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Tech Futures:  Dec 3, 1999 By Michael Volker CDNX Opens, T-Net20 and VCP Updates  CDNX Opening Day  On November 29, the day the CDNX (Canadian Venture Exchange) opened for business, I was listening to the stock market reports on my way to the office. The commentator announced that the new CDNX Index was up 1600 points to 2000 on the day. What a great start for the new exchange! Curiously, the reporter didn't hiccup as she said this. Being quick at math, I easily figured out that the index must have started off at 400, for a 400% gain on day one. Well, obviously that's not possible (notwithstanding the wild market gains we've been seeing lately in the internet arena).  The newly created CDNX index is an equally weighted price index comprised of the top 80 per cent of companies (i.e. top 80% by market capitalization). It is a price movement index which is not weighted in favor of higher valued companies unlike the old VSE (Vancouver Stock Exchange) index which was market cap weighted.  The new index, which bears no resemblance to the old VSE index - either by composition of companies or weighting - was pegged at 2,000 (wonder why 2000?) to start. Because indices track relative movements, they can be initialized to any desired value. For example, when we started the T-Net20 we set it to 1000 as of Jan 1, 1998 (we hoped that it would reach 2000 by 2000, when in fact it might yet break 3000!).  The CDNX's progenitor, the VSE, when it stopped trading the previous Friday, closed at 394.88.  Because the new index started at 2000, and because it was updating the former VSE data feeds, this amusing little opening day error occurred.  Although CDNX officials said that they would not reconstruct the new index on a historical basis, it is interesting to note that the CDNX website incorrectly shows old historical VSE index data re-labelled as "CDNX". But, I really shouldn't be too critical - the CDNX (i.e. VSE) folks have produced a great website with gobs of useful corporate data. In fact, it is better than what you'll find on many senior exchanges.  So how did the new exchange really perform on its first day? Led by a strong showing in technology stocks, trading volume at 62.3 million shares was 60% higher than the combined average numbers for the predecessor markets (i.e. the ASE and VSE). Trading value at $86.6 million and the number of trades at 21,783 were both more than twice November’s combined levels. The CDNX Index closed at 1998.33, down 1.67 on the day. By Thursday, however, it was up to 2,021.01.  The CDNX will also be introducing a number of new stock indices, i.e. the main index and some sub-indices for industry groups, like the technology sector.  Will this make our T-Net20 stock index redundant? Not at all. Remember that the T-Net20 tracks the value of the top B.C. firms regardless of where they are listed whereas the CDNX index will track only companies listed on the CDNX regardless of where they are located.  By the way, if you try to look up the old VSE at http://www.vse.cayou will automatically be flipped over to http://www.cdnx.ca. It really is gone (almost)!  In William Hanley's Market Eye column in the Financial Post, his comments on the CDNX moniker reinforce some of the points I've been making for some time. I have not heard any others taking a position on this. I think it is so important to choose the right name because of both the perception we need to create and because nowadays branding is so important.  I reiterate some of these concerns: "Cee-Dee-En-Ex" is an awkward mouthful of syllables; if Venture is the operative word in the new market, where is it represented in CDNX?; CDN is the designation for the TSE's Canadian Dealing Network (Canada's unlisted Over-the-Counter market) and the CDNX may be seen as a revamped CDN (not very flattering); with fiascos such as Bre-X, Cartaway and YBM Magnex lingering over Canada's stock market, it might have been prudent to leave Canadian out of the Venture Exchange entirely (there's no American in NASDAQ, huh?).  According to Hanley, some people are already calling the new exchange the "Candex", the "C-Dex", and the "CV", although he prefers "Ex", "V-Ex" or "Ven-Ex". I like "V-Ex". Then, stock market infosources can still use the ".V" extension.  And I thought I was alone in my crusade to make it not only sound more international but to indeed fill the North American niche between the NASDAQ smallcap market and the poorly regulated OTC-BB market!  In this regard, Eric Reguly in the Globe and Mail noted that CDNX companies are unlikely to want to graduate to the TSE when they could go directly to an esteemed NASDAQ listing.  Name aside, I'm excited about the "V-Ex". It'll bode well for our junior technology companies who can now spread the risk for investors among many rather than trying to find those few big investors. Many of the companies on the T-Net20 list (see below) got their start on the VSE. Don't you wish you'd bought some then?  Lately, I've been seeing more local technology startups than ever before. Through my work at Simon Fraser University's Industry Liaison Office and the Vancouver Enterprise Forum, I get to see new ventures in their early days.  Many of these are candidates for junior public financings on the CDNX. Being more visible on such an exchange will attract not only the more speculative "retail" investors, but may also attract the attention of potential acquistors. At a KPMG technology executives breakfast this week, it was noted that mergers and acquisitions are "in" and instead of migrating to a senior exchange, an acquisition is a likely alternative.  What keeps one of these young listings from being a scam? All we need is a few disasters and the CDNX will be viewed with disdain, as was the VSE, even years after having undergone substantial reforms. Surely, we don't want to go from being the "scam capital of the world" to being the scam country.  