Tech Futures:
June 18, 1999
By Michael Volker
T-Net20 Breaks 2000, Company AGMs, Private
Placements, VCP Update.
T-Net20 Breaks 2000
This past week, the T-Net20
soared past the 2000 mark. At the beginning of this year, I predicted that the
index would reach 2000 by the year 2000. Well, we're half a year early. The
index, which was pegged to 1000 on Jan 1st, 1998 has appreciated by 100% in just
under 18 months. This means that if you are a high tech investor with the simple
rule of keeping your money invested in BC's top 20 technology ventures, pro rata
to their relative market values (updated quarterly), you'd have doubled your
money. In view of recent reports (see Industry Report Card '99 on the BCTIA
website) on the growth of the high technology industry in which it appears
as if the growth is slowing, this increase in valuation is reassuring. However,
this should not be too surprising. Although the top companies' valuations are in
the billions of dollars, they are nonetheless still growing companies with tons
of potential.
Much of the increase in value can be
attributed to the top three on the list, PMC Sierra (NASDAQ:PMCS), Ballard
Power (TSE:BLD), and QLT Phototherapeutics (TSE:QLT) which all showed
impressive gains. When the Index was 1000, PMC was at $21.83 ($CDN). It is now
at $88.42. Ballard was at $36.33 and is now at $47.50 whereas QLT, which was at
$27.95, is now at $76.50. PMC, now the most valuable B.C. technology venture,
boasts a market cap of more than C$5.5 billion.
The list will be updated again at the end of
this quarter to include new entries like Sierra Wireless (TSE:SW) which
recently completed its IPO.
Company AGMs
Have you ever been to a company's Annual
General Meeting? Although AGMs occur year-round, Spring seems to be particularly
busy. Public companies must hold an AGM in order to report their financial
results to shareholders and, most importantly, to elect a new slate of
directors. Although these meetings follow a fairly routine agenda, it is a good
opportunity for shareholders to meet with company officials. Most AGMs are
sparsely attended, especially in the case of smaller public companies. Many
public shareholders don't even bother to send in their votes by mail (or via the
new telephone response voting system). These meetings are not, as you may think,
open to the public. However, it is not often that non shareholders are turned
away (except maybe the hecklers). After all, these may be future investors. And
besides, if they do turn you away, that's a good sign not to invest in such a
company.
The election of the board of directors is
usually the most important agenda item. Boards report to their shareholders and
once elected, they direct the affairs of the company over the ensuing year.
Choosing the board is a serious matter and gives shareholders their once-a-year
democratic right to have a say in the running of their company.
If you are a shareholder, you will be
notified when an AGM is coming up. AGMs are not broadly advertised (management
often favors smaller turn-outs) but you can usually find out by checking recent
news releases, quarterly reports, or SEDAR filings. If there's a company you are
keen on investing in, the AGM is a good way to meet the folks who'll make money
for you. Indeed, some companies use this as an event to gain investor interest
and as an opportunity to show their stuff. The Electric Mail Company (VSE:ELE)
is in this category.
I've been to some AGMs where the formal part
of the meeting may be as brief as five minutes. But the real benefit of
attending is the informal, post meeting part where you get a chance to mingle
with the execs. Give it a try!
Living in the Lower Mainland does make it
easier to participate in AGMs for some of B.C.'s technology firms. A few AGMs
coming up in Vancouver in the next few weeks are:
Electric Mail Company: June 21, 2:00 pm
Terminal City Club, 837 West Hastings St.
ASC Avcan Systems Corp: June 29, 2:00 pm
100-625 West Kent Ave.
Immune Network Research Ltd: June 29, 2:00 pm
777 Dunsmuir St. 12th Flr Boardroom.
Burnt Sand Solutions Inc: June 24, 2:00 pm
Waterfront Centre Hotel.
Marine BioProducts International Inc: June
29, 2:00 pm, SFU Harbour Centre, 515 W Hastings St.
DynaMotive Technologies Corporation: June 29,
11:00 am BC Research Inc. 3650 Wesbrook Mall.
Working Opportunity Fund: June 23, 7:00pm,
Hyatt Regency Hotel.
Icron Systems Inc: June 30, 10:00am 1673
Cliveden Avenue, Delta.
Are you curious why so many are at 2:00 pm?
That's because the local markets close at 1:30 pm allowing brokers to attend
without missing any trading action.
Private Placements
A not too well known fact about junior
exchanges like the Vancouver Stock Exchange (VSE) is that far more capital is
raised via so-called "private placements" that via public offerings
using a prospectus. Our securities rules and regulations offer some convoluted
methods by which companies can legally raise capital without too much red tape.
Generally speaking, companies must issue a fairly comprehensive disclosure
document in the form of a prospectus if they want to raise new capital. There
are numerous "exemptions" to this requirement. One such exemption
entails a "private" sale of shares to sophisticated investors who,
theoretically, don't need a full prospectus. It's a good deal for investors and
the company. The only catch is that you need to invest at least $25,000 (i.e. in
B.C. - it's much higher in other provinces) and you have a short hold period on
your shares during which you cannot trade them (which is a good rule).
If you meet certain net worth tests, you can
participate in such financings. It is a good way to get a block of stock,
usually at a slight discount to market with a "kicker", e.g. warrants
which allow you to buy more shares for a period of time (like a stock option).
