Another feature of US capital markets that is now crossing the border is its legendary litigiousness. 'Until now, Canadian IROs have been more casual about the legal ramifications of activities than they have in the US,' says Sandra Croy, IRO at Vancouver-based Methanex, the world's largest producer of methanol, capitalised at C$2 bn, which trades on the TSE, ME and Nasdaq. Croy
has a valuable perspective here, having formerly been IRO at Chase Manhattan Bank. 'This is an area that has caught Canadian IROs off-guard.Take reviewing analysts' financial models.The point was made at the Ciri conference in May that if you correct them, and if you go into detail, you can be construed as having blessed them.The next time an analyst comes out with a report way off base, and gets sued, you could be held partly responsible.Canadians are becoming more sensitive to these issues.'
On the information front, Croy
has already had to deal with a minor crisis.The TSE goofed recently when it published that the short position on Methanex
stock was a hefty 35 mn shares.The company has about 180 mn shares outstanding.In fact, the real short position was 19.7 mn; and many of those are not naked short positions but positions by arbitrageurs who are long on Methanex
had to prod the TSE to verify figures. 'We were getting a flood of calls asking what was wrong with Methanex
,' comments Croy. 'It felt good to set the record straight.'
Whatever they think of the trends coming north from the US, many Canadian companies are looking south for new shareholders.Around half of the trading in many of Canada's largest
blue-chips now takes place on a US market; and several Canadian IPOs, particularly in the high-tech area, have bypassed domestic exchanges in favour of a US listing.With US pension funds expected to increase their exposure to foreign securities from about 3 per cent of their total assets to some 15 per cent by the end of the decade, Canadian IROs are pondering ways to get US exposure and attract some of the large pools of available capital.
For now, Canadian equities make up less than 1 per cent of US portfolios and it is difficult for Canada's IROs to capture the imagination of US investors.Nevertheless, they do pound the streets in their bid to expand shareholder bases away from Canada's domestic market: those who represent companies dominant in their business sector, or perceived to have superior growth potential and liquidity, tend to be the best received.