We started this century with the invention of the Internal Combustion engine which literally moved our industrial age forward by a quantum leap. At the mid-point of the century, specifically in 1948, the invention of the transistor led to the Integrated Circuit which resulted in the invention of the Microprocessor in 1971. Now, as we approach 2000, another I.C. technology is taking hold - Internet Commerce.
The internet, which its origin in university and defense related research networks, has spawned many new companies and created wonderful new investment opportunities - the high tech version of finding gold. But the most exciting investments - certainly the most entertaining - appear to be those involving commercial transactions on the 'Net. Some of the new 'Net billionaires owe their new-found wealth to their view of the 'Net: a 24-hour global shopping mall.
The on-line shopping mall is not fantasy. According to Jupiter Communications, a research firm specializing in electronic commerce, on-line sales during the upcoming holiday season are expected to reach $2.3-billion, up from $1.1-billion last year! This appears to jive with Forrester Research's estimate that all internet commerce purchases will hit that same figure $8Bn in the current year!
Who will be the Microsoft of the on-line world? People like University of Toronto graduate Jeff Skoll who founded on-line auctioneer Ebay Inc. have become billionaires in a period of months. (Note that when Microsoft went public, it was valued at $21 - which works out to 30 cents when adjusted for Microsoft's 7 stock splits. But, Microsoft was profitable and had sales of $200 million then.) Ebay's stock has jumped to $123.94 from on offering price of $18 in less than two months. Skoll still owns 22 per cent of the San Jose, Calif.-based company.
Recently, we witnessed the spectacular market debut of New York-based TheGlobe.com Inc. (no connection with The Globe and Mail newspaper) which hit a high of US$97 (Nasdaq: TGLO) from on IPO price of $9 on the first day of trading! That same week, on November 11th, Earthweb's (NASDAQ: EWBX) amazing IPO, priced at U$14.00 opened trading at U$40 and rose to over $60!
High profile companies like Amazon.com Inc. and Yahoo Inc. are being chased by many investors and their stocks have become virtually unaffordable. In his "Something Ventured" column, Brent Holliday takes a look at some of this internet insanity.
Some of the smaller, lower profile firms including some Canadian startups are being helped by this healthy appetite for 'Net stocks. In one day (Nov.13), Toronto-based Bid.Com International Inc., climbed 50 per cent to $1.74 (Canadian) on the Toronto Stock Exchange.
In defiance of all the principles espoused in my last column, i.e. identify good management, invest for the long haul, find an undervalued situation, I jumped in and bought some Bid.com. It doubled to close at $3.56 less than two weeks later (Nov 26). Note that I use the word "betting" in the title of this column because that's what you're doing.No one really knows how to invest in this industry. So far, there are only a few such publicly listed companies in Canada.
Those who invested in Canadian internet companies just a few years ago, may still be suffering from a financial hangover. So-called Internet Service Providers (ISPs) like Istar Internet Inc. almost doubled to C$22 on its first day of trading, but then slumped to less than a buck before it was bought by PsiNet Inc. earlier this year. But it did have a really catchy ticker symbol: WWW.
The lesson to be learned here is that, partly because of the rapid changes in, and the adoption of, new 'Net technologies, it is very difficult to properly assess and value such opportunities from an investment perspective.
With respect to investing in technology ventures, one might question whether many of these internet companies should even be called high tech companies especially when one applies the customary R&D criterion. Many of these companies are just marketing or transaction companies which happen to have latched on to a good thing (i.e. cheap and accessible networks).
So, let's look now identify a few "local", i.e. B.C.-based, internet companies. Unfortunately, there aren't many which are focusing strictly on internet commerce (hint: now may be a good time for some of you entrepreneurs to be thinking about an IPO). The companies which could be called internet companies would include Cyberion Networking (VSE:CYB), Electric Mail Company (VSE:ELE), Mosaic Technologies Corp (VSE:MAC), Net Nanny Software (VSE:NNS), Totally Hip Software (ASE:THW), and Uniglobe Travel Online Inc (VSE:UTO). Let me know if I've missed any. We'll take a preliminary look at a couple of these.
Information on these companies is readily available from the T-Net listing and the links to the respective company websites and stock quotation services. The intent of this column is to identify these companies so that you can start to monitor them in case they start to get carried along with the market.
Uniglobe Travel, for example, seems to be in this category having shown strong stock gains in the past few days. Trading in the past year has been in the $.20 - $3.29 range! Uniglobe is pinning its hopes on its chief, U. Gary Charlwood. To quote from the company, "U. Gary Charlwood is one of the most successful entrepreneurs in the franchise industry. Not only is he CEO and Chair of newly minted UNIGLOBE® Travel Online, he is also founder, Chair and CEO of Uniglobe Travel (International) Inc. and Chair and CEO of Century 21 Real Estate Canada Ltd. In 1991, he won the Entrepreneur of the Year Award from the International Franchise Association (IFA), an honor previously bestowed upon Bill Marriott from the Marriott Corp." With the current price being near its peak (around $3), I'm not rushing in to buy, but I'm keeping an eye on it.
Mosaic Technologies Corporation claims to be a leader in the network, desktop, and Internet delivered education and training market. Again, quoting from the company, "The Company's management and board of directors are comprised of a team of highly qualified, professionals with a proven track record in marketing and public company management. Mosaic's Chairman and CEO is the former CEO and co-founder of Direct Choice TV (now Star Choice TV). Joel Burke and David Burke, President and COO respectively, are the founders of Applied Multimedia
Training Centres (AMTC). Kim Adolphe is the founder and President of Gemini Learning Systems Inc.(Gemini)." Sounds good. Mosaic has traded in the $.36 to $1.10 range in the past year and is currently around $.50. May be worth taking a look!
So, before you jump on the internet bandwagon
south of the border, consider some of these Canadian prospects. Take a
look at their websites and their investor information. I'll bet there are
some good ones out there!
Copyright, 1999.