A new Opportunity for our new Exchange?
The merger of the VSE and ASE is proceeding as predicted with the official head office located in Calgary, the centre of operations located in Vancouver, and regional offices located across the country. I'm still not sure why anyone would make a big deal out of the location issue. Does anyone know where the head office of NASDAQ is located? I'd like to see a neutral new name to reflect the new identity of this exchange. As suggested earlier, a name like "Venture Equities Exchange" or "Emerging Ventures Market" might be worth considering. Or, how about something like "Venture Quotation System" to make it sound more NASDAQ-like?
Some folks are predicting that the Exchange might be called the "Canadian Venture Exchange". Although this is a step up from calling it by a city name, it would still make us look more foreign to the US market. It appears to me that this new exchange could fill a niche between the unruly OTC and NASDAQ markets and attract more American companies. This would be an excellent strategic marketing move. It would attract participation from US investors and provide Canadian tech companies with US-like valuations. It would also make our firms more competitive.
The new exchange could be home to many junior technology companies just as NASDAQ is home to many senior technology listings. In October, 1998 NASDAQ merged with the American Stock Exchange (AMEX) resulting in the NASDAQ National market. In addition to NASDAQ's national market, NASDAQ operates a smallcap exchange. However, for a company to be listed on the junior NASDAQ, it must have a market cap of at least $50 million (US) and begin trading at $4/share (and maintain an ongoing minimum price of at least $1/share). Our new exchange would provide companies (and investors) with an earlier entry opportunity to a regulated market environment.
Small cap companies could graduate from this new exchange, as they do now in the case of VSE companies, to the TSE or NASDAQ. Please remember that the OTC (Over-the-Counter) market has nothing to do with NASDAQ, even though the OTC is operated by the NASD (National Association of Securities Dealers) - hence the confusion.
The new "Venture Equities Exchange" would be a big boost to emerging technology companies. Many companies have shunned the VSE because of its tarnished image and mining history and the ASE because of its perceived oil and gas history and the perception that it is a more limited market. Both exchanges have competed with each other in attracting technology listings. The VSE in particular has improved its service standards while implementing the necessary systems to ensure market integrity. The elimination of a local flavor to the new Exchange in favor of a national orientation, and a bias towards junior industrials and technology ventures can make a solid difference in the development of our technology sector. The VSE already lists many US tech firms and even facilitates trading in these securities in US funds.
Although this will be good for BC companies, it will be even better when provincial regulatory barriers are harmonized, for example, eliminating the need for a company to file with each provincial regulatory body. Presently, a BC company approved by the BC Securities Commission cannot simply distribute its securities in Ontario without more red tape. Interestingly those companies that have gone to the OTC market don't even have any disclosure or reporting obligations to local (Canadian) investors. You won't find them on the SEDAR website. Now, even the OTC rules are being tightened up by the Americans, strengthening the case for our new Venture Equities Exchange!
Wealth Creation led by the Tech Sector
In the recent issue of Business in Vancouver (Apr
20/99), Harry Jaako wrote an excellent piece on the relative market values
of various stock groupings in BC. He concludes that, in BC, wealth creation
is in the hands of the high tech sector. He did this by taking the
top 10 companies, by market cap, in various sectors and comparing their
market values. Here's a summary of what he found:
| SECTOR | Market Cap | Rank |
| High Tech (Ballard, PMC-Sierra, QLT, Forbes, etc) | $10.5 Billion | 1 |
| Oil and Gas (Pacific Northern Gas, Westcoat Energy, BC Gas, etc) | $9.9 Billion | 2 |
| Mining (Placer Dome, Cominco, Teck, Pan American Silver, etc) | $7.8 Billion | 3 |
| Forest (Fletcher Challenge, MacMillan Bloedel, West Fraser Timber, etc) | $6.7 Billion | 4 |
| Industrials & Manufacturing (Finning, Western Star Trucks, Wajax, etc) | $2.7 Billion | 5 |
| Prop.Management & Real Estate (Intrawest, Bentall, CHIP REIT, etc) | $2.0 Billion | 6 |
| Entertainment (WIC, Lions Gate, Vidatron, Rainmaker, etc) | $1.3 Billion | 7 |
I would add another interesting observation to Harry's concerning the returns on investment in high tech. The T-Net20 index, which measures the performance of the BC tech sector, is presently trading in the 1700+ range. The BIV100 index, which measures all BC public companies, including tech stocks, is in the 900 area. Both indexes were pegged to 1000 on Jan 1, 1998. So, if you had bet on tech, you'd be up 70% and if you bet on BC industry in general, you'd be down 10%!
Now, maybe if the new Venture Exchange is properly positioned, many of these companies - not just the tech ones - could enjoy even better valuations.
Checking In Some New Listings
TranDirect Holdings Inc., a Burnaby based developer of Home Banking Systems recently went public via a reverse takeover of Speyside Ventures Inc.(VSE:SYV, $1.25). The core business is providing specialized E-Commerce Internet Services and the licencing of the TranDirect home banking systems. The Company has developed technology enabling on-line banking over the Internet as well as direct-dial that allows not only PCs but also television sets and game machines full access to these banking services. TranDirect continues to develop commercial products that enhance televisions, personal computers and telephones for home banking, shopping and electronic commerce. The stock has traded in the $1.25 to $1.80 range on good volumes.
What promises to be a big winner for early investors, is Richmond-based Sierra Wireless Inc. Sierra Wireless is a producer of cellular packet data subscriber products, including PC Cards for portable computers, ruggedized vehicle-mounted modems, OEM modules for embedded applications, telemetry modems, and software tools and utilities.The company is in the process of going public via an IPO and I expect the shares to be priced around the $15 area. The issue will be underwritten by a syndicate of underwriters, led by Scotia McLeod Inc. and including RBC Dominion Securities Inc., CIBC Wood Gundy Securities Inc. and TD Securities Inc. Because these securities are not being offered or sold in the United States, Canadian investors are getting a privileged entry opportunity. Usually it's the other way around. You can find the preliminary prospectus on SEDAR (http://www.sedar.com).
When looking at new companies, the key thing is to check out the management. I may be sounding like a broken CD, but I keep emphasizing the importance of management in the companies you choose to invest in. David Baines, a Vancouver Sun writer is well known for his investigative reporting on the activities of junior public companies whose management integrity may be questionnable. Websites like Canada-Stockwatch's, allow you to see who the directors of a company are and what their other board involvements are. This is a great start, but it would be nice to be able to access more personal data on insiders. You can call the Securities Commission to see if any insiders have been off-side on certain corporate matters, but that's a nuisance.
Finally, our Venture Capital Pools chart listing all the VSE VCP companies has been updated.
Copyright, 1999.