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Gold/Mining/Energy : Nuvo Research Inc -- Ignore unavailable to you. Want to Upgrade?

To: the Chief who wrote (6523)	1/21/2001 6:23:45 PM
From: David Graham	Read Replies (1) \| Respond to of 14101

Chief/Wolf and the rest of the gang: I think that the Acqua investment confirms that DMX has a plan for getting a NASDAQ listing. I know we've heard it before, but I think Acqua would have required an acheivable plan before signing on. Acqua is a U.S. based venture capital firm and most of the investors in Acqua'a funds (who buy into a limited partnership run by Acqua) will be U.S. institutions. Now the way most venture capitalists payout their investors is not by handing them cash but by distributing shares in the investee companies. However, the venture capitalist(VC) only distributes the shares to the limited partners when the VC chooses. The distribution is usually after the shares have appreciated nicely. The reason for this is that the VC is paid in part based on the return of their fund. So it is in their interest to hand over DMX shares only after they have gone up, way up. The VC gets paid more if DMX triples rather than doubles, etc. This is where the NASDAQ listing comes in. Those U.S. institutions often want to unload at least some of their shares quickly (the selling pressure will come from the limited partners, not Acqua) and they prefer to sell in the U.S.. Honestly, some of them don't believe there is a stock market in Canada. That's why I think Rebecca msut have detailed a believable strategy for getting DMX on NASDAQ. Now, there is no rush, VC's can, and normally do, wait years before distributing their investments. But she must have convinced Acqua. On another note, someone mentioned that this wasn't in the Globe or the Post. That floors me, this is one of the biggest VC financings ever in Canada. I just don't get it. This deal won't encourage Bay Street research though - they didn't pay any financing fees. John - excellent post. I agree that this gives DMX a larger breathing space when it comes to negotiations. Another nice point about the deal's structure is that the financings will be done at the discretion of DMX. However, I wonder if Acqua has any right to preclude a public financing. Suppose the shares went to $35, then DMX would prefer to issue new equity at $35 rather than at $25. What happens then? The more I think about it, the more I like this deal. Given that I've been pretty suspicious of DMX's management skill in the last year, I tip my hat to them.