Holdings as of and for the period ending September 30, 2009 and as of and for periods ending prior to September 30, 2009 and the historical Management's Discussion and Analysis of Financial Condition and Results of Operations of Cowen Holdings have been included elsewhere in this prospectus. In addition, unaudited pro forma condensed consolidated financial statements of Cowen Group giving effect to the transactions described above have also been included elsewhere in this prospectus. See "Unaudited Pro Forma Condensed Consolidated Financial Statements."

        The assets and liabilities of Cowen Holdings were, as of November 2, 2009, recorded at their respective fair values and added to those of Ramius. The financial statements of the Company that include periods after November 2, 2009 will reflect such fair values and will not be restated retroactively to reflect the historical financial position or results of operations of Cowen Holdings. For periods after November 2, 2009, the results of operations of Cowen Holdings will be included in the results of operations of the Company.

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Business Overview

        Prior to the consummation of the Transactions, the Company conducted its operations through one reportable segment, the alternative investment management segment, which provides management services to its hedge funds, fund of funds, real estate and other investment platforms. After the combination of Ramius and Cowen Holdings, the Company conducts its operations through two segments: an alternative investment management segment and an investment banking segment. The Company's alternative investment management business is conducted primarily through Ramius, its wholly owned subsidiary (the business of which was operated by RCG, the Company's accounting predecessor, prior to the consummation of the Transactions). For purposes of this historical discussion of the business of the Company as of September 30, 2009 and for prior periods, the Company's business is that of Ramius, the business of which was operated by RCG, the Company's accounting predecessor. For a discussion of the historical results of the Company's investment banking business see "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cowen Holdings."

        We operate our alternative investment management business primarily through Ramius, our wholly owned subsidiary. Our alternative investment management business had approximately $7.9 billion of assets under management as of October 1, 2009, after giving pro forma effect to the consummation of the Transactions. The predecessor to this business was founded in 1994 and, through one of its subsidiaries, has been a registered investment adviser under the Investment Advisers Act since 1997. Our alternative investment management products and services include hedge funds, fund of funds, real estate, health care royalty funds and cash management services. Our institutional investors include pension funds, insurance companies, banks, foundations and endowments, wealth management organizations and family offices.

        Ramius's hedge fund and fund of funds platforms have historically sought to deliver consistent, risk-adjusted returns throughout a market cycle (which Ramius generally views as approximately three to five years). In these platforms, Ramius seeks positive performance with minimal correlation to directional market indices. Risk-adjusted returns refer to positive returns with lower volatility as compared to traditional asset classes such as equities.

Factors Affecting Our Alternative Investment Management Business

        Our alternative investment management business and results of operations are impacted by the following factors:

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        In addition, our alternative investment management business and results of operations may be affected by a number of external market factors. These include global asset allocation trends, regulatory developments and overall macroeconomic activity. Due to these and other factors, its operating results may reflect significant volatility from period to period. Ramius was affected by the conditions impacting the global financial markets and the hedge fund industry during 2008, which was characterized by substantial declines in investment performance and unanticipated levels of requested redemptions. Investors sought liquidity wherever it could be obtained, often due to liquidity constraints within their own organizations. As was generally the case on an industry-wide basis, during 2008 Ramius's funds experienced negative investment performance and increased redemptions. Ramius's assets under management declined from $12.9 billion as of December 31, 2007 to $7.1 billion as of October 1, 2009. After a very challenging period during the first quarter of 2009, market conditions subsequently stabilized and then began to improve. While there have been net redemptions in the industry for much of the year, investors' need for capital has become less acute. Although we remain cautious, we believe the pace of redemptions may be slowing with calendar 2009 coming to a close, as investors adjust their asset allocations looking forward to 2010. The variability of redemptions affects our alternative investment management business, and it is always possible that Ramius could intermittently experience redemptions above historical levels, regardless of fund performance. These conditions will continue to affect our alternative investment management business, and as other alternative investment managers continue to restrict fund investor liquidity, it is possible that we could continue to experience elevated redemptions relative to historic levels, regardless of fund performance. However, we believe the diversity of our alternative investment management products and services as well as the strength of our institutional platform, supported by our own capital, should benefit us throughout this period.

        For a discussion of the factors affecting our investment banking business see "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cowen Holdings."

        The principal drivers of the results of our alternative investment management business are assets under management and investment performance. Delivering positive fund performance that is consistent with its investors' objectives is the principal determinant of the long-term success of our alternative investment management business as it enables us to grow assets under management organically, generate investment returns on our own invested capital, should enable us to attract new capital and minimize redemptions by our fund investors. Conversely, poor investment performance decreases our assets under management, can result in investor redemptions from its funds, generates

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losses on our own capital and impairs the marketability of our alternative investment management products and services.

        For a discussion of the principal drivers of the results of our investment banking business see "Management's Discussion and Analysis of Financial Condition and Results of Operations of Cowen Holdings."

        The ability of investors to contribute capital to and redeem capital from Ramius's funds can cause assets under management to fluctuate considerably from period to period. Such fluctuations also result from investment performance due to the retention and reinvestment of fund profits as well as the impact of fund losses. All of these factors impact the revenues we earn from management fees, incentive income and returns on its own capital. The need of Ramius's clients to satisfy their own liquidity requirements (especially if other managers have instituted redemption restrictions) may cause some investors to redeem investments in Ramius's funds for reasons unrelated to Ramius's performance.

