Palisade – Sprott Monthly Market Update: A Guide for US Investors on Private Placements
If speculators in the US who are interested and able to participate in the junior resource private placements aren’t doing so, they are doing their portfolios a grand disservice. The SEC restricts after-market trading in privately issued securities for US citizens, and Rick Rule shares some useful ways that US investors can negotiate private placement terms that are on par with the Canadian terms. One way is to have restrictions (aka legends) stripped from the certificates.
There is some frustration from US investors about the restrictions, but most small Canadian companies that don’t accept American investors are incompetent. Either the management doesn’t have the skillset, or can’t afford the legal accounting skills to include you. If the company is too unsophisticated to include investments from a market (USA) that’s 92% of North American capital markets, they aren’t worth investing in anyway.
To get access to private placements, you need to be a part of a network of investors either through a brokerage firm such as Sprott Asset Management (whose specializations include private placements which can be tailored to the individual investor). You can also call the company yourself, as an individual US retail investor. Rick recommends asking to talk to the CEO or CFO, and explain you are an emerging company looking to invest, and you want to be included in their list
As in any kind of investing, its important to choose a good management team. Rick mentions the ‘9 Nosey Questions’ you should ask of Junior Resource companies. He also gives an interesting account of the history of his successful career, and some useful time-management tips that anyone can apply- regardless of profession. For Palisade Radio listeners, Rick is offering to do a free portfolio ranking of your resource stocks, as well as personally answering questions in regards to private placements.
Talking Points From This Week’s Episode:
•Money is made in emerging companies by stripping away layers of the market’s doubt about the venture’s success.
•With choosing companies, the correlation of management resume & management skill to the task-at-hand is critical.
•The task at hand should yield a big reward, as the investor is taking a big risk.
•Only 1 in 5 investors will succeed, and 1 in 10 will get excessive rewards.
Rick Rule began his career in the securities business in 1974.. He is a leading investor specializing in mining, energy, water, forest products and agriculture. Rick founded California-based Global Resource Investments, Ltd., which grew into a much larger organization with significant affiliated companies. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.