Vancouver stock exchange seeks to lure local firms to trading board.

The Vancouver Stock Exchange is busily trying to convince Los Angeles companies to use its services.

It has tentative plans to hold a big seminar for potential listees in Century City in September and, according to its manager of market development, will continue a two-year policy of visiting the Southland every six weeks.

In addition, the VSE's president, Donald J. Hudson, addressed the Los Angeles Venture Association's Investment Capital Conference earlier this month while two other VSE representatives pitched their case to local investment bankers, stockbrokers and potential listees.

Over the years, the VSE has had a questionable reputation stateside. In May 1989, a Forbes magazine reporter "found enough chicanery and speculative excess to make the U.S. penny stock rackers tame by comparison."

Although Forbes' follow-up article in May 1992 noted the establishment of a PreListings Advisory Committee in 1991 and the suspension of various exchange members, it concluded that the VSE was not "a marketplace for widows and orphans."

According to an official VSE statement, the exchange last year made wide-ranging rule and policy changes, reorganized its staff and hooked up with various professional organizations to improve service in its marketplace and monitor its business.

In his most recent trip to L.A., Derick Walker, the VSE's manager of market development, reminded local stockbrokers of the relatively higher returns and rates of success on VSE-listed stocks.

A December 1993 report by the VSE stated, "73 percent of the companies listed on the exchange since 1991 had achieved or exceeded the level of expectations projected in their business plans," said Walker. Other calculations done by the VSE's staff, he said, showed that the overall value of initial public offerings listed on the VSE in 1991 more than doubled by 1993.

Walker and Alexander Korelin, an independent publicist who represents the VSE and Canadian-listed companies, pitched local investment bankers on the potential "goodwill" a referral would bring. If an IPO candidate whose $1-million to $3-million offering was turned down by an L.A. underwriter is referred to VSE brokers, said Korelin, it may eventually come back to do a $15-million to $20-million deal with an L.A. investment bank.

As for potential listees, Walker noted the VSE has been focusing on smaller companies since it was established in 1907. As such, he claimed, VSE brokers have developed the expertise needed to keep costs down. He estimated the cost of doing a $1-million to $3-million deal at C$80,000-C$150,000 (Canadian dollars).

But the need to deal in two different currencies has intrinsic drawbacks. Walker conceded a VSE listing is not for every company. In addition to working in two currencies, getting listed takes a lot of time and effort, he said, estimating the time needed to do an IPO at six to eight months.

According to Walker, the VSE lists 200 U.S. companies. Of these, seven are based in L.A. County: Abstract Enterprises Inc., Daleco Resources Corp., Desper Products Inc., NHI Nelson Holdings, Pacific Vista Industries, Modern Records Inc. and Soligen Technologies, Inc.

Northridge-based Soligen was incorporated in 1991 and started its operations in 1992. It designs, manufactures and markets computerized systems that produce metal parts and tooling. Revenues for the nine months ended Dec. 31 were $97,000, according to CEO Yehoram Uziel.

Soligen has been listed on the VSE since April 15, 1993, when it acquired a shell corporation that had been listed on the exchange since 1988.

This so-called "reverse takeover" transaction did not require a cash payment, said Uziel. But it did, he said, require the delivery of 350,000 shares of Soligen common stock to a Canadian investment banker. The payment in shares covered the cost of acquiring the shell and fees for a private placement of equity which raised C$5.6 million (about $4.6 million) in new capital for Soligen.

Between April 15, 1993 and March 31, 1994, Soligen's capitalization doubled from $25 million to $50 million due to the price appreciation of the stock, which climbed to C$2.70 a share from its C$1 listing.

As icing on the cake, on March 10, 1994, Soligen also became a listed member of the American Stock Exchange's Emerging Company Marketplace. But a VSE listing, Uziel cautioned, can make a small business become a public company sooner than it should. "For a young company, unless you have the structure to accommodate all the rules of compliance, you dilute your managerial efforts," he warned.