Internet Update
Dateline: 06/04/99
There are a few Canadian Internet companies that have not even bothered to be listed on a Canadian exchange. They know that the big market for such shares is the American one. So they've bypassed Canada and listed directly on the exchanges down south, particularly the NASDAQ.
This is a boon for Americans as it makes it much easier for them to pick up these Canadian stocks. Many Yankee brokers are reluctant to handle stocks on foreign exchanges, but if it's on the NASDAQ or the NYSE, they don't care where the company has its offices and plants.
But it's not so good a deal for Canadians who might want to invest in these firms, particularly within your Registered Retirement Savings Plan.
One of the oddities of Canadian tax law as it pertains to investing in Canadian companies in your RRSP is that they are not considered Canadian by the government unless they trade on a "prescribed stock exchange in Canada". At the same time, a foreign company trading on a Canadian exchange is still considered a foreign company.
This takes on some significance when you consider that 80% of your RRSP must be Canadian. There is considerable agitation now for the government to change those annoying foreign content rules. In yesterday's FP Investing section of the National Post, Jonathan Chevreau notes that mutual fund industry and the official opposition want the rule scrapped.
Monte Solberg, Reform Party finance critic, introduced a private member's bill last October to eliminate the 20% rule. It was tabled and has been collecting dust ever since.
Meanwhile critics point out that the government is actually shooting itself in the foot with this idiotic requirement. If an investor can make more money investing outside Canada, some of that extra profit will find its way into government coffers when the investor retires and starts withdrawing from the plan.
Moreover, the more money accumulated within the plan by retirement, the less likely the plan holder will run out and have to rely on government largesse.
Eventually this rule will be dumped (and the sooner the better), but meanwhile, if you have enough foreign content room left within your RRSP or if you want to find some interesting investments to hold outside your RRSP (or if you're an American reader looking for some Canadian Internet stocks), here are a few that are listed exclusively on American exchanges.
Entrust Technologies - This spinoff from Nortel Networks used to be called Nortel Secure Networks and develops and markets privacy and security software applications for use in networks including the Internet and intranets. It was the number two fastest growing company by revenue in Deloitte & Touche's Fast Fifty-Five last year (see my article The Technology Fast 50). While Nortel is listed on both the TSE and the NYSE, Entrust is only listed on the NASDAQ as ENTU.
Stockgroup.com - In March, Vancouver based Stockgroup effectively went public when it was acquired by I-Tech Holdings Group which traded on the OTC BB. The company subsequently changed its name to Stockgroup.com and now trades as SWEB. In May it applied for NASDAQ listing. The company operates a popular financial website focusing on small and micro-cap stocks.
Starnet Communications International - Starnet is a leading developer of subscription based online entertainment services. It got its start with interactive pornography, but has since divested itself of this line and focused on developing online gambling sites. Another Vancouver based company, it trades exclusively on the OTC BB as SNMM.
Additionally, Stockscape Technologies Inc. which runs the Stockscape.com financial website has been acquired by Cornucopia Resources which now trades exclusively on the OTC BB as CNPGF. It used to trade simultaneously on the TSE, but delisted as part of its strategy in becoming a dot-com company. It will change its name to Stockscape.com soon and the stock symbol will change as well.
If you know of any others to add to this list, please let me know.
In addition to the above companies which trade exclusively on American exchanges, there are many Canadian companies that trade on both Canadian and American exchanges. Nortel Networks, and TD Bank, for example, and more recently, Bid.com. trading as NT, TD and BIDS respectively.
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Definition of Foreign Property - A Revenue Canada memorandum on what constitutes foreign property under the tax act.
Internet Sourcebook - This interesting and useful site lets you narrow down searches on Internet companies with various parameters including country.
High Tech Links - my collection of High Tech Links at Investing: Canada.
Canadian Internet Stock Average - my charts of Canadian Internet stocks and how they have fared since January First.
06/02/99 - Can You
Trust Your Broker?
Tales of woe from the trenches - some people lost big on bad
advice from their brokers - Bre-X, etc. - and want to sue.
05/31/99 - Stamp
of Approval
All about stamp collecting for fun and profit!
05/28/99 - More on
Internet-Come-Latelies
We follow up on a reader's suggestions and add to and amend our
Canadian Internet Stock Average.
05/26/99 - The
Technology Fast 50
For the second year running, Deloitte & Touche are searching
for the 50 fastest growing high tech companies.
05/21/99 - Internet
Update: Mining the Net
They used to be mining companies. Now they're Internet companies!
Disclosure: The author owns shares in Cornucopia Resources.
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