        Most of the Company's return on its own invested capital is derived from Ramius's investment in the Enterprise Fund, with such income directly dependent on the performance of the Enterprise Fund. As of September 30, 2009, Ramius had $276 million of its own capital invested in the Enterprise Fund. As such, the investment performance of the Enterprise Fund may have a material impact on our performance. Pursuant to its authority as the investment manager of the Enterprise Fund and in accordance with the terms of the Enterprise offering documents, Ramius Advisors, LLC, a subsidiary of Ramius, is segregating certain illiquid and other assets of the Enterprise Fund, representing approximately 55% of the assets of the fund, in a "side-pocket" effective as of December 31, 2009. Investors in the Enterprise Fund, including the Company, may not withdraw any portion of their investment that has been allocated to the side-pocket, but as such assets are sold or income is received, the proceeds will be credited back to the investors' accounts in the Enterprise Fund. Ramius will continue to earn a management fee on the segregated assets, but will not be eligible to earn an incentive fee with respect to those assets until any gains are realized. Ramius has received redemption requests from investors in the Enterprise Fund for approximately $135 million for redemptions through March 31, 2010 (excluding the redemption request from the Company referred to under "—Liquidity and Capital Resources"), but investors will only be entitled to withdraw the portion of their investments that has not been allocated to the side-pocket. The Enterprise Fund has a rolling two year redemption cycle. Therefore, the remaining assets in the Enterprise Fund, excluding approximately $70 million which is eligible to be redeemed as of June 30, 2010, are locked up for another two years.

        Following the consummation of the Transactions, Ramius transferred interests in Enterprise having a value of approximately $190 million to the Company. The discussion in this section does not reflect this transfer.

        Our alternative investment management business generates revenue through three principal sources: management fees, incentive income and investment income from our own capital. The amount of revenues earned from those sources is directly related to the amount of its assets under management and the investment performance of its funds. Management fees are directly impacted by any increase or decrease in our assets under management, while incentive income is impacted by its funds' performance and any increase or decrease in assets under management. Investment income from our own capital is impacted by the performance of the funds in which its capital is invested, which is principally the Enterprise Fund.

        As of September 30, 2009, Ramius owned 50% of Ramius Alternative Solutions, the Ramius fund of funds business. Although 100% of the revenues from the fund of funds business were included as revenue in Ramius's consolidated financial statements, 50% of the net income was allocated to a non-controlling interest. As described above, following the closing of the Transactions on November 2,

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2009, the Company became the sole indirect owner of Ramius Alternative Solutions. Furthermore, the general partners of Ramius's real estate funds are owned jointly by Ramius and third parties with Ramius's ownership interest in the general partners of the real estate funds ranging from 30% to 55%. Accordingly, the management fees, incentive income and investment income generated by the real estate funds are split between us and the other owners of the general partners. We do not possess unilateral control over the general partners. Pursuant to GAAP, the management fees, incentive income and investment income received by the general partners are accounted for under the equity method and are reflected under other income instead of management fees, incentive income and investment income.

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        The expenses for our alternative investment management business consist of compensation and benefits, interest expense and general, administrative and other expenses. In 2008, Ramius decided to focus on its larger products and rationalize or eliminate those products, strategies and businesses that were less likely to attract significant assets under management or were marginal to its business. This decision has resulted in a reduction in expenses (including a reduction in compensation expenses as a result of headcount reductions of both investment professionals and support staff). Such expense reductions began in the fourth quarter of 2008 and Ramius continues to evaluate its expenses on an ongoing basis.

        Ramius's other income (loss) primarily consists of realized and unrealized gains or losses from the investment of its own capital and from its consolidated funds and certain non-wholly owned operating subsidiaries.

        Historically, Ramius operated as a limited liability company and was not subject to U.S. federal or state income taxes. However, Ramius is subject to unincorporated business income tax (which we refer to as UBT), on its trade and business activities conducted in New York, New York. The effective UBT rates vary significantly between the effective rate applicable to income from business activities and the effective rate applicable to income from investment activities. Ramius is also subject to foreign taxation on income it generates in certain countries. In the third quarter of 2009, one of the consolidated Ramius funds had an investment in reinsurance companies that generated a significant tax benefit, which is explained in more detail below. See "GAAP Quarterly Comparison—Income Taxes."

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        Non-controlling interests represent the pro rata share of the income or loss of the non-wholly owned consolidated entities attributable to the other owners of such entities.

        In accordance with Ramius's operating agreement in effect prior to the consummation of the Transactions, Ramius's managing member was historically entitled to receive a special allocation equal to 35% of Ramius's net profits. Following the closing of the Transactions as of November 2, 2009, Ramius no longer allocates a portion of its profits to its managing member, and the principals of the managing member, in their capacities as officers of Cowen Group, instead receive compensation in the form of salaries and discretionary bonuses.

Changes in Connection with the Transactions

        The changes discussed below occurred as of November 2, 2009 upon the closing of the Transactions. The impact of these changes are not reflected in the results of operations for the third quarter of 2009 discussed in this prospectus as they had not yet occurred.

