|
|
| Making the list |
September 3, 2001 |
By Sheldon Gordon
701.com has been listed on the Canadian Venture Exchange (CDNX) since March 2000, but its president and CEO is looking for bigger markets.
The Hamilton, Ont., company creates and manages interactive online directories and e-commerce platforms for communities of fewer than 500,000 people. Now, CEO Herman Turkstra is thinking two years ahead, when he expects the company will be ready to upgrade to a senior exchange.
“If our business develops in the U.S., I would probably list on Nasdaq first and the Toronto Stock Exchange (TSE) second. If our business develops in Canada, I’d say TSE only and not worry about Nasdaq.”
Turkstra recently retained American counsel to “take the first step in allowing us to be recognizable and tradable in the U.S, where the dollars are bigger,” he said. 701.com also raised its profile among U.S. investors by listing on two investment Web sites, which resulted in hundreds of requests for information about the company.
Market conditions will keep the window for initial public offerings (IPOs) closed until 2002, according to investment dealers, yet many Canadian high-tech companies are using the interval to consider where to list their shares when the time is right to go public or to graduate from a junior to a senior exchange.
And both the TSE and the Nasdaq are courting potential Canadian listees. The Toronto exchange has recently hired regional managers for British Columbia, Alberta, Ontario and Eastern Canada to urge local firms to list on the TSE or to list on both the TSE and the Nasdaq. As of May 2001, 186 companies were interlisted on the two exchanges, down from 213 in 1997.
Windows of opportunity
Kabir Ahmed,TSE regional manager for Ontario, approached 20 potential candidates in his first three months on the job. “An IPO takes planning, so if we approach them now, it gives them an opportunity to start those discussions with their legal counsel and investment bankers. The planning takes nine to 12 months and that timeline may mirror when the new window of opportunity opens.”
During the dot.com boom, many companies bypassed the TSE and went directly to the Nasdaq to list, Ahmed said. But he cites the experience of two Ottawa companies, JetForm and WorldHeart, as an example of why smaller firms should consider the TSE first. “They were relatively small in the U.S. market and were not getting the appropriate analyst coverage.”
Both companies eventually repatriated to the Toronto exchange. “They used the opportunity [in the U.S.] to gain a solid reputation as a publicly-traded company and to enhance their liquidity and performance in this country. Hopefully they can use that as a base for international exposure down the road,” Ahmed said. “That seems to be a common theme that we’re seeing now.”
Ahmed contends the TSE is a less-expensive and less volatile exchange than the Nasdaq. “We’re a lower-cost exchange in terms of listing fees,” he said, “and companies have told us that legal and accounting fees associated with going public are a lot lower here than in the U.S.” Also, he said, “the Nasdaq has experienced far greater volatility than we have.”
That may be true of the TSE as a whole, but observers point out that when its technology group is compared to the tech-heavy Nasdaq, performance is similar.
And many Bay Street underwriters still stand by the Nasdaq. John Douglas, vice-president of corporate finance at Sprott Securities, which has four offices across Canada, said that in months past “the Holy Grail was the Nasdaq. There was a perception, and I think rightly so, that the Nasdaq would give you a better valuation and better liquidity. I think that argument still stands. It’s a broader market, there’s more specialization. I think people who do most of their business in the U.S. still believe, ‘why not have a U.S. listing?’”
Douglas acknowledges the TSE’s point that Canadian firms have a tougher time obtaining analyst coverage on Wall Street than on Bay Street. He advises his clients to “get a good institutional following in Canada before you go down to the U.S. And do it on the back of a decent-sized offering of securities down there so that you don’t just list and become orphaned because no investment bank is interested in following you.”
Eyeing Nasdaq
One of the Canadian firms looking southward is ComNetiX Computer Systems of Oakville, Ont., whose technology enables U.S. police forces to transmit mug shots and fingerprints to the FBI. The company wants a CDNX listing but “we’re also aggressively looking at doing something on the Nasdaq,” said Darcy Killeen, vice-president of finance.
“If we are listed on the Nasdaq, we believe we will be better received [by investors],” he said. “The perception of the value of the company is significantly higher in the U.S. than it is in Canada.We’re so conservative in Canada; I want to get my money from the U.S. where 95 per cent of our sales are located. It’s a lot easier, and it’s a lot cheaper as well.The valuation is so much higher in the U.S., therefore it’s so much cheaper to raise capital there.
Several Canadian-born technology firms, in addition to listing on Nasdaq, have even moved their headquarters to the U.S., while maintaining the bulk of their workforce in Canada. These include PMC-Sierra of Burnaby, B.C, and Santa Clara, Calif., and Entrust Technologies of Ottawa and Plano, Tex. Some high-tech CEOs estimate they can achieve a 40 per cent gain in market capitalization by establishing a U.S. head office and listing on a major U.S. exchange.
Turkstra of 701.com doesn’t consider it necessary to move his head office to the States. “I think I’m in a minority on that,” he said. “But [in my experience] it doesn’t seem to bother major U.S. money managers if a head office of a company is in Ontario. However, the American investor is not as interested in investing in a company that trades on a Canadian exchange. It makes a big difference to them where your shares are traded.”
W E B S T O C K S
701.com http://www.701.com
ComnetiX Computer Systems http://www.comnetix.com
Entrust Technologies http://www.entrust.com
JetForm http://www.jetform.com
Nasdaq http://www.nasdaq.com
PMC-Sierra http://www.pmc-sierra.com
Sprott Securities http://www.sprott.ca
Toronto Stock Exchange http://www.tse.com
WorldHeart http://www.worldheart.com
|
|
|
| Top 300 Issue |
 
|
| Gadget of the Week (Canadian) |
|
Boost your cell
ARC Wireless Freedom Blade
Mobile data and voice are great, as long as the signal is strong. And while mobile networks are pretty good these days, road warriors quickly discover that dead zones still exist.
more>>
|
| Gadget of the Week (Japanese) |
Sounds of Japan
Why record just the visual when you can capture the sounds as well.
more>> |
| Backblog RSS feed |
Click to subscribe  |
|
sponsored by 
