Globe says old RailPower investors chew on tin can

2008-05-28 07:14 ET - In the News

The Globe and Mail reports in its Wednesday edition that RailPower Technologies investors are suffering from another near-life experience. The Globe's Fabrice Taylor, writing in Vox, says late last year, they cheered when the Ontario Teachers' Pension Plan injected $35-million into the struggling company, saving it from insolvency. The stock tripled before plummeting. This week, when Teachers once again saved the company's life, the cheering was just as short-lived, even though the company's future looks a lot brighter than it did. RailPower shares almost doubled on the news, then crashed Tuesday, probably as investors realized what being saved would cost them. RailPower makes eco-friendly locomotives called Green Goats used at ports and train yards. The engines also supposedly save fuel, so with oil at $130 (U.S.) a barrel and environmental calamity in the headlines, it is an alluring business. Assuming the company puts the Teachers cash to constructive use and turns things around, Teachers will convert its loan into shares and own 65 per cent of the company. Teachers struck a good deal by garnering a majority of the upside for $55-million compared with other investors' contributions in excess of $180-million.