        Prior to November 2, 2009, Ramius Alternative Solutions was operated as a joint venture between Ramius and HVB. As a result, for all periods prior to November 2, 2009 the net income with respect to the fund of funds business was distributed equally to Ramius and HVB. On November 2, 2009, we purchased HVB's interest in Ramius Alternative Solutions in exchange for approximately 2.7 million shares, or 4.9%, of the Company's outstanding Class A common stock and approximately $10.4 million of cash. As a result, Cowen Group is now, indirectly, the sole owner of Ramius Alternative Solutions, the fund of funds business, and HVB will no longer participate directly in the fund of funds net income.

        As described above, following the closing of the Transactions as of November 2, 2009, Ramius no longer allocates a portion of its profits to its managing member.

        Ramius sponsors an employee ownership plan (which we refer to as the REOP program) for certain key employees at Ramius. The REOP program provides for the granting of equity interests in Ramius to certain participants, or equity REOP. Other participants have been granted non-equity awards which track the returns of an equity interest in Ramius, or phantom REOP. The equity REOP and phantom REOP awards which were awarded prior to the Transactions (other than the transaction REOP grants discussed below) vested upon the closing of the Transactions. More specifically, upon the closing of the Transactions, $3.3 million in outstanding equity and phantom REOP vested, of which $0.8 million will be paid out in cash with respect to equity REOP to fund certain tax withholding requirements, $1.8 million in outstanding equity REOP was converted to ownership interests in Ramius and $0.8 million in outstanding phantom REOP vested, and which was paid out in cash.

        Ramius Alternative Solutions also sponsors an employee profit participation plan (which we refer to as the RAPP program) for certain key employees at Ramius Alternative Solutions. The RAPP program provides for the granting of equity interests in related entities with the initial grant values based on a certain percentage of profits of the fund of funds business. In years that awards are granted, one half of the amount granted represents equity units in one of the consolidated fund of funds products managed by Ramius Alternative Solutions chosen by senior management and the other half of the amount granted represents equity units of Ramius. Upon the closing of the Transactions, $2.8 million in outstanding RAPP awards vested, of which $0.7 million was paid out in cash to fund

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certain tax withholding requirements, $1.0 million was converted to ownership interests in Ramius and $1.0 million was converted to ownership interests in certain fund of funds platforms.

        In connection with the Transactions, Ramius awarded equity REOP (which corresponded to an aggregate of 2,859,426 of the shares of Class A common stock RCG received in the Transactions) to certain key employees, or the "transaction REOP." The transaction REOP is a one-time award which will vest over a three-year period, with 50% of the awards vesting on each of the second and third anniversaries of the closing of the transactions. The Company will recognize the transaction REOP as compensation expense each year in relation to the services received over the requisite service period.

        As of the closing of the Transactions, the Company is subject to U.S. federal, state and local income tax on its income. The Company's carrying value of the Ramius business is higher for income tax purposes than for financial reporting purposes. The net deferred tax asset that will be recognized for this difference will be limited to the tax benefit expected to be realized in the foreseeable future. This benefit will be estimated based on a number of factors, especially the amount of unrealized gains in all of the net assets of the combined company existing for tax purposes at the date of the transaction that are actually expected to be realized, for tax purposes, in the foreseeable future. If the unrealized gains at the date of the closing of the Transactions that will be realized in the future increase or decrease, deferred income tax expense or benefit will be recognized accordingly.

Assets Under Management and Fund Performance

        Assets Under Management.    The following table sets forth our assets under management as of October 1, 2009 across our alternative investment management products and services, without giving pro forma effect to the Transactions:

Platform
  Total Assets
under
Management
  Primary Strategies
 
  (dollars in millions)
   

Hedge Funds

  $ 1,919 (1) Multi-Strategy
Single Strategy

Fund of Funds(2)

    2,017   Ramius Multi-Strategy
Ramius Vintage Multi-Strategy
Ramius Customized Solutions

Real Estate(3)

    1,628 (4) Debt
Equity

Other

    1,526   Cash Management
Mortgage Advisory

Total

  $ 7,090 (5)  

(1)
This amount includes our own invested capital of approximately $276 million as of September 30, 2009.

(2)
As discussed above, as of October 1, 2009, HVB owned 50% of Ramius Alternative Solutions, the fund of funds business. As of November 2, 2009, the Company acquired HVB's interest in Ramius Alternative Solutions.

(3)
As discussed above, Ramius owns between 30% and 55% of the general partners of the real estate business. We do not possess unilateral control over any of these general partners.

(4)
This amount reflects committed capital.

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(5)
This does not reflect $806 million of assets under management in the CHRP Funds. Following the closing of the Transactions, the CHRP Funds became part of the alternative investment management business.

