Good evening, Kris. Thanks for the question. Your research is commendable as it shows a willingness to actively participate in the direction of your money, as opposed to blindly following the questionable remarks of others.
With respect to effects of an IPO on the parent, the general rule is that a well accepted IPO will benefit both the new company and the parent. The question remains, will the spin-off be accepted?
Generally, if the spin-off (let's call it "Newco")can grow faster by releasing itself from the chains of a big and slow parent, the parent will definitely be rewarded for releasing new value into the market. A great example of this is Lucent Technologies, a spin-off of AT&T. By spinning-out, Lucent was able to become a much more dynamic company than would have been possible within AT&T. It gained agility and creative thinking that just was not available within the big parent.
This ability to create new value is essential, otherwise, a company is exchanging 4 quarters for a $1 bill.
The recent phenomenon of Internet IPO's has made the possibility of a spin-off even more lucrative. A great example of this is the recent IPO of Net2Phone (NTOP.Nasdaq), a spin-off of IDT Corp. (IDTC.Nasdaq). In this case, the IPO was priced at $15 and went as high as $90 in its first 30 days. As a result, the value of NTOP shares held by IDTC (the parent) were worth twice as much as the parent! Talk about releasing new value into the market.
A word of caution, however. Though IDTC should have been worth over $60 based on it's NTOP holdings alone, the market never gave IDTC a share price higher than $33.00. Thus, proving that Internet hysteria does have its limits and the market would prefer for NTOP to prove itself before giving the parent full value for the shares it held in the spin-off.
Re: SYD and your theory. You stated "it just may be that SYD is about to IPO its new US corp, Sideware Corporation."
Respectfully, we don't agree with this theory for the following reasons. First, such a spin-off would essentially involve the part of the company with the greatest value and leave the parent with nothing more than an R&D facility in Vancouver. In our opinion, the real value in SYD now stems from the US operations, which has raised financing, hired key personnel, signed the largest marketing contracts and signed the largest sales agreements. Remember, an IPO is usually a small subsidiary and not the heart of the corporation.
Secondly, we don't believe Jay Nussbaum et al would ever agree to running an SYD subsidiary. If they are on board, they want to run the complete ship.
This bring us to our theory, which shares the fundamentals of your theory - taking the company to a US exchange. Given the fact Sideware USA is now the meat and Sideware Canada is now the de facto subsidiary, would it not make more sense to roll the Canadian company into the US company and re-package it for a US exchange?
Once again, we point to Jay Nussbaum and all the US based money people who are backing Sideware. We don't believe for a single minute that they have any interest in attaching their name to a VSE (and soon to be "Canadian Venture Exchange" following the merger with the ASE) company. It just does not make sense. The company has now added GTSI and SAIC to the marketing and sales side.
Conclusion? The personnel, money and partners are way too big for the VSE. This company is headed for bigger and better things in the US. When and where is the big unknown but if you follow the logic, there is no plausible alternative.
As much confidence as we have placed in SYD in the past, we are even more confident today. Fundamental analysis is not reliable due to the company's early stage of growth. Thus, it is necessary to read between the lines and we like what we have seen. As such, AGORA and its readers remain very long and strong on SYD.
Kris, thanks again for the question. As of Friday, September 17, feel free to discuss SYD with us at our AGORA Forums.
agoracom.com
By the way, 3COM just announced they are going to be spinnig off their Palm Pilot Division. Here is a great article on that story, which also touches on the points you are interested in:
biz.yahoo.com
Regards,
AGORA |
