Pay Heed to the followingThis article was posted on Friday May 19/00
I am hoping not to scare investors but rather, enlighten them. Please forward this e-mail to Mr. John Way, with the heading ..."could we be next". Express your pleasures and displeasures regarding the outlook of the company. Make sure you get answers.
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Investors have grown increasingly impatient awaiting the launch of Digital Gem's on-line trading website,
which management claims will offer features not available on rival sites. The company gives no specific
explanation as to why it has taken over one year to build, and this should be a warning sign for investors.
Toronto, ONT, May 22 /SHfn/ -- It was April, 1999, when Digital Gem [T.GEM], formerly known as American Gem, announced to
the world that it was exploring the possibility of converting an ailing mining company into a full service online brokerage. Investors
roared with excitement and their goodwill did not go unnoticed as the stock set a TSE record as the most heavily traded stock. One
year later, after delays, extensions, excuses, and finally just the word "soon," investors' loyalty has turned to muffled expletives.
To date, Digital Gem has done a number of significant mergers and acquisitions to become a full service online broker. The first of
note was the April 12, 1999 purchase of Northern Securities Inc. The second significant development was the acquisition of certain
assets of St. James Securities' and the hiring of 20 of its employees to be incorporated into the present structure of Northern
securities. Northern Securities is to be Digital Gem's traditional full service brokerage arm that will offer, on line, securities trading,
initial public offerings, and mergers and acquisitions. On June 29, 1999 Digital Gem entered into an agreement to acquire Romspen
Investment Corporation, a mortgage investment company that has assets in excess of $50,000,000 in commercial mortgages that
will be incorporated into the infrastructure of Digital Gem for the sale of mortgages on line.
Since January, 2000, there has been a smattering of activity. On January 19, eNorthern announced the launch of its new initial public offering (IPO) site that would allow registered retail clients access to new issues. This was once a privilege afforded only by institutional clients and select high net worth clients at brokerage houses. Stroud Resources [T.SDR] was the first of a handful of eNorthern's subsequent offerings. Stroud is currently under review by the TSE for suspension under the new continued listing requirements. eNorthern was co-underwriter in the equity offerings of SR Telecom [T.SRX], and Hemosol [T.HML]. The company was the sole underwriter in 701.com [O.SEVO] and Image Sculpting [V.IIX]. The real benefit to investors will be if Digital Gem can get hands on new issues that are more prominent.
When StockHouse asked president and CEO Vic Albioni what Digital Gem has been doing since January, the issue was skirted and
a reply regarding the site was offered: "In terms of where do we go from here, the on-line trading site is going to be launched soon."
He added: "We are extremely pleased with the website. There's no on-line trading site that has the financial services type portal that
we have, and people will have to judge for themselves when it comes out, but I think people will be pleased."
The new eNorthern site, says the company, will give its investors access to financial news, stock quotes, investment and analytic tools, investment information provided by third parties and will also produce research in-house.
There are approximately 155 million Digital Gem shares outstanding, a number that Alboini deems as "not relevant." He explains: "What is relevant is stock price, and whether we create shareholder value. We've come from $.025 to $.57. That's not bad in a year." Management owns about 26% of shares outstanding with Alboini pocketing approximately 21 million shares, CEO Nadir Desai and COO Wesley Roitman slide in next with approximately 10 million shares each. There is one institutional holder with just under 10 million shares.
Digital Gem's stock has technical support at about $0.55 and encounters resistance at approximately $0.65. This stock should be traded on a highly speculative basis, if at all. There have been many other opportunities lost to those investors who have hung on to GEM shares because of promises, and with 155 million shares outstanding, share dilution is a definite factor. Investors can expect to see a spike in price if and when the site is up and running. However, as the old adage goes, it may be wise to "buy on rumor, sell on fact." Investors will be expecting a great deal from this site when it is fully functional, and it may be an uphill battle for Digital Gem to satisfy these disgruntled customers.
Alboini would not elaborate to any extent as to what the problems with the site are, nor when the site would be fully functional. The best answer that could be pulled out of Alboini was: "In the prospectus, we say in the next few months. But, I go back to my word and say that it will be soon." This was most likely an answer that was carefully constructed well in advance of the StockHouse
interview.
Digital Gem is most definitely filling a gap in the online financial services industry. At present, service at the majority of discount brokerages is lacking. However, GEM's continued inability to open its online financial services site to the market in a timely fashion, is in keeping with the poor service and reliability of discount houses that investors have come to be all too familiar with. Hopefully, this not a precursor to investors in the future.
Again, this may be a warning for us to look (seriously) at. I do not want XST to follow suit of the practices of this company. As I am sure all of the other investors wish for the same.
Thanks, novice1