        Ramius typically accepts new investors and additional investments from existing investors into its funds on a monthly basis. Investors in Ramius's hedge funds and fund of funds, but not cash management accounts or real estate, generally have the right to redeem their interests on a quarterly basis, after providing the required advanced notice which typically ranges from thirty to 120 days. However, depending on the investment strategy, some products have less frequent redemption periods, such as annual or semi-annual. The funds generally have a lock-up period of one year or more from the date of investment during which time redemptions can only be made upon payment of a fee ranging from 1% to 5% of the amount being redeemed. Investors in the Enterprise Fund, however, only have the right to redeem their interests after a two-year period upon providing 120 days' notice. If an investor in the Enterprise Fund does not provide notice, the investor would then be subject to another two-year lock-up period with respect to investments in the Enterprise Fund. Investors in Ramius's real estate funds are required to meet capital calls over a designated investment period to the extent of their previously agreed capital commitments and redemptions are generally not permitted. Investors in Ramius's cash management accounts may freely withdraw capital from such accounts.

        The following table sets forth the changes to our alternative investment management business's assets under management, which, since 2007, has included Ramius's investment in the Enterprise Fund:

 
  Year ended December 31,   Three months
ended
October 1,
  Nine months
ended
October 1,
 
 
  2006   2007   2008   2009   2009  
 
  (dollars in thousands)
   
 

Beginning Assets under Management

  $ 8,810,398   $ 9,592,135   $ 12,900,355   $ 7,394,095   $ 9,765,230  

Net Subscriptions (Redemptions)

    46,484     2,601,939     (1,066,714 )   (484,624 )   (2,947,067 )

Net Performance(1)

    735,253     706,281     (2,068,411 )   180,956     272,264  
                       

Ending Assets under Management

  $ 9,592,135   $ 12,900,355   $ 9,765,230   $ 7,090,427   $ 7,090,427  
                       

(1)
Net performance reflected is representative of the net return of the most recently issued full fee paying class of fund interests offered to investors. The net returns are net of all management and incentive fees, and are calculated monthly based on the change in an investor's current month ending equity as a percentage of their prior month's ending equity, adjusted for the current month's subscriptions and redemptions. Such returns are compounded monthly in calculating the final net year to date return. Included in net performance is the effect of any foreign exchange translation adjustments.

        Assets under management declined substantially during 2008 due primarily to substantial declines in investment performance and unanticipated levels of redemptions related to the unprecedented global financial market conditions, particularly during the second half of 2008. Our alternative investment management business has been adversely affected by these global market conditions. As a result, the investment returns in the funds were adversely affected, most significantly in the second half of 2008.

        Assets under management as of October 1, 2009 were $7.09 billion, a decrease of $2.68 billion from December 31, 2008, comprised of investor inflows of $943 million, investor outflows of $3.89 billion and performance related appreciation of $272 million. Ramius believes the redemptions were investors' response to the continuing global financial crisis and the decline in fund performance. Ramius believes its assets under management will continue to experience net outflows for the near term. As a result, Ramius expects that management fees will be lower in future quarters compared to prior periods until assets under management begin to increase. In addition, due to the high-water marks set in 2008, Ramius may not earn incentive income in 2009 and beyond until the high-water marks are reached with respect to the investments of the fund investors who suffered losses last year.

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        In 2008, the decrease in assets under management was driven by net outflows of $1.07 billion, comprised of $3.57 billion of inflows and $4.64 billion of outflows, including $1.38 billion in inflows and $1.34 billion in outflows from cash management accounts as well as an $83.0 million inflow from an additional investment made by Ramius into the Enterprise Fund. In 2007, growth in assets under management was driven by net inflows of $2.60 billion, comprised of $5.87 billion of inflows and $3.27 billion of outflows, including $2.03 billion in inflows and $1.89 billion in outflows from cash management accounts as well as a $266.4 million inflow from Ramius's initial investment in the Enterprise Fund. In 2006, growth in assets under management was driven by net inflows of $46.5 million, comprised of $3.10 billion of inflows and $3.05 billion of outflows, including $1.36 billion in inflows and $1.19 billion in outflows from cash management accounts.

        Performance information for Ramius's most significant funds is included throughout this discussion and analysis to facilitate an understanding of its results of operations for the periods presented. The performance information reflected in this discussion and analysis is not indicative of the future results of any particular fund. An investment in Cowen Group's shares is not an investment in any of Ramius's funds. There can be no assurance that any of the specified funds or Ramius's other existing or future funds will achieve similar results.

        The table below sets forth performance information for the three month periods ending September 30, 2009 and 2008, the nine month period ending September 30, 2009 and the years ending December 31, 2008, 2007 and 2006 for Ramius's funds with assets greater than $200 million as well as information with respect to Ramius's largest single-strategy hedge fund. The performance reflected below is representative of the net return of the most recently issued full fee paying class of fund interests offered for the respective fund. The net returns are net of all management and incentive fees, and are calculated monthly based on the change in an investor's current month ending equity as a percentage of their prior month's ending equity, adjusted for the current month's subscriptions and redemptions. Such returns are compounded monthly in calculating the final net year to date return.

