If little else, opinion on extending the idea of flow-through shares to the technology/bio-technology sector – a style that was the topic of a recent column – is mixed.
Here would be the comments from one reader who likes the idea that, if implemented provides capital to companies and tax breaks to investors C with the expectation because the idea being developed provides large capital gains at some future date. That idea continues to be promoted as a way of diversifying the economy, a procedure that probably needs some type of government assistance.
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READER A. “As investment propositions, it startups have similar characteristics to junior mines. They are capital-hungry lotteries with virtual certainty of loss balanced with a remote hope for dramatic riches.
“There’s clearly a nearby community with an appetite for your sort of risk, possibly justified by a faith in subject expertise. It’s long seemed regrettable that there hasn’t been a mechanism for tapping into the community, and extending its skills to provide venture capital for something apart from rock-bashing.
“To the extent it is sensible to inspire what is considered wild gambles, (since the collateral benefits outweigh individual losses), extending flow-through shares to startups will be a good development,” he explained.
JAY KELLERMAN. The managing partner in the law practice, Stikeman Elliott, recently wrote an opinion piece for MicroCap Review Magazine.
In that piece, Kellerman, whose practice through the years has centered on mining companies, writes from the similarities between your junior resource sector and the start-up technology sector. Those similarities include: both are in line with the ability to own and exploit property; both have an insatiable appetite for capital; both are run by entrepreneurs, both of them are risky ventures and if successful, a number of the founders see their companies sold to larger concerns, often prior to the commercialization of their assets.
Kellerman noted one possible difference: in the mining sector “title is generally very secure,” whereas with the technology sector property rights “are within the brains of those who cease working every day.”
As part of his work, Kellerman has noticed a different feel about we’ve got the technology sector, whether it is in and around Kitchener/Waterloo; the Ottawa area or in Vancouver.
And because of the new government’s priorities on innovation/science/technology C Kellerman were built with a few ideas for the tech sector, most of which will take time for you to germinate.
starting something like the Prospectors and Developers Association of Canada (PDAC) where investors could meet with management;Engage with the key federal ministries. Kellerman suggested the tech sector might take a webpage from the mining book “and engage the us government around the concept of investor incentives like a “technology flow through share”, where certain R&D expenses might be directly flowed through to investors.”
Kellerman made those suggestions around the expectation that “there would be some appetite along with other market participants, such as Canadian investment banks and maybe the Toronto Stock market to participate within the growth and development of this important Canadian industry.”
INVESTOR B. This B.C.- based investor were built with a bad experience with investing in a labor-sponsored investment capital fund. “All they do with one of these things is find a reason to pay the executives which are set up to run these things outrageous annual salaries.” This investor said that he spent over $50,000 “supporting this kind of thing and today the shares are in a value of $3,000.” That isn’t a great outcome, for a product which is being phased out in areas.
In this investor’s view, “you don’t make things work unless there’s a minimum of an opportunity of some reward. People are better off dealing in a straight market exchange with companies that have been proven. Therefore if Ottawa is considering extending the flow-through concept to the technology sector, it now has the benefit of the opinions of three Canadians.
