At the recent Vancouver Investment Conference (Jan 24-25) hosted by Cambridge Conferences, it was refreshing to see, for the first time, more than a dozen technology "early" companies among the traditionally resource-rich crowd - thanks to local tech organizations like T-Net, TIA, BCBA, and VEF who sponsored the event.
The technology speakers' hall attracted a healthy number of retail investors (some 2000+) interested in investing in technology companies. It was obvious to me that they were there to spot some early opportunities.
I had the privilege of moderating a couple of panels on tech investing. On one panel we had three tech analysts (Martin Karcz of TD Evergreen, Julian Marlowe of Golden Capital, and Eric Groner of Canaccord). On another we had two venture capital investors (Harry Jaako of Discovery Capital and Brent Holliday of the BDC) and two analysts (Jason Zandberg and Kevin Binnie, both with Pacific International Securities). The latter of these panel discussions can be viewed on-line at http://www.dentv.com/cambridge/.
A couple of company CEOs, specifically Cathy Munn of The Electric Mail Company (VSE:ELE) and Jim Tocher of NTS Computer Systems (TSE:NTS) participated in the "CEO Hotseat" in which they were grilled by attendees about their companies' investment prospects. Both left the impression that they were good early prospects. These were also profiled briefly in my last column.
Let's take a look at some previous "early" deals.
This chart, with the exception of Microsoft, shows how a few reasonably
well-known B.C. companies have produced gains for the their investors.
Of these, all but Ballard and Microsoft got their start on the VSE. As
is often the case with junior tech companies, notably Silent Witness, their
share price often drifts south after being listed because management is
busy building the company and there is little or no promotional activity.
|
Low
|
High
|
Max Gain
|
Recent
|
|
| Ballard Power |
1.75
|
62.62
|
35.78
|
38.10
|
| Spectrum Signal |
0.30
|
18.00
|
60.00
|
4.30
|
| QLT Phototherapeutics |
2.00
|
60.15
|
30.08
|
60.15
|
| Silent Witness |
0.02
|
10.20
|
510.00
|
9.75
|
| ALI Technologies |
1.25
|
25.00
|
20.00
|
14.70
|
| Microsoft |
0.30
|
158.00
|
526.67
|
158.00
|
An "early" company identified by Eric Groner as his favorite, was Infowave Wireless Messaging Inc. (VSE:IWM). Infowave historically supplied printer software to the Apple market and, as the name implies, is moving into wireless messaging. However, the recent surge in popularity of Apple computers has been good for Infowave's cashflow while allowing it to address bigger opportunities in the emerging wireless sector. Infowave is trading in the $2 area and Eric sees it going beyond $4 over the next year.
Axion Communications Inc. (VSE:AXN) exhibited at the conference. Axion recently received the Vancouver "Consumers Choice Award" in the category of Internet Service Provider. Axion is an interesting case because, unlike many internet service companies that sprang up a few years ago, it was able to re-invent itself. The company contracted Iain Black, now a partner with Caldwell Partners, to act as an interim CEO to turn the company around. In its most recent year (Oct.31,1998), the company reported an 18% increase in sales to $3.2M and a modest loss of $268K as compared to a loss of $1.7M in 1997. The stock is now trading around $.32. An important "success factor" that was cited by many of the conference's panelists was the value of strategic alliances, i.e. partnerships of various forms, with other companies. Axion is a good example of this.
Brent Holliday warned about getting in too late, i.e. the greater fool theory which we're certainly seeing in the internet stock euphoria. If I buy Ebay.com, which is trading at only US$300+, or Amazon.com now, is there someone even more foolish who will buy these from me at even higher prices?
Ironically, Axion is an example of a company in which getting in early, i.e. at the beginning, was too early. Now, some years later, the stock is much cheaper and may be early enough. Who knows, maybe buying stock in companies like Ebay and Amazon is too early today!
An interesting example of how the internet is providing a new route to venture financing for startup companies was seen this week as a Canadian mining exploration company (interesting because it’s a resource company, not a technology issuer) posted its Initial Public Offering (IPO) on the web.
E-minerals Exploration Corp (http://www.e-minerals.com) was looking to raise between $376,250 and $752,500 via its cyber IPO thereby bypassing the need (and cost!) to use a broker. This company used an Ontario securities rule under which a company acts as both an issuer of securities and a dealer of same. Normally, broker-dealers charge as much as 35% in commissions on junior mining IPOs like this. Brokers were quick to point out that they play a valuable role in orderly market making and that there is the possibility that the internet will be used for unscrupulous stock promotions. They're just going to have to be creative as to how they can add value to these types of deals. Isn't the internet great? Now we all have access to the same information.
Some other tidbits to consider….
ID Internet Direct (VSE:IDX) announced first quarter, 1999 net income of $442,000 on revenues of $2.25 million. This compares to a net loss of $194,000 on revenues of $1.7 million in the same period of 1998. Looking good! By the way, ID Internet Direct is the new entity resulting from the merge of Vancouver's ID Internet Direct and the Internet Direct unit of Tucows Interactive Ltd. Tucows is the most popular Canadian Web Site and the only one in the top 100 according to PC Magazine. With the stock trading around $1.40, near the middle of its 52 week hi/low, I wonder if this isn't an early opportunity!
Further to an earlier column on internet companies in which I identified various B.C. public companies, another one has been brought to my attention: EMNet Corp. (VSE:EMN) an internet content provider focused on the theatre, the theatrical industry and on Broadway. One of their products is a Broadway internet site at http://www.buybroadway.com/.
SCS Solars Computing Systems (VSE:SCS), http://www.solars.com, has seen its shares appreciate in value recently. Solars began by providing on-line wholesale travel information on the Internet. This concept did not take off very quickly so the company started providing on-line travel information through the seven major CRS (Computer Reservation System) via terminals on travel agents' desks worldwide. Solars trades in the $.20 range.
And then there's Uniglobe Travel (VSE:UTO), another internet travel-related service, which has also enjoyed some healthy stock gains lately and is now in the $6.50 area and has recently been up to $9.. I remember looking at this one a few months ago wondering if it was a good early bet.
Since 1996, the VSE has listed some 26 (only 26, you say?) new technology companies, almost half of which are software firms and many of which are B.C. based. In case you'd like to find a good "early" one, here's the list (courtesy of the VSE):
ATC Technologies Corp. (ATE)
CTF Technologies Inc. (CLF)
Dexton Technologies Corp. (DXT)
ESoft Inc. (EZ.U)
Gemcom Software International Inc. (GCM)
Group West Systems Ltd. (GPW)
Infonow Corp. (INO.U)
Infowave Wireless Messaging Inc (IWM)
Integrated Business Systems and Services Inc. (IBS)
Intrinsyc Software Inc. (ICS)
King Communications International Ltd. (KCI)
KSAT Satellite Networks Inc. (KSA)
Mercury Scheduling Systems Inc. (MRY)
Multivision Communications Corp. (MTV)
National Healthcare Manufacturing Corp. (NHM)
NTS Computer Systems Ltd. (NTS)
Orcatron Communications Ltd. (OCT)
Rystar Communications Ltd. (RYS)
Symplex Communications Corp. (SYC.U)
Systech Retail Systems Inc. (SYS)
The Electric Mail Company Inc. (ELE)
Titan Trading Analytics Inc. (TTA)
Trade Wind Communications Ltd. (TWC)
Uniglobe Travel Online Inc. (UTO)
USV Telemanagement Inc. (UVT)
Happy surfing!
Copyright, 1999.