Double Blind

The February 28th edition of the Vancouver Sun, in the business section is a story about this couple called Sean and Christie Alger and their RRSP investment strategy. Some choice quotes include:

“Their all-or-nothing strategy involves putting every spare dollar into shares of the small Vancouver high-tech firm where Sean works as vice-president of finance.”
…
“‘My goal is to make a killing. I am confident I will make money, no matter what. It is just a question of how much.’”
…
“Christie, 29, also holds all of her RRSP in shares of Sean’s {her husband} employer, Contec Innovations Inc., a 20-person firm that develops mobile service delivery platforms for the Internet.”

So it turns out that Contec Innovations trades on the TSX Venture exchange and is at around 15 cents a share, trading down from 40 cents in the middle of 2002 when they went public (through a reverse merger). Just skimming their quarterly report, we can see that the company has very little in revenues and is currently burning about $400,000 a quarter while trying to develop this mobile data service called Hornet. What’s relevant is that the technology is not shielded from competition – there’s quite a few companies jumping into the very same space. The company recently raised about $600,000 which should keep it going until the middle of 2005 before they’ll have to raise more money again.

If this guy is the VP of finance, I’d start worrying if I held shares in the company since he clearly has no concept of risk management. It is absolutely insane to put 100% of your RRSP assets in an illiquid stock of a company with zero revenues, especially one planning to do the majority of their business in China. The only killing he is going to make is falling on his own sword. However, it’s his right to do so.

This entry was posted on Monday, February 28th, 2005 and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.