I want to use this thread to present the key findings of going through recent Wayland news releases. Everything shown here is public accessible. I have no intention to accuse someone of fraud or something like this, just asking questions .... Feb 20 2019: Wayland Group Provides Corporate Update I do not want to speak about the well below average generated revenues nor the revenue forecasts. Just as a side note: Ben had a forecast of ~ $15,000,000 for Q4 2018 (October – December 2018). The corporate update states $1,305,033 for Q4 2018 (< 10 percentage of the forecast). In addition, you cannot whitewash the 480% increase to the previous quarter.
“Wayland has also entered into an agreement to obtain additional funds to support the expansion of the Company’s global footprint and fund development of its flagship Langton facility. This agreement is with certain investment funds managed by Alpha Blue Ocean Inc. (“Alpha Blue”) a money manager based in London, United Kingdom with a strong track record of partnering with public companies and delivering meaningful value to their shareholders.”
QuickCool AB (Publ) ("QuickCool" or the "Company") has entered into a financing agreement with European High Growth Opportunities Securitization Fund through its financial advisor Alpha Blue Ocean Inc.
MAR 28 2018: CybAero and European High Growth Opportunities Securitization Fund (“EHGO”), advised by Alpha Blue Ocean Advisors Ltd, member of the Alpha Blue Ocean Investment Group (“ABO”), has now signed an agreement regarding a financing solution of up to SEK 52.5 million in the form of thirteen convertible loans, the first loan of SEK 4.5 million and the following twelve loans each of SEK 4 million.
“CybAero had provisionally negotiated a financing solution with the Luxembourg-based European High Growth Opportunities Securitization Fund, or EHGO, to raise $6 million in the form of 13 convertible loans. The EHGO had hired the London-based Alpha Blue Ocean Advisors to mediate a deal. The first tranche in this solution involved a bridge loan amounting to $227,000. Nasdaq First North rejected this first tranche arrangement and insisted that, in order for trading in its share to resume, CybAero needed to place a minimum of $114,000 in escrow on a authorized bank account. Moreover, Nasdaq First North launched an investigation to determine if the negotiated financing solution violated stock exchange rules.”
Liquidity crisis, request for a tranche and changes to financial calendar and date of the Annual General Meeting Despite the financing agreement in force, Alpha Blue Ocean (”ABO”) has not paid tranches envisaged by the agreement since 12 November 2018. This has resulted in a liquidity crisis in FIT Biotech Oy (”Company”). The Company has today filed a latest request for a tranche with ABO. Unless ABO pays this tranche by 22 February 2019, Company will have to file for bankruptcy.
I could go on like this, but I think you got it. So this means “strong track record and delivering meaningful value to their shareholders.” for Ben? Next news release: Feb. 07, 2019: Wayland Group Receives EU-GMP Certification for German Facility
“Wayland Group is pleased to announce that it has received both Good Manufacturing Practices and Good Distribution Practices certifications from the national authority in the State of Saxony for the Company’s Ebersbach facility in Germany.”
“These certifications provide Wayland with the foundation to start selling product into the lucrative German and other developing European markets …”
Oh really? Not in my view … Next news release: Jan. 31, 2019: Wayland Group Comments on Recent Promotional Market Activity
“Since September 1, 2017 the Company has engaged MJM Markets and Consulting (Toronto, Canada; Follow The Money Investor Group, o/a 2632436 Ontario Limited (Toronto, Canada); Harbor Access LLC (NY, USA); Investing News Network; M. Davis & Associates Capital Inc (Vancouver, Canada); ERPR AS (Oslo, Norway); BlackX GmbH (Germany); Tycona Media (Vancouver, Canada); DiePRBerator (Germany); Global Financial Network (Toronto, Canada), and Prosdocimi (London, UK) at various times to provide investor relations services, public relations services, marketing, native advertising or other related services including the promotion of the Company, its business and/or its securities.”
The Falcon Funds bust is a big thing. See also Malta Civil Court https://www.gov.mt/en/Government/DOI/Government%20Gazette/Court%20Notices/Pages/2018/09/CourtNotices2009.aspx. “By the present, the Agency, refers to your involvement inter alia as the final person in control, director and/or shareholder of Oxxy Group Polc, Rock Energy AS, Element ASA (previously known as Intex Resources AS) and White November Fund, in respect of which a number of transactions have been carried out to the detriment of the Sub-Funds and any other direct or indirect involvment in the investments made in the name of the Sub-Funds. It results that these Sub-Funds have suffered a loss, and there could be futher substantial loss, and this loss is, inter alia, the direct or indirect result of your actions and/or omissions, resulting from your negligence, and/or fraud, and/or carelessness, lack of skill and/or for your failure to observe the laws and rules applicable and also because of default in your obligations.”