 
   
   
  Performance  
 
   
   
  Three months
ended
September 30,
   
   
   
   
 
Platform
  Strategy   Largest Funds(1)   2009   2008   2009(2)   2008   2007   2006  
Hedge Funds   Multi-Strategy   Ramius Multi-Strategy Fund Ltd.
(Inception Jan. 1, 1996)
    3.98 %   (9.77 )%(3)   5.64 %   (22.64 )%(3)   6.05 %   12.51 %
        Ramius Enterprise LP
(Inception Jan. 1, 2008)
    4.41 %   (11.88 )%(3)   3.94 %   (25.38 )%(3)   24.91 %(4)   13.63 %(4)
    Single Strategy   Ramius Value and Opportunity
Overseas Fund Ltd.
(Inception Mar. 1, 2006)
    5.70 %   (3.14 )%   12.07 %   (20.81 )%   6.34 %   23.77 %
Fund of Funds   Ramius
Multi-Strategy
  Ramius Multi-Strategy FOF Ltd.
(Inception Jan. 1, 1998)
    3.35 %   (6.45 )%   8.06 %   (24.22 )%   9.08 %   6.94 %
    Ramius Vintage
Multi-Strategy
  Ramius Vintage Multi-Strategy FOF Ltd.
(Inception Jan. 1, 2006)
    5.28 %   (8.67 )%   12.59 %   (27.76 )%   11.87 %   8.99 %
    Managed Accounts   Global Value Creation Portfolio with Hedging Overlay
(Inception Sept. 1, 2007)
    7.02 %   (3.99 )%   10.54 %   (8.90 )%   2.47 %   na  
        Low Volatility Multi-Strategy Fund
(Inception Aug. 1, 2005)
    2.56 %   (6.25 )%   6.05 %   (18.17 )%   9.41 %   3.79 %
Real Estate   Debt   RCG Longview Debt Fund IV, L.P.
(Inception Nov. 12, 2007)
    (3.31 )%   (2.47 )%   (9.09 )%(5)   (8.57 )%   8.34 %   na  
    Equity   RCG Longview Equity Fund, L.P.
(Inception Nov. 22, 2006)
    6.37 %   (0.22 )%   4.75 %(5)   (14.85 )%   (3.64 )%   (18.76 )%
Other   Cash Management         0.26 %   0.87 %   0.15 %   3.67 %   5.24 %   5.05 %

(1)
Funds with assets under management greater than $200 million and Ramius's largest single-strategy fund. The inception date for a fund represents the initial date that the fund accepted capital from third party investors. As of October 1, 2009, the net assets of the funds presented above were $4.23 billion, or 59.7% of the total assets under management as of October 1, 2009 of $7.09 billion. Excluded from the table above are funds with $2.86 billion, or 40.3% of total assets under management as of October 1, 2009. These include a total of 62 smaller individual funds and managed accounts.

(2)
Performance for 2009 year to date as of September 30, 2009.

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(3)
Performance does not reflect any decrease in valuation for LBIE assets which have been segregated. See section titled "Management's Discussion and Analysis of Financial Condition and Results of Operation of the Company—Assets Under Management and Fund Performance—Fund Performance—2008 Fund Performance—Lehman Brothers."

(4)
Reflects returns on our own invested capital prior to the creation of the Enterprise Fund with the application to such performance of (i) an assumed annual management fee of 2% on average invested assets; (ii) an assumed annual performance fee of 20% on net income; and (iii) assumed annual estimated expenses of 0.26% on average invested assets. See section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company—Assets Under Management and Fund Performance."

(5)
Returns for each year represent net internal rates of return to limited partners after management fees and incentive allocations, if any, and are computed on a year-to-year basis consistent with industry standards. Incentive allocations are computed based on a hypothetical liquidation of net assets of each fund as of the balance sheet date. Returns are calculated for the investors as a whole. The computation of such returns for an individual investor may vary from these returns based on different management fee and incentive arrangements and the timing of capital transactions. The hypothetical liquidation value may not reflect the ultimate value that may be realized from the real estate investments, particularly given the relatively long period of time that the real estate investments may be held under the terms of the real estate fund documents.

        As 2009 began, market conditions remained unstable following the events of 2008, and industry-wide investor liquidity issues had yet to be resolved. For the first two months of the year and into early March, Ramius preserved capital in its funds while equity market indices declined substantially. In the second quarter, market conditions began to stabilize and directional markets improved. While the Enterprise Fund was profitable for the second quarter, the portfolio's asset mix is essentially non-directional in nature. When combined with a number of hedges still in place after the sharp market declines of 2008 and early 2009, performance would not be expected to be in line with the major market indices. The performance of Ramius's funds, however, has sequentially improved each quarter, with the third quarter being the year's strongest, as the Enterprise Fund was positive in each of the three months. Performance in the more liquid investment strategies has also continued to improve, not only as general market conditions have become more receptive, but also due to specific investments made in the various strategies in which Ramius engages. The less liquid investments, which have a longer term orientation, had experienced month-to-month variability in pricing which had been a drag on performance during the first half of 2009. As described above under "—Understanding Our Results—Assets Under Management and Investment Performance," effective as of December 31, 2009, Ramius Advisors, LLC, a subsidiary of Ramius, is segregating certain illiquid and other assets of the Enterprise Fund, representing approximately 55% of the assets of the fund, in a "side-pocket."

        In 2008, the majority of the decline in performance was attributable to unprecedented levels of market volatility, a lack of liquidity in global markets and, beginning in the third quarter, investors' demands for liquidity wherever it could be obtained. These factors resulted in substantial declines in the value of almost every asset class globally. The combination of declining asset values, illiquid markets and redemption demands in turn forced a large part of the hedge fund (and fund of funds) industry to impose restrictions on redemptions (such as gates or outright suspensions), and to create a variety of investor structures (side pockets, liquidating and retention classes) in order to bring portfolio assets and liquidity requirements into a manageable balance.

