Stockhouse Ticker Trax is published to subscribers every Monday (annual cost only $99). We focus on best-in-class high growth small companies trading on the TSX and TSX.V between 5 cents and $3 with a market cap below $300 million.
Equity Analyst Danny Deadlock has 30 years of experience speculating on Canadian penny stocks and targets capital gain opportunities and diversification in metals and minerals exploration, energy, and technology.
For the experienced investor, Ticker Trax provides an extra set of eyes and ears (idea generation) and for those learning to invest in micro cap stocks, we provide stock picks and market education.
Subscribers receive; (1) new research (stock picks) weeks in advance of being featured on this weekend column (2) exclusive access to our list of junior gold exploration companies (critical for peer valuation), (3) exclusive access to our list of Cash Rich micro cap companies (our Virtual Vulture Fund) which contains 80 companies with almost $3 Billion.
Both tables are updated monthly.
A month ago I reported here that American tech stocks were on fire in 2013 and if you have been following (or fortunate to own) my October stock pick in the tech sector – LX Ventures Inc. (TSX: V.LXV, Stock Forum) (65 cents) you will appreciate how strong social media stocks are – LXV has gained more than 200% for Ticker Trax subscribers in the past few weeks.
Shortly after that I featured to Ticker Trax subscribers a cash rich oil exploration company Primary Petroleum (TSX: V.PIE, Stock Forum) (halted at 9 cents) with $16 million in the bank and trading well below their cash value. A week later PIE was halted to announce the proposed reverse takeover (RTO) of Keek.com
Keek is the closest thing to Twitter’s Vine (six second videos) with the exception that Keek is a social media app allowing 30 second videos. Keek in a relatively short period of time has managed to build an audience of 60 million International users!
In theory, Keek as part of a small public company could do exceptionally well for both old and new investors. It is believed that Facebook offered $3 Billion for two year old social media app Snapchat. Snapchat is a photo messaging app where the “snaps” disappear in 1 to 10 seconds. Their money must also disappear that quickly as apparently they generate very little revenue. Yet it is worth $3 Billion (?)
Regardless one would thing a video app with 60 million registered users could “eventually” be worth a LOT. And based upon initial terms of the deal I personally believe this PIE / Keek partnership could be a marriage made in heaven for both Keek and Primary Petroleum investors.
Maybe the TSX or TSX Venture (TSX-V) would take pride in helping foster more tech success stories. Currently the Americans are dominating this and it would be nice to see more public tech and social media companies in Canada
HOWEVER...
Instead of being a HELP, I believe they will be a HINDERANCE
For almost three years now junior exploration companies (which make up a huge percentage of the Canadian markets) have struggled. In fact, this has been one of the worst periods in Canadian history for resource exploration companies.
In an effort to salvage (or grow) shareholder value, many of these public companies would like to “strike while the iron is hot” and venture into the tech sector with new money, new management, and new directors. This was done quite successfully in 1999.
However, this is deemed a “change of business” and from what I have seen over the past couple years, a “change of business” on the TSX or TSX-V can be a NIGHTMARE.
The public company is buried in legal and accounting fees and I don’t know why, but these transactions are dragging out forever. In most cases you are lucky to complete an RTO in six months and many I have seen are pushing nine months!
I personally own four that are dragging out forever so I can only imagine how many companies must be out there going through the same frustration and red tape. One company I spoke with who has been waiting eight months, tells me their legal and accounting fees are more than $200,000 and they have a binder of paper work six to eight inches thick. And they are still halted awaiting approvals.
______________________________________________________
Running a stock exchange like this should be an embarrassment to the financial institutions that own the TMX Group. How do they expect these public companies to survive (or prosper) when roadblocks are continually being thrown ahead of them? Regulation and protecting investor interest is one thing, but delays of this nature go WAY beyond the normal course of running a business.
_______________________________________________________
Just one example is NWT Uranium Corp. (TSX: V.NWT, Stock Forum) who announced in April they would go from becoming a mining issuer to becoming an investment issuer. And to support their initiative of rebuilding shareholder value they put together an excellent board of directors with decades of public company experience. The stock has been halted since January!
FOSTER NEW BUSINESS – DONT DISCOURAGE IT
Canadian public companies have a chance at salvaging shareholder value but NOT if the TSX and TSX Venture Exchange continue on the same path they have demonstrated for the past couple years.
If the exchange doesn’t do something to “dramatically” improve the time it is taking to get approvals, the tech rally on the Canadian side of the border will be over before it even gets started. They will leave most companies with dead-end resource projects and those with big bank accounts will be forced to stay in a resource sector that has very little investor interest.
And if you are a private company approached by a cash rich public company (or a company with the ability to raise a lot of capital) why would you be motivated to close the deal when it would take you just as long (or longer) to do an IPO.
In the case of Primary Petroleum (PIE) I can only hope Keek is willing to sacrifice some delay in return for having immediate access to PIE’s large bank account. Unfortunately though, if the exchange does what they do to everyone else (and buries them in a ridiculous amount of paperwork), the tech sector rally will pass them completely by in 2014 – and Canada will have missed another opportunity to showcase something besides resource exploration.
For reference:
https://en.wikipedia.org/wiki/TMX_Group