I know this is much content, but if you want to make your own picture of Beitnes just dig into this whole Element ASA debacle starting last year. Two auditors (EY & PwC) and the CFO left Element … Then Beitnes left as Chairmen but now serving as external consultant for Element receiving 100.000 NOK monthly. https://www.dn.no/bors/element/lars-christian-beitnes/rikard-storvestre/avtroppende-styreleder-far-100000-kroner-i-maneden-for-radgivning/2-1-498862 would be a good start. Or dig deeper into the Swedish Pensions Authority lawsuit against Beitnes. Finally … just ask yourself why does Ben deals with such shady persons? Did Ben no DD on those guys or did he not want to … And that is just the top of the iceberg. TO BE CONTINUED
I'm doing a tribute to the 24 days of Christmas by going over the financial statements of 24 companies that are considered downrange, speculative, and just plain high risk. The legal cannabis industry already has a ton of risk in it - but this stuff - is only for thrill seekers. All opinions are my own, and certainly not a recommendation for or against any of them, or to buy or sell. I've limited myself to 45mins to each, and kept to most recent financial statements and MD&A's. You'll likely know more about the company than me if you're following them. This is only my reactions with a brief commentary about what I see in their latest financial statements. I haven't been consistent in following them all over the past year: some I have, others not. Ah, it's that time of the year again. The smell of chestnuts roasting....the sights of snack tables filled with shortbread & egg nog....of lights and decorations and presents....and that time when the elves revisit the route on their 2017 Dive Bar Pub Crawl. Some of the share prices have been up and down faster than a toddler's mood. Let's take a look, and see who has been 'naughty' or 'nice'. MPX - MPX Bioceutical Price then: $0.40 - Price Now: $0.87 Recently, I toured their Nevada facility, and wrote their financials up here, and you can find the grow op writeup here. Gonna cheat a little this year, and refer to that. KALY - Kalytera Therapeutics, Inc. Price then: $0.29 - Price Now: $0.065
That very expensive Talent Bio pickup wasn't so expensive after all. Bottom fell out of a contingency payment, expected liability turned into income. Presto!
Note 5. Reads like the script from a Mexican soap opera.
If you decide to read Note 5, have a box of tissues, a spreadsheet, a bottle of rum, and a bowl of popcorn handy. You might have need of all four during it. Or maybe just the rum alone.
That $12MM write-down of expected contingent liabilities in Talent landed them $0.01/share in diluted EPS.
Woooo! They're profitable!!!!..???....
First time I've ever seen income derived from G&A.
A true Dive Bar HOF nominee: the 'secured debenture' remains. Note 7.
Best reading yet: Beetlebung Pharma Ltd. (no, I didn't make that up). Find out all about the brand spanking new contingent liabilities in Note 9.
Ugh. Just ugh. As I said last year, pharma is outside of my wheelhouse, as does financials related to them. Anyhow, I still think the financials suck. GLH - Golden Leaf Holdings Price then: $0.28 - Price Now: $0.13
Woot! Announced a merger with Terra Tech! Great fit! Complimentary businesses!
Fast forward 5 weeks, 'merger' off. A one line press release that says nothing else.
My new favorite: 'Unsecured Convertible Subordinated Debenture Units'. They raised $8MM with them.
Which, happened to be closing 2 weeks after the merger announcement.
That retinal burn I got last year was prevented. I invested in a pair of auto-darkening welding glasses. Smart call if you're thinking of reading any of these financials.
Some of these notes shine brighter than a 50 amp arc weld.
Break even business on sales/cogs. Guess that's a positive. They were negative a year ago. At this rate, by 2026, they might have a positive gross margin.
$220k in intangible customer relationships appeared, then disappeared during the period. Yet total customer relationships remain unchanged at $1.512MM. Nyuk-nyuk.
Spoke too soon: the welding glasses reaction time wasn't quick enough to dim the intensity of Note 17. All I can see is spots right now.
Man, life's too short for this shit.
While searching for a reason for the merger cancellation, I came across a Terra Tech comedy sketch. Sadly, there is not even a mention of the merger 'oopsy' on their website. Seriously, if space becomes available in the Crawl, Terra Tech is first in line. As for GLH....well....caveat your fucking emptor. Eye bleach is/was too gentle a term for this outfit's fins. THC Biomed Price then: $0.80 - Price Now: $0.32
G&A and SBC far in the lead of reported operations.
$8MM write-up of warrant liability. Note 10. Yeep.
Of the $1.3MM they paid for the shipper, 1.1MM of it allocated to patents and trademarks.