        Lehman Brothers.    Certain of the hedge funds managed by Ramius used Lehman Brothers International (Europe) (which we refer to as LBIE) as one of their prime brokers and some of these funds also held assets through accounts at Lehman Brothers, Inc. (which we refer to as LBI). As a result of LBIE being placed into administration on September 15, 2008 by order of the English Court and LBI entering liquidation proceedings under the Securities Investor Protection Act of 1970, as amended, the assets, including securities and cash, held by Ramius and the hedge funds in their LBIE accounts and LBI accounts were frozen at LBIE and LBI, respectively.

        The net assets of the Ramius hedge funds held at LBIE at the time of administration, which Ramius refers to as the total net equity claim, were approximately $232.6 million. Given the great degree of uncertainty as to the status of the assets held at LBIE and the process and prospects of the return of those assets, Ramius has valued the total net equity claim at an 80% discount, or approximately $46.5 million, which Ramius believes is a reasonable estimate of value that ultimately

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may be recovered with respect to the total net equity claim. Since the status and ultimate resolution of the assets under LBIE's administration proceedings is uncertain, Ramius decided that only the investors who were invested at the time of the Administration should participate in any profit/loss relating to the estimated recoverable Lehman claim. As such, Ramius has segregated the Lehman claims for the benefit of such investors for so long as they remained in the funds. These segregated Lehman claims do not earn management fees.

        In November 2008, one of the hedge funds managed by Ramius was appointed as a member of the unsecured creditors' committee of LBIE and representatives of Ramius have been attending regular meetings of the creditors' committee and assisting in working on a solution to provide a framework for returning assets to clients.

        In addition, Ramius currently estimates that the combined net exposure of the hedge funds to LBI amounts to approximately $18.7 million in cash and securities. On September 19, 2008, LBI was placed in a Securities Investor Protection Corporation ("SIPC") liquidation proceeding after the filing for bankruptcy of its parent Lehman Brothers Holdings, Inc. The status of the assets under LBI's bankruptcy proceedings has not been determined. The amount that will ultimately be recovered from LBI will depend on the amount of assets available in the fund of customer property to be established by the trustee appointed under the Securities Investor Protection Act (the "SIPA Trustee") as approved by the bankruptcy court as well as the total amount of customer claims that seek recovery from the fund of customer property. Based on recent court filings by the SIPA Trustee, the total amount of customer claims exceeds the assets that are likely to be in the fund of customer property. In addition, the court filings also indicate that Barclays plc has submitted a substantial claim against LBI relating to an asset purchase agreement entered into by Barclays with LBIE near the time of the SIPC liquidation proceedings that could affect the amount of assets that are included in the fund of customer property. As a result of these uncertainties and the timing of any distributions from LBI in respect of our customer claims, Ramius has estimated its recovery with respect to our LBI exposure at 65%, which represents the present value of the mid point between what it believes are reasonable estimates of the low side and high side potential recovery rates with respect to its LBI exposure. The estimated recoverable amount by the Ramius hedge funds may differ from the actual recoverable amount of the pending LBI claim, and the differences may be material.

        As a result of Ramius being an investor in Enterprise and due to Ramius's additional direct exposure to LBIE, Ramius had a total exposure to LBIE of $12.94 million and a total exposure to LBI of $1.64 million, as of September 30, 2009. At September 30, 2009, the value of Ramius's exposure to LBIE and LBI after the mark downs discussed above, was $3.65 million.

        Performance in 2007 was bifurcated between a strong first half and a modestly weak second half. Turmoil in the capital markets in the second half of the year caused Ramius to de-leverage the portfolios and employ significant macro-portfolio hedges, which helped protect performance. This period was the start of the unwinding of the massive overleveraging of the capital markets and adjustment in housing, mortgages, commodities and other asset classes.

        Performance in 2006 was generally strong with solid performance coming from across the firm. In 2006, global liquidity was readily available, debt markets were extremely receptive, allowing for record issuance of both investment-grade and high-yield debt, driving global announced transaction volume to record highs.

Results of Operation

        In the discussion and analysis that follows, certain line items are not comparable from period to period as a result of the consolidation and deconsolidation of numerous funds. One of the most

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significant changes over the past three years was as a result of Ramius conducting investment activity for its own capital through the Enterprise Fund rather than directly. Ramius owned 100% of the Enterprise Fund since the fund's formation in 2007 until the fund was opened to outside investors in early 2008. As a result of these changes, different accounting treatment was applied to Ramius's investments in each of these periods.

        In 2006, Ramius invested its own capital directly in public and private securities, real estate, third party funds and funds managed by Ramius. Furthermore, due to Ramius's control of certain funds and entities, Ramius had to consolidate the assets and liabilities as well as the income and expenses of numerous fund entities. As a result:

        Beginning October 1, 2007 Ramius transferred the vast majority of its direct investments to the Enterprise Fund which at that time was a wholly owned investment company. As a wholly owned entity, the financial performance of the entire Enterprise Fund was consolidated on a line by line basis in Ramius's financial statements. In addition, twenty-three other Ramius funds were deconsolidated from Ramius's financial statements.

