Triant in todays Globe and mail:
Vancouver brokers ride tech wave
Firms generate record revenue, commissions for salespeople
as interest surges in high tech, wanes in resources
PETER KENNEDY
Friday, March 17, 2000
Vancouver -- After two very lean years, the Vancouver brokerage industry is riding high again, thanks to the wave of interest in high-tech stocks and the recent launch of the Canadian Venture Exchange (CDNX).
In spite of this week's technology sector selloff, Howe Street firms such as Goepel McDermid Inc., Canaccord Capital Corp. and Georgia Pacific Securities Corp. are generating record revenue and commissions for their salespeople.
"This is probably one of the best markets I've ever seen. We're very busy," said Georgia Pacific chairman Brian Ashton, who has worked in the securities industry for more than 30 years.
"Most of the firms I talk to had all-time record revenues last month," said Gordon Medland, a 46-year-old vice-president at Goepel McDermid and director of CDNX, which was formed last November following the merger of the Vancouver and Alberta stock exchanges.
While many of British Columbia's 3,400 registered brokers cut their teeth trading in junior mining and oil and gas stocks, Mr. Medland said the current boom is being driven by a wave of interest in junior high-tech stocks. "The public's imagination has been fired up by it," he said.
That means broker commissions are being driven these days by stocks like Bidcrawler.com Online Inc., Triant Technologies Inc. and Imagis Technologies Inc., instead of the junior resource issues that formed the bedrock of the VSE and ASE.
Brokers such as Mr. Medland said the Howe Street boom is being fuelled by the huge increase in trading volumes that has occurred since the VSE and ASE agreed to merge last fall.
Since CDNX was launched last November, the average volume of shares traded on the new exchange has soared to 114 million per day, compared with a combined ASE-VSE volume of 32.8 million in February, 1999. In the same period, the value of shares traded on CDNX has jumped to $163-million per day, from $22.6-million.
Because brokers get paid even when stock prices are falling, industry sources say the increase in trading activity is more than compensating for a sharp drop in commission rates to 1.5 per cent from around 3 per cent a decade ago.
Mr. Medland said firms like Goepel McDermid have also benefited by acting as underwriters of companies that have emerged from the VSE's junior capital pool program. It was intended to provide funding for early-stage shell companies which raise money before looking for business opportunities.
For example, in August, 1998, Goepel helped raise $450,000 for Imagis Technologies by acting as underwriter of a junior capital pool initial public offering of 1.5 million shares that was priced at 30 cents a share.
Goepel did well on the deal because it received not only a 10-per-cent commission fee, but also a $7,000 sponsorship fee and the right to buy 150,000 shares at 30 cents each for 18 months after the shares began trading.
Since the agreement was reached, shares of the CDNX-listed software company have soared as high as $4.
But if stock brokers are making more money these days, signs of their new-found wealth aren't always palpable in the bars around the old VSE building at the corner of Granville St. and Dunsmuir St.
Canaccord chairman Peter Brown's $505,000 Bentley Azure convertible can still be seen parked outside the sedate Wedgewood Hotel after stock markets close on Tuesday afternoons. Still one of Howe Street's top money makers, Mr. Brown and his sons Jamie and Jason are investors in Voda, a gaudy new nightclub that attracts Hollywood actors such as Sean Penn.
"Guys that come in here aren't your average stockbrokers," said Voda general manager Michael Backinski while he was setting up for the club's regular Tuesday evening salsa night. "They have tons of dough already."
But long-time Howe Street watchers say the securities industry is increasingly dominated by a new breed of stockbrokers who are more likely to spend their evenings hiking in Vancouver's North Shore Mountains than drinking in bars.
"In the old days, everyone would be heading for the bars at about 1.30 p.m.," Mr. Medland said. "But you just don't see that any more. It's a much more professional industry."
Others say the typical Howe Street retail broker of today is much less flamboyant than the veteran promoters who once dominated the VSE -- and they are much less likely to splurge on expensive toys such as flashy new cars.
One broker who asked to remain anonymous said that while he is feeling a lot more confident about his financial position, he has restricted his buying to a new leather couch and other furnishings for his home.
Mr. Medland believes this financial prudence is partly because of the "long dry spell" most brokers had to endure after the Bre-X Minerals Ltd. gold mining scam of 1997 and the collapse in bullion prices. "There was a good 2« years when it was pretty tough to make a go of it," he said.
Besides, the surge in CDNX high-tech stock is a new phenomenon that has lasted only six months so far. "Six months isn't long enough to pay off all the debts people have accumulated: mortgages they have to pay, the trips they owe their wives, and the braces their kids need et cetera et cetera," he said. "If this goes on for another six months or more, you will see the wealth effect really start to take over again."
Others say some Howe Street brokers aren't cashing in simply because they and their clients are still focused on Old Economy mining stocks, which are generating little interest among the majority of investors.
Veteran Howe Street broker Larry Pezim said he was recently visited by clients who wanted to talk to him about a mining exploration project in Newfoundland. "I could hardly keep myself from yawning," said Mr. Pezim, who retains a natural interest in mining because his late uncle Murray Pezim financed so many mining discoveries during his years as the undisputed king of the VSE.
Mr. Pezim said he often wonders what his uncle Murray would have done if faced with the choice of sticking with his old mining stocks or following the trend towards investing in small high-tech firms.
The answer? He said his uncle would have changed his investment strategy and focused on high tech. "He always told me if the public wants bananas, you don't try to sell him apples," Mr. Pezim said. "You have to go with the flow."
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