Lord God above, protect us. Note 10 here could be a contender with some notes in GLH for retinal burn.
Good itemization of G&A. Hey, gotta say something nice. It's xmas after all.
Ok, gonna take that back. Note 15 detail 3 pages (3!) of related party transactions. I've never seen any company in my life require that much.
$5.5MM in loss carry forwards a positive. If they ever make money that is. Which, at a negative margin and a $12MM loss this year.....
Through disclosure, we know that they pay $25 an hour, a $500 xmas bonus, and 250,000 stock options. Which is pretty good. Qualification is that you have to be a close family member of the CEO, and buy $1,400 in product. Well, there's many different fish in the sea. But I do suspect that this isn't a fish, it's just a sea slug. EAT (Nutritional High) Price then: $0.22 - Price Now: $0.18
40% of all assets intangibles/goodwill. Just like an old favorite xmas song we all know the words to.
S/E deficit doubled, now up to $20MM
Gross margin positive. Well then, that is a positive.
Note 23. Holy Hannah. These guys show THC how it's really done in related party transactions. $5MM of the $10MM in total op expenses for the year to related parties. THC? Pffft. Amateurs.
52 pages of statements. Totally fucking merciless. Sociopathic in fact.
I'd need a hyper-cluster of blade servers to calculate the optionality in Note 21 alone. My apologies, I don't have one. Maybe the elves will find one second hand.
Seriously, the complexity of these statements rivals CGC.
Ok. They have stuff littered everywhere, and it doesn't look like any of it is worth anything. Oh, wait, that's what I said last year. Realistically, to get a good handle on this thing, one would need an Act of God. I waited for a little while, but it didn't happen. On to..... RVV - Revive Therapeutics Price then: $0.30 - Price Now: $0.09
Share Capital: deficit of $10MM.
Office expenses: a lean mean $19k. Whoppingly eclipsed by $24k in research costs.
$150k in salaries.
Thankfully, this thing is only 15 pages long. Given it looks like a one person shop operating out of a phone booth, probably also explains it.
Heavy in options, some design around clinical trials. Nothing much else stands out. Again, pharma and value hunting in research ain't something I know much about. The entire assumption in here is that they'll actually put out someday, or get taken out by a larger fish (hopefully for more than the $10MM they've dumped into it). Anyone investing in stuff this downrange, better have your scope sighted in. Or perhaps you know that the FDA's granting of orphan drug status for CBD in the prevention of ischemia and reperfusion injury resulting from solid organ transplantation is just the shot in the arm this company needed. If you do, please keep it to yourself.
I'm doing a tribute to the 24 days of Christmas by going over the financial statements of 24 companies that are considered downrange, speculative, and just plain high risk. The legal cannabis industry already has a ton of risk in it - but this stuff - is only for thrill seekers. All opinions are my own, and certainly not a recommendation for or against any of them, or to buy or sell. I've limited myself to 45mins to each, and kept to most recent financial statements You'll likely know more about the company than me if you're following them. This is only my reactions with a brief commentary about what I see in their financial statements. I haven't been consistent in following them all over the past year: some I have, others not. The first one this year.....is here LDS - Lifestyle Delivery Systems Price Then: $0.34 - Price Now: $0.37
They call themselves a pharmaceutical company. Ok. Yet R&D as a percentage of expenses is less than 5% of total. Guessing they discovered what they were looking for.
SBC $1.8MM last quarter.
Revenues have been languishing until this quarter. $600k reported, double the first 6 months of their year.
Gotta say, related party transactions seem to be an emerging theme of this year’s crawl. Note 7.
At the burn rate they have (consulting fees per note 7), they’re gonna have to go back to the well pretty quick.
PP&E increased by $6MM, to $16MM.
Capital structure is a steaming pile (Note 8). Should have a warning statement in front of it before reading.
Speaking of which, immediate vesting of stock options for management is waaay cute.
And unlike most of the year, share price decay is going to be shutting down any fun that could’ve been had.
Almost all o/s warrants exercised. Only 5MM left now.
Bleh. Still looks like a very expensive front office for a million a year in revenue and 50% margin. Leverage is nose bleed inducing, $26MM in accumulated deficit, and no real end in sight. If I was a shareholder - I’d be all over mgmt. As in: ‘when will a business actually emerge here?’. Still looks like an ATM for mgmt. RTI - Radient Technologies Price Then: $1.54 - Price Now: $0.77
Buckets and buckets of cash. $47MM. 2 large raises, one each previous quarter.
Revenue flat yoy. $3.5MM in operating expenses last quarter. Expenses suggest operational build out occurring.
Given quarterly sales of $100k - that build out will need to do something. Sometime. Soon.