This gives participants additional leverage on their investment.
If you see a company that you're serious
about, just let the principals know that you might be interested in
participating in a private placement if and when the company elects to do one.
Totally Hip Software
(ASE:THW) recently completed a private placement of 789,805 units at
a price of 84 cents per unit for gross proceeds of $663,436. The proceeds,
net of finders' fees of $11,816, have been released to the company. Each unit
consists of one common share of the company and
one two-year non-transferable
warrant. One warrant will entitle the holder to purchase one additional
common share of the company at a price of $1
per share during the first year, and $1.30
per share during the second year. The shares
and any shares issued pursuant to the exercise of warrants will be
subject to a statutory hold period.
Another example of a local company which
recently completed a private placement is Stockgroup.com (OTCBB:SWEB)
which sold 150,000 shares at $6.00 per share (i.e. US$900,000). Stockgroup.com
is a Vancouver company which went public via a takeover by I-Tech Holdings
Group. Stockgroup.com has filed for a listing on the Nasdaq exchange. Founded in
1995, Stockgroup.com is a leading provider of Internet financial news
and information services. The Company's website, www.stockgroup.com,
focuses on the small and micro cap markets and is one of the largest and
most popular investment destination Communities on the Internet. In
addition to providing news and information, the
company provides Internet development and marketing services to small and micro
cap companies.
Stockgroup.com is presently developing its
next generation site which will be launched late this summer. The new site
will feature research capabilities on more than 8,000 small microcap companies
in North America.
These research capabilities will include news
releases, financial information, company snapshot, Edgar filings, insider
trading reports, etc. In addition Stockgroup.com has developed a proprietary
section that will display which analysts and newsletter writers are covering the
companies and what the institutional holdings are.
Stockgroup.com has 37 staff in offices in San
Francisco, Vancouver, Calgary, Toronto and New York (August '99) and an
experienced management team of six. Stockgroup.com has been profiled or featured
in Barron's, Fortune, CNBC, CNN/fn and dozens of other media programs across
North America. The site has won more than 10 different awards.
In B.C., a new concept known as the Small
Financing Exemption was introduced by the VSE in May, 1999 which allows VSE
listed companies to raise $1 million in any 12-month period from retail
investors through a new Short Form Offering Document. Companies that have filed
a current Annual Information Form and other required continuous disclosure
materials with the British Columbia Securities Commission (BCSC) are eligible to
raise capital without a prospectus, and investors can purchase up to 2% of the
offering without a hold period.
Listed companies also have the option of
approaching the investing public for larger amounts of capital via a traditional
prospectus offering of shares from treasury. Although more onerous for the
company, it does provide a means for raising new capital.
For example, Angiotech Pharmaceuticals,
Inc. (TSE:ANP) announced this past week that it has filed a preliminary
short form prospectus with the securities commissions in all Canadian provinces
relating to a proposed offering of approximately $15 million of common shares.
The underwriting syndicate for the offering
will be co-led by Levesque Beaubien Geoffrion Inc. and Loewen, Ondaatje,
McCutcheon Limited. The offering is expected to close mid-July 1999.
The net proceeds of this offering will be
used principally to fund the accelerated development of the Company's micellar
paclitaxel, secondary progressive multiple sclerosis (MS) program. Preliminary
results from the phase I/II study announced last month showed that a significant
percentage of patients showed favorable trends in the drug's effect on overall
disability and function, quality of life and changes in the amount of brain
tissue scarring as demonstrated by MRI. A 150-patient, double-blind, phase II MS
study is planned to be initiated in November at seven centers throughout Canada.
Angiotech shares are trading in the $11.25
area with a 52-week hi/low of 16.00/6.50).
VCP Update
Sabertooth Holdings Inc
(VSE:SBH) went public on June 15th at $.20 per share. The principals of
Sabertooth are Gordon Politeski, Jim Heppell, Paul Visosky, Michael Evans, and
Ron Murphy who are all fairly well known in the local high technology community.
The stock is trading in the $0.35 area.
Check our Venture
Capital Pools chart for a complete updated list all the VSE's VCP companies.
To date, only two of the 19 VCP's that have issued a prospectus have completed
their "qualifying transaction" (QT) thereby removing their VCP status.
Other Notes
A large number of people have mentioned that
they have tried to get their foot in the door on the pending CREO IPO
which is due out any day now. It appears that few locals will get in on the deal
as most of the selling will be south of the border. Five million shares don't go
far. I just hope the company doesn't get cheated by offering underpriced shares.
Michael Volker is the
Director of the University/Industry Liaison Office at Simon Fraser University,
Chairman of the Vancouver Enterprise Forum, and a technology entrepreneur. He
owns shares in many of the companies he writes about. Contact: mike@risktaker.com.
Copyright, 1999.
What Do You Think? Talk Back To
Mike Volker
Tech Futures is a bi-weekly column that focusses attention on new and emerging BC publicly listed
technology companies. Mike Volker is the Director of the University/Industry Liaison Office at Simon
Fraser University, Chairman of the Vancouver Enterprise Forum, and a technology entrepreneur. He owns
shares in many of the companies he writes about. Contact: mike@risktaker.com
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