Investing in CleanTech

A sector specialist shares his insights...

SPENCER GRIMES is managing director of Merriman Capital Services Group, where he runs day-to-day operations. He previously oversaw Merriman's corporate services practice, where he specialized in advising corporate management teams on a variety of matters, including executing complex trades, share-repurchase programs and coordinating with investment banking to assist in financing transactions. He has held similar roles at Morgan Stanley and Hambrecht & Quist.

Here Spencer Grimes shares with The Gold Report his secret to investing in the right cleantech companies.

The Gold Report: Tell us a bit about Merriman Capital Services Group, the advisory services that you provide to investors and perhaps some of the company's history.

Spencer Grimes: Merriman Capital is a financial services firm focused on fast-growing companies and their institutional investors. Solid fundamental analysis is at the core of everything we do and what drives our business decisions. As such, we view equity research as the "point of the arrow" among our services, which also include investment banking and institutional sales and trading. 

TGR: In the past, Merriman specialized in tech-related investments. Has that evolved? 

Spencer Grimes: Yes. When Jon Merriman helped establish the firm in February 2002, the mission was clear: Revitalize the boutique investment-banking landscape by servicing emerging-growth technology, telecom, consumer, media and Internet companies. 

The West Coast growth banks that once advised these companies had disappeared, having succumbed to larger financial institutions or were destroyed by the effects of the Internet meltdown of 2000. Merriman saw the need to fill this void.

Subsequently, in 2004, we established our cleantech industry practice, making us one of the first Wall Street firms to devote significant resources to this sector. As it relates to companies we advise in the Services Group, our cleantech practice has adjusted along with advancements in green technologies and a rise in the rare earth element (REE) space. 

These types of companies are no longer limited to the end producers of hybrid cars or lithium batteries. Institutional investors are seeing more opportunity in the commodity side of cleantech. This is also evident in the types of companies we've been working with on the OTCQX.

TGR: Your work with the OTCQX has helped Canadian issuers be presented to US investors, so it is easier for them to participate?

Spencer Grimes: Yes. Simply put, the OTCQX allows US investors to invest and see real-time trading in US currency through US broker/dealer information systems. The Canadian companies that list don't have any redundancies, in terms of reporting. It's a very efficient, cost-effective manner for them to engage with US investors more fully. To date, we've seen great success.

With the increased number of companies listing on the OTCQX, we've started seeing interest from investors and institutions that previously weren't engaged because they didn't do commodities.

Now, these investors are starting to come around and see it as a cleantech play. They see how lithium integrates and operates within the battery space, the way vanadium can be added to increase storage time for the smart meter and how wind and solar can benefit from some of these rare earth and strategic metals to increase productivity and lower price.

When investors thought it was just commodities, they weren't sure; now, the macro picture is starting to take a different shape in their minds. I think there's great opportunity here.

TGR: Can you give us some information about the upcoming resource investor conference you're involved in?

Spencer Grimes: The event is April 26-27 at The W Hotel New York. We're excited to be part of it because, as we've had more and more success in the resources space, we find more investors who want to see the companies we're working with and the opportunities that are out there. Main Street US investors are not as familiar with the commodity space or resources in general as are investors in Canada and Australia, for instance. 

But with recent activity and success over the past few years, a lot of US investors see that this may be more than a blip on the radar. It's not necessarily a bubble, but rather a part of a longer-term trend as we progress into a new phase of the economy. We're excited to have investors attend. The conference is free; for more information, visit our website at www.merrimanco.com 

TGR: And is the conference open to portfolio managers, brokers and individual investors? Also, will there be an opportunity for investors to meet with management?

Spencer Grimes: Yes to both questions. We've seen a lot of interest from institutional, as well as retail, investors. There also will be a couple of keynote speakers, including David Franklin from Sprott Asset Management and Rob McEwen from McEwen Capital.

TGR: I'm sure you agree it is exciting to find a full-service investment bank in the US interested in making a commitment to this space. 

Spencer Grimes: Yes. And while it's nice to be a leader in this space, I do think that more people will come on board. What's paramount is the convergence of commodities with the cleantech play. 

As US investors learn how these companies are the building blocks of solar, battery smart grid technologies and so on, the more opportunities will emerge for these investors to make money. If investors can find an opportunity to increase alpha, they will move toward it.

TGR: Thank you for your time. 

Spencer Grimes: You're welcome. Thank you.

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