We have to be careful not to put the CDNX in the position of judging and assessing the business propositions of companies which seek to be listed. That's the job of brokers and investors. The role of the Exchange should be that of enforcing adherence to disclosure standards, especially with respect to requiring more disclosure on the people involved in these companies.  As technology becomes more complex and as marketing strategies become more creative, why put the onus of assessing these plans and opportunities on the Exchange? That's up to investors. However, they need to know that information disclosure and proper corporate governance systems are in place. The Exchange will have its hands full just making sure that such reporting standards are met, let alone assessing report contents. The former VSE has indeed made some progress in this area. For example, one of its newer publications is specifically focussed on technology company standards.  This approach has worked well for the Americans, the NASDAQ SmallCap being a case in point. Have you ever heard of any scams on this market? Some failures or flops come to mind, but no scams. We can take a lesson from this. Let's make the CDNX work!  T-Net20 List  As of November 30th, the list of the top twenty companies (by market capitalization) in the T-Net20 index has been updated as shown in the table below. There are now five companies headquartered in B.C. which are each worth over $1 billion! PMC Sierra (NASDAQ:PMCS) itself is worth a cool $10 billion - no small change, even for Bill Gates.  A couple of companies which are no longer based in B.C. (i.e. Systech Retail Systems and GenSci Regeneration Sciences) were removed and replaced by Anormed Inc (TSE:AOM) which, admittedly, should have been on the list sooner and by eDispatch.com (CDNX:EWD) which has seen its shares rise from $2 to $8 in the past two months. Stressgen Biotechnologies (CDNX:SSB) was stressed out from 19th spot to place 22nd. This made room for Burntsand Inc. (TSE:BRT) which is now trading around $2. Uniglobe Travel Online Inc. (CDNX:UTO.b) travelled south losing half of its value in the past three months dropping to 26th place. This made room for Infowave Wireless (TSE:IW) which propagated to the 18th spot resulting from a recent jump in its trading price to $8. Infowave also recently graduated from the old VSE to the TSE.  Other noteworthy gains can be attributed to Creo Products Inc. (NASDAQ:PMCS, TSE:CRE), Pivotal Corp (NASDAQ:PVTL), and Sierra Wireless (TSE:SW) which all enjoyed dramatic price moves. Ballard (TSE:BLD) stayed relatively flat and was nudged out of its second place spot by QLT Phototherapeutics (TSE:QLT) which has been rising steadily.  Let's hope that some of these windfall gains will find their way into new startups!  T-Net20 List (as of November 30, 1999)   COMPANY $Mil   COMPANY $Mil 1 PMC-Sierra Inc 9670 11 Angiotech Pharmaceuticals 141 2 QLT PhotoTherapeutics 4257 12 Westport Innovations Inc 117 3 Ballard Power Systems  3216 13 Sierra Systems Group Inc  114 4 Creo Product Inc 1594 14 eDispatch.com 93 5 Pivotal Corp 1153 15 Sideware Systems Inc  87 6 Sierra Wireless Inc 495 16 Burntsand Inc  85 7 NII Norsat International 274 17 Silent Witness Enterprises  73 8 Forbes MediTech Inc 268 18 Infowave WIreless 72 9 MDSI Mobile Data Solutions  194 19 Micrologix Biotech Inc 67 10 AnorMED Inc 162 20 AIM Safety Company Inc 66 The T-Net20 index closed at 2877.77 at the end of November, up from a 2562.66 close at the end of October. Who knows? It might break 3000 by 2000! T-Net20 Venture Capital Pool Corporation(VCP) Update I've been keeping track of Venture Capital Pool ("VCP") companies in this column as defined by the former Vancouver Stock Exchange because they may provide funding to, and in the process acquire, technology companies.  Since the CDNX has now taken over from the VSE, VCP's are going to be modified slightly as a result of being combined with Alberta's popular Junior Capital Pool ("JCP") program. The new product is called a Capital Pool Corporation ("CPC").  As new CPC's get formed, we'll be adding them to the current list of VCPs. We won't be merging in the JPCs because they are mostly non-B.C. companies.  Since CPCs are unlikley to be primarily B.C. entities, we'll start flagging them by the location of their head office.  JCPs and VCPs still exist until March 1, 2000. If they still have not done their major transactions by then, existing JCPs and VCPs will be re-classified as CPCs.  New entries to our current VCP list include Abington Ventures Inc., Intergulf Resources Corp., and Salish Ventures Inc.  Since the previous update, the following VCPs have come to trade:  * Airedale Financial Corp.  * AVC Venture Capital Corp.  * Duke Capital Corp.  * Fountainhead Projects Corp.  * Western Prospector Group Ltd.  New conditional listings include the following VCP companies:  * Aitchison Capital Inc.  * Future Mineral Corporation  * Plutonic Capital Corp.  Check our Venture Capital Pools chart for a complete updated list of the VSE's VCP companies.  Michael Volker is the Director of the University/Industry Liaison Office at Simon Fraser University, Chairman of the Vancouver Enterprise Forum, and a technology entrepreneur. He owns shares in many of the companies he writes about. Contact: mike@risktaker.com. Copyright, 1999. What Do You Think? Talk Back To Mike Volker Tech Futures is a bi-weekly column that focuses attention on new and emerging BC publicly listed technology companies. Mike Volker is the Director of the University/Industry Liaison Office at Simon Fraser University, Chairman of the Vancouver Enterprise Forum, and a technology entrepreneur. He owns shares in many of the companies he writes about. Contact: mike@risktaker.com Tech Futures Archive T-Net 20 High Tech Stock Index