        On January 1, 2008 Ramius contributed substantially all of its remaining directly owned investments into the Enterprise Fund and opened the fund to outside investors. As part of accepting outside capital Ramius established a master feeder structure for the Enterprise Fund with all of its capital invested through the domestic feeder. As a result:

        To provide comparative information of Ramius's operating results for the periods presented, a discussion of Economic Income of our alternative investment management segment follows the discussion of its total consolidated GAAP results. Economic Income reflects, on a consistent basis for all periods presented in RCG's financial statements, income earned from the Ramius funds and managed accounts and from its own invested capital. Economic Income excludes certain adjustments required under GAAP. See the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company—Segment Analysis—Investment Management—Economic Income" and Note 20 to RCG's audited consolidated financial statements and Note 12 to RCG's unaudited consolidated financial statements for a reconciliation of Economic Income to total Company net income (loss).

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GAAP Quarterly Comparison


Three Months Ended September 30, 2009 Compared with the Three Months Ended September 30, 2008
Consolidated Statement of Operations

 
  Three Months Ended
Sept 30,
  Period-to-Period  
 
  2009   2008   $ Change   % Change  
 
  (dollars in thousands)
 

Revenues

                         
 

Management fees

  $ 8,974   $ 17,795   $ (8,821 )   (49.6 )%
 

Incentive income (loss)

    177     (862 )   1,039     120.5 %
 

Interest and dividends

    47     530     (483 )   (91.1 )%
 

Reimbursement from affiliates

    2,342     5,077     (2,735 )   (53.9 )%
 

Other Revenues

    577     2,352     (1,775 )   (75.5 )%
 

Consolidated Ramius Funds and certain real estate entities revenues

    4,345     11,927     (7,582 )   (63.6 )%
                   
     

Total revenues

    16,462     36,819     (20,357 )   (55.3 )%
                   

Expenses

                         
 

Employee compensation and benefits

    22,083     15,769     6,314     40.0 %
 

Interest and dividends

    435     441     (6 )   (1.4 )%
 

General, Administrative and Other Expenses

    11,178     14,550     (3,372 )   (23.2 )%
 

Consolidated Ramius Funds and certain real estate entities expenses

    5,311     13,022     (7,711 )   (59.2 )%
                   
   

Total expenses

    39,007     43,782     (4,775 )   (10.9 )%
                   

Other income (loss)

                         
 

Net gain (loss) on securities, derivatives and other investments

    1,274     (523 )   1,797     343.6 %
 

Consolidated Ramius Funds and certain real estate entities net gains (losses)

    19,356     (102,936 )   122,292     118.8 %
                   
   

Total other income (loss)

    20,630     (103,459 )   124,089     119.9 %
                   
   

Income (loss) before income taxes

    (1,915 )   (110,422 )   108,507     98.3 %

Income taxes

    (5,929 )   554     (6,483 )   (1170.2 )%
                   
   

Net income (loss)

   
4,014
   
(110,976

)
 
114,990
   
103.6

%
 

Less: Income (loss) attributable to non-controlling interests

    9,899     (48,787 )   58,686     120.3 %
                   
   

Net loss attributable to all Redeemable Members

  $ (5,885 ) $ (62,189 ) $ 56,304     90.5 %
                   

        Management fees decreased $8.8 million, or 50%, to $9.0 million for the three months ended September 30, 2009 compared with $17.8 million in the third quarter of 2008. The decrease was primarily due to the lower level of assets under management in the current year period relative to the prior year period.

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        There was almost no incentive income for the three months ended September 30, 2009 compared with negative incentive fee income of $0.9 million for the third quarter of 2008. As previously discussed, 2008 performance in the funds resulted in losses and the negative incentive fee income in the 2008 period represents a reversal of incentive income that was accrued for the first and second quarters of 2008. In addition, due to the losses in 2008, many of the funds now have high-water marks such that Ramius will not earn incentive income with respect to the assets of the fund investors who suffered such losses last year until these investors recover their losses.

        Interest and dividends decreased $0.5 million, or 91%, to $0.05 million for the three months ended September 30, 2009 compared with $0.5 million in the third quarter of 2008. The decrease was primarily attributable to a combination of lower average interest rates and lower average interest bearing assets in the third quarter of 2009 compared with the third quarter of 2008.

        Ramius's reimbursements from affiliates decreased $2.7 million, or 54%, to $2.3 million for the three months ended September 30, 2009 compared with $5.1 million in the third quarter of 2008. The decrease was attributable to lower assets under management in the 2009 period as such allocations are largely made based on a percentage of assets under management.

        Other revenue decreased $1.8 million, or 76%, to $0.6 million for the three months ended September 30, 2009 compared with $2.4 million in the third quarter of 2008. The decrease was primarily due to placement fee income earned by a non-wholly owned subsidiary of Ramius that engaged in the distribution of interests in the real estate funds in 2008. Ramius exited the placement agent business in the third quarter of 2009.

        Consolidated Ramius funds and certain real estate entities revenues decreased $7.6 million, or 64%, to $4.3 million for the three months ended September 30, 2009 compared with $11.9 million in the third quarter of 2008. The decrease was primarily attributable to a decrease in the interest and dividends earned by the Enterprise Fund.

