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Shell Summary for May 15, 2017

2017-05-15 20:37 ET - Market Summary

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by Stockwatch Business Reporter

The TSX Venture Exchange climbed 11.45 points to 805.09 Monday. Nathan Smith has filed a preliminary prospectus to list his first capital pool shell, Value Capital Trust. The shell plans to sell a $500,000 initial public offering of five million trust units at 10 cents. Its IPO agent is Echelon Wealth Partners Inc.

Unlike most shells, Value Capital is a mutual fund trust rather than a corporation. It chose this structure because it plans to seek a real estate deal (perhaps in the United States) for its qualifying transaction. The shell explains in its prospectus that its structure "is useful only for certain types of transactions" and that it may incur extra costs if it ends up finding a QT that would require conversion into a corporation.

Among the shell graduates that have closed real estate QTs are R&R Real Estate Investment Trust (RRR: $0.16) and European Commercial Real Estate Investment Trust (ERE: $4.90). R&R went public in August, 2014, through a capital pool shell called WestCap Investments Corp., which was founded by hotelier and one-time shell-maker Majid Mangalji. WestCap's IPO shareholders, who paid 10 cents a share, have had more than two years to get out of their investment with a profit since the shell closed its QT. The other REIT, European Commercial, was founded by Thomas Schwartz and Phillip Burns as a capital pool shell called European Commercial Real Estate Ltd. Mr. Schwartz is the founder and president of Canadian Apartment Properties REIT (CAR: $33.70), and Mr. Burns runs a private real estate investment and management firm in London. This duo of first-time shell-makers listed European Commercial with a 10-cent IPO. The shell closed its QT in February, 2017, by acquiring a commercial building in Germany, then two weeks ago it converted into a REIT and rolled back 1 for 31.25. The shell's IPO shareholders, whose rollback-adjusted break-even price is now $3.125, would be up on their investment if they still hold their shares.

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