Technology is great, but how can we invest in high tech and make a buck?
Just as the VSE was instrumental in funding exploration in the traditional resource sector, and many investors made money by investing in mines, it's now an opportune time to do the same by investing in a new resource - our high tech minds.
Here in British Columbia, there are approximately 100 technology ventures which are publicly listed - either right here on the VSE or elsewhere like the TSE, NASDAQ or even the OTC (Over the Counter) markets in Canada and the USA.
There are basically two types of technology companies that are publicly traded: big ones and little ones. The big guys likely went public on a senior exchange such as the TSE in order to raise several million dollars for expansion while at the same time giving the original founders and investors an opportunity to "cash in". The little ones - let's call them "emerging ventures" - went public on a junior exchange like the VSE or ASE in order to raise a small amount of venture capital, typically a few million dollars or even less than one million.
Many emerging companies choose the junior IPO (Initial Public Offering) route as an alternative to investments by traditional venture capitalists. They do so because, although venture capital investments in B.C. have increased substantially, i.e. to $207 million in 1998, there are still relatively few venture capital investors and VCs drive harder bargains with respect to company valuations. And it's still tough to mobilize early stage high risk seed capital.
By doing a junior IPO, companies open their doors to many investors - ranging from the astute "smart-money" types to the retail speculator, willing to gamble a few thousand dollars a pop.
Junior VSE-style IPOs, after all, is how the resource sector in B.C. got its venture financing. Can you imagine a venture capitalist investing in some moose pasture? Not likely! Retail investors have always been attracted to these early stage speculative plays. So, why not high tech? Its time has come.
Some technology companies, notably Spectrum Signal Processing (TSE: SSY), QLT Phototherapeutics (TSE:QLT), and ALI Technologies Inc. (TSE:ALT) all started on the VSE and their shares could have been bought for small change. Spectrum went as low as $.30 per share and has traded as high as $18.00. QLT has been as low as $2.00 and as high as $35.00 and ALI once traded at $1.25 and soared to $24.00. We're talking about gains of from 2000 to 6000 percent! How do you like that for entertainment?
In this column in T-Net, which will appear bi-weekly, I plan to draw some attention to new emerging publicly-listed companies. This is not going to take the form of a tout sheet with buy/sell recommendations or a traditional stock analysis. Now that so much information is readily available on the web, it'll be easy for you to do additional research on specific companies and then make your own informed (or gut feel) investment decision.
Most junior stock listings are plagued by one common problem: liquidity. After the IPO, no one follows or watches or talks about these companies. The brokers are off looking for their next deal and trading prices and volumes taper off. Company execs usually don't care because they're stock is escrowed anyway and their focus is, rightfully so, on building the business. This column will hopefully rekindle some interest in these poor orphans.
I've always liked the mining paradigm. You invest in ten ventures knowing that many will come up dry. However, when you score, your losses are offset by one or two big wins. Let's see if we can spot some winners.
So, how to get started? A good place to begin is right here on T-Net where you can at least see who is on the list. On January 24 and 25, 1999, T-Net and the Vancouver Enterprise Forum and others are co-sponsoring an emerging company investment conference to showcase some of the rising stars.
Remember, the returns on the successful companies that start public life early are not measured in percentage points. They're measured in multiples!
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