        Employee compensation and benefits expenses increased $6.3 million, or 40%, to $22.1 million for the three months ended September 30, 2009 compared with $15.8 million in the third quarter of 2008. The increase was a primarily a result of variable compensation accruals taken in the third quarter of 2009, compared to the reversal, in the prior year period, of variable compensation accruals taken in the first and second quarters of 2008. The reversal in the prior year period was made in order to reduce the aggregate awards for 2008 to an appropriate amount due to negative performance in the third quarter of 2008 that more than offset positive performance in the first and second quarters of that year.

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        Interest and dividend expense remained substantially unchanged at $0.4 million for the three months ended September 30, 2009 compared to $0.4 million in the third quarter of 2008.

        General, administrative and other expenses decreased $3.4 million, or 23%, to $11.2 million for the three months ended September 30, 2009 compared with $14.6 million in the third quarter of 2008. This decrease was primarily attributable to a decrease in client service and business development expenses of $1.6 million and a decrease in expenses associated with the placement agent business of $1.7 million. As stated above, Ramius exited the placement fee business in the third quarter of 2009.

        Consolidated Ramius funds and certain real estate entities expenses decreased $7.7 million, or 59%, to $5.3 million for the three months ended September 30, 2009 compared with $13.0 million in the third quarter of 2008. The decrease was primarily attributable to the decrease in interest and dividend expense recognized by the Enterprise Fund.

        Other income increased $124.1 million, or 120%, to a gain of $20.6 million for the three months ended September 30, 2009 compared with a loss of $103.5 million in the third quarter of 2008. The increase is a result of positive fund performance in the current year period versus negative performance in the prior year period due to the general unprecedented levels of market volatility, and liquidity constraints, that began in the third quarter of 2008 and affected almost every asset class globally. As previously described, Ramius invests its own capital primarily in the Enterprise Fund with any gains or losses on Ramius's own capital shown under Consolidated Ramius Funds for that period. The gains and losses shown under Consolidated Ramius Funds reflect the consolidated total performance for such funds, and the portion of those gains or losses that are attributable to other investors is allocated to a non-controlling interest.

        Income taxes decreased $6.5 million resulting in a tax benefit of $5.9 million for the three months ended September 30, 2009 compared with a provision for taxes of $0.6 million for the three months ended September 30, 2008. This change was primarily due to a tax benefit of $6.0 million representing Ramius's proportionate share of deferred tax benefits generated by reinsurance companies invested in by one of the consolidated Ramius funds. During the third quarter of 2009, this Ramius fund acquired reinsurance companies in Luxembourg as part of a service program that provides reinsurance coverage to this Ramius fund. In order to obtain reinsurance coverage against certain risks, this Ramius fund, through a local subsidiary, acquired reinsurance companies in Luxembourg that had deferred tax liabilities. Upon these purchases, the local subsidiary generated deferred tax assets that fully offset these liabilities, resulting in the recognition of the deferred tax benefit.

        Income attributable to non-controlling interests increased $58.7 million, to a gain of $9.9 million for the three months ended September 30, 2009 compared with a loss of $48.8 million in the third quarter of 2008. The increase was the result of positive performance of the Ramius consolidated funds and entities in 2009 compared to negative performance during the prior year period.

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Table of Contents


Nine Months Ended September 30, 2009 Compared with the Nine Months Ended September 30, 2008
Consolidated Statement of Operations

 
  Nine Months Ended
Sept 30,
  Period-to-Period  
 
  2009   2008   $ Change   % Change  
 
  (dollars in thousands)
 

Revenues

                         
 

Management fees

  $ 31,408   $ 56,443   $ (25,035 )   (44.4 )%
 

Incentive income

    177         177     NM  
 

Interest and dividends

    225     1,443     (1,218 )   (84.4 )%
 

Reimbursement from affiliates

    7,832     11,675     (3,843 )   (32.9 )%
 

Other Revenues

    2,265     4,737     (2,472 )   (52.2 )%
 

Consolidated Ramius Funds and certain real estate entities revenues

    12,312     26,165     (13,853 )   (52.9 )%
                   
   

Total revenues

    54,219     100,463     (46,244 )   (46.0 )%
                   

Expenses

                         
 

Employee compensation and benefits

    50,869     67,703     (16,834 )   (24.9 )%
 

Interest and dividends

    1,122     1,195     (73 )   (6.1 )%
 

General, Administrative and Other Expenses

    36,948     36,734     214     0.6 %
 

Consolidated Ramius Funds and certain real estate entities expenses

    11,831     27,040     (15,209 )   (56.2 )%
                   
   

Total expenses

    100,770     132,672     (31,902 )   (24.0 )%
                   

Other income (loss)

                         
 

Net gain (loss) on securities, derivatives and other investments

    (2,702 )   800     (3,502 )   (437.8 )%
 

Consolidated Ramius Funds and certain real estate entities net gains (losses)

    25,268     (85,523 )   110,791     129.5 %
                   
   

Total other income (loss)

  $ 22,566     (84,723 )   107,289     126.6 %
                   
   

Income (loss) before income taxes

   
(23,985

)
 
(116,932

)
 
92,947