The old adage that it takes money to make money proves itself once again.
When Whistler Blackcomb goes on the chopping block - and there's really no nicer way to describe the slaughterhouse that is the modern stock market - it's not like just anybody can buy in.
If you're a Whistler Blackcomb employee, the rumour is you have to purchase at least 100 shares that will likely be priced $14 to $15 per share. If you're Joe Public, you'll need to buy a minimum of 1,500 shares, which will set you back up to $22,500 - well out of reach for the average Whistler family that could actually use a six or seven per cent annual dividend.
(By the way, a six per cent dividend on $22,500 is about $1,350 before taxes, which is considerably more than the $450 or so you'd get from a savings account these days.)
I understand why it's being done this way, and applaud the idea - it encourages long-term, serious shareholders who are more interested in dividends than share prices, keeping share values high while reducing the number of holders to a manageable level. You can't buy a single share in the IPO and use it to get into the AGM to harass the top brass about the selection of mustard at the Rendezvous Lodge. At least not yet...
But while this qualified approach buys Whistler Blackcomb some security from the sharks that circle the stock exchange, it also feels like a missed opportunity.
When the IPO (Initial Public Offering) was first announced, I was contemplating whether this is something I would ever invest any of my limited savings in, and, if so, under what conditions.
The bottom line is that I think that more local ownership should be encouraged, meaning residents, employees and second homeowners - even if it means setting up a tent at the base of Blackcomb and physically selling people shares in the company.
For one thing, many locals are already invested in the town, and owning a stake in Whistler Blackcomb would only encourage people to take more interest in the success of the resort. Shareholders would provide better customer service, chat up guests on the chairlifts, pick up their dog shit, keep their voices down when exiting the bar at night. Local shareholders would complain less about how busy it is, and would start thinking of long lines as something that benefits them rather than another reason to move to Revelstoke next year.
For another, locals understand the ski industry better than the average Wall/Bay Street investor, the powder years and the droughts, and are less likely to ditch their stock after a February rain in the high alpine or rockslide on Highway 99. Locals are going to care less about quarterly reports and hitting profit targets than the average investor, and can more easily understand the limits for growth - we can see those reasons out our windows, after all.
Local ownership also presents an opportunity for Whistler Blackcomb to keep more money in the company for on-hill improvements and marketing. For example, what if you could roll your dividend from one year into the cost of your season pass for next season? And if that's impossible then it's still fair to say that a large portion of those dividends will come back to Whistler Blackcomb and the resort as a whole, keeping profits in town for a change.
A larger portion of local ownership also provides protection for your investment, because the majority of investors will be in it for the long term. That means less stock out there for the day traders, short sellers, inside traders, trading houses that use computer algorithms to buy and sell shares at the blink of an eye, corporate raiders looking for companies to loot and countless others who don't care about the company or the town, but only want to wring every penny of profit they can from the mountains and its other shareholders.
Maybe that sounds hysterical, but there's no denying after the latest financial collapse that the stock market is a dangerous place that is driven by greed, perception and emotions - short-term thinking at its worst.
Just ask Fortress, Whistler Blackcomb's current owner: Fortress has seen the value of its shares in the fund that includes Intrawest and Whistler Blackcomb plunge from a high of about $28 in February 2007 to a low of $1 in December 2008. Share prices have since increased to around the $4 range, but metaphorically speaking it's like giving someone $100 to hold onto and being handed back $14.
To placate investors, Fortress is busy selling off all the assets it acquired when the hedge fund purchased Intrawest, in the process breaking up a respected name in the resort and real estate business.
The bottom line is that I can't afford to invest under the current conditions, and I doubt many locals will be able to either. But if I did have the money, I wouldn't invest either because I think this IPO needs a lot of local participation to be successful.
Maybe that will happen when the share price comes down?
