The New CDNX: restoration of a traditional predator-prey system?
By John Kaiser
The Vancouver and Alberta Stock Exchanges have merged to form the Canadian
Venture Exchange, or CDNX for short. There has been much media talk about how
CDNX will be able to compete on the global stage by offering strong
regulation and transparency. I have been among those quoted by the media as
espousing this view. Unfortunately, I have an ominous feeling that I may be
mistaken. While checking out the new CDNX web site (www.cdnx.ca), I
discovered that CDNX has abandoned the long standing VSE policy of publishing
details about corporate transactions that involve the creation of paper. This
decision has apparently been made by Gerry Romanzin, the new head of CDNX
corporate finance who was the former executive vice president of the Alberta
Stock Exchange. As you know, the ASE steadfastly resisted suggestions to
adopt a VSE style of disclosure, and in the process helped investors lose
extraordinary amounts of money through disasters like Cartaway, Timbuktu and
YBM Magnetics that would have been nipped in the bud by VSE style disclosure.
The information which CDNX is now planning to keep internal to the exchange
is important because it alerts investors to possible conflicts of interest
within the brokerage industry, and it lets them see the degree of stock
dilution in the form of options, warrants, convertible debt and asset related
contingent stock issuances. This information was traditionally picked up and
retransmitted by Market News and Canada Stockwatch, the only news vendors
that do justice to the Canadian junior markets in terms of detail and
universal coverage. Their news feeds are picked up by a number of financial
web sites that specialize in Canadian listings. The loss of this information
thus affects more than a few people like myself for whom it is critical
research material. A key frustration that I have had with the ASE is that
there was no way of knowing what financings or transactions had closed, who
was involved, and what the true full dilution was for an ASE listing. CDNX
has adopted the VSE daily bulletin notice system, but to stop publishing the
corporate transaction details somebody had to go out of their way to make
this happen. The discouraging implication is that the new CDNX is nothing but
a clone of the ASE, and that the merger was contrived by the brokerage
industry as a way of getting back the business that fled to the OTC Bulletin
Board. If this attempt to shroud the corporate transactions of CDNX listings
prevails, there will be little reason to prefer the Canadian junior market
over American equity markets. Any regulator who claims to have the ability to
protect investors is a fool or a liar. If investors in Canadian juniors are
to avoid becoming prey for predatory brokers and promoters, they need to use
their own brains to supplement regulatory efforts. And if the information
investors need to assure themselves that they are dealing with a fair playing
field is not available, the smart thing will be to steer clear of
predator-prey systems where they are the prey. This "little thing" is
symbolically a "big thing" that would be easy to fix if CDNX is truly
interested in being the best regulated and most transparent venture capital
exchange in the world. If you believe CDNX is making a big mistake in cutting
back its disclosure policies, please contact any or all of the CDNX directors
I have listed below and let them know what you think.
William Hess (CDNX President): whess@cdnx.ca
Dennis Burdett (CDNX Chair, Canaccord): dennis_burdett@canaccord.com
Ian Brown (CDNX Co-Vice Chair, Goepel): ian.brown@goepelmcdermid.com
Scott Paterson (CDNX Co-Chair, Yorkton): spaterson@yorkton.com
Wiley Auch (First Energy): wdauch@firstenergy.com
Chris Lay (CIBC): lay@cibc.ca
John Hagg (Northstar Energy): johnh@northsnrg.com
Norman Thompson (Union): nfthompson@union-securities.com
Deborah Weinstein (LaBarge Weinstein): dw@lwlaw.com
John Anderson (Anderson Expl): andersj@axl.ca
Mary Macdonald (Macdonald & Assoc): mmacdonald@canadavc.com
Alain Auclair (Scotia Capital): alain_auclair@scotiamarkets.com
John McCoach (Yorkton): jmccoach@yorkton.ca
Ian Beddis (RBC): ibeddis@rbcds.com
John Brock: jsbrock@istar.ca
Gordon Medland (Goepel): gordon.medland@goepelmcdermid.com
Sesto DeLuca (Latimer): drdyp@wdlatimer.com
James Sorenson (Merrill Lynch): jim_sorenson@ca.ml.com
Harry Jaako (Discovery Capital): hjaako@discoverycapital.com
John Wells (National Bank): jwells@isiedm.com
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