SBC is down from $4.2MM to $800k same period. Hmm.
Margin no hell.
Share printer on overdrive (glowing white hot really. Probably could be deployed as a cogen for heat recapture).
Long term debt is cheap.
Share capital in Note 10: an abominable snowman. Really. And since so many of these seem to land in the #10 slot, I’m going to avoid that number on all lotto tickets I buy from here on out.
Take out the bank balance, the market is valuing the business at about $0.50. For 2 years of stagnant revenue and billowing losses...$7MM last 2 quarters alone...meh. They do look to be operationalizing, perhaps that’s the dev cycle this industry business model is within. If that’s the case, I’m looking to see what happens over the next year - and if the spend justifies the returns. Investors should be hoping their sales pipeline doesn’t turn into a TransMountain. TNY - Tinley Beverage Company Price Then: $0.85 - Price Now: $0.46 Funny enough, Tinley came across the radar a few months ago, and the elves took a stab at it. A couple of fans of this outfit took umbrage with their characterization at the time. They still didn’t put up any math though. Nor referenced the financials. I was talking with u/GoBlueCdn the other day on the phone, and in conversation, he said: ‘fundamentals will always bear out.’ I couldn’t agree more. The noise and heat and smoke and knees and elbows of the intra-houday/week/month price moves….will always get throat-punched by solid ops. Never a question of it. It’s simply a function of time. The question of whether fanboys (and their accusations) will still be there when night turns to day….is an answerable one. They usually melt like toilet paper put into water. I stick to financials. If they're rocking it, I'll say so. If they're not......same deal. I haven’t looked at these guys since then. Let’s do it again…..
Cash issues on back burner, they have some now. Given they need it to operate, that’s a good thing.
Intangibles mercifully low (fresh as a spring rain in this crowd).
$30MM deficit in S/E. A pretty large bump under the corner of the rug.
Lost $1.1MM on $52k of sales. Been a year now. And they’ve had the margaritas out now for a quarter. Maybe haven't shown up yet.
Net $100k loss on forex. Sigh. Just like the good ol’ days of last year's Crawl.
Props to them for a SBC and G&A. If this thing looked like an actual business, I suspect it’d be higher.
Shares o/s metastatic. Shares that are issued are seemingly born pregnant.
Godammit. Another Note ’10’. This one is like staring at the sun. Where’d I put those welding glasses…..
CFO is cheap relative to others in c-suite. Bad negotiator, or, value for money? Your choice.
G&A inelegant. See for yourself….Note 15. Honest.
Ok. I could wax poetic for awhile on this, nothing other than incremental at this point really. I don’t have anything against it. I like the idea of drinkables, but I've never tried one. And….I’m woefully ignorant about emulsions and such. If it’s a good product: I’m there. Probably like most people. The reality is that these guys have tripped and slipped and reset several times…and aren’t delivering. Maybe I have expectations that are unreasonable (like the one’s they’ve established in the investor decks?). One way or the other, limping along with no sales will eventually catch up with you. Despite the pitch. Revenues fix almost everything. Onward: iAn - Ianthus Capital Holdings Scratched! Now post merger with MPX - and that I’ve already done that one - means redundancy at this juncture. We’ll skip this, and add a newcomer to the list at the end. Xmas surprise time! CHV - Canada House Wellness Group Inc Price Then: $0.37 - Price Now: $0.13
Lots of cash atm. That’s definitely gonna be needed as we’ll see. Sales Tax rec’ble says they’ve had sales too. They're gonna need every cent.
Liabilities remain as big of yoke as last time. An ox pulling a dull plough through compacted soil is the mental image I get.
$32MM in accumulated deficit in S/E. Plenty of ‘junk in the trunk’.
$1.2MM in revenue. $1.4MM in salaries.
That $1.4MM in salaries is only 38% of total operating expense.
Love the detail in financials. Remember it from last year. All companies can do this. And it’s appreciated.
Interest expenses are from another planet. A very, very big planet.
These guys need a tourniquet. Hemorrhaging from every limb, orifice, window, door, niche and crevice.
Seeing SBC of $1.4MM - in this operational state - C’mon. Seriously. There’s pushing envelopes, and then there’s that.
Added $1.1MM in ‘intellectual property’ - but it’s not itemized. WTF. Did I miss it? Curious if actually omitted. ?
Another Note 10 setting new benchmarks of vulgarity….I got light headed reading it.
This one could have a sign over it’s Note 10 portcullis: ’Abandon all Hope Ye Who Enter Here.’
Interest free loans to a director (when an outfit is in this shape????)
“You are now entering Liquidation City” Population: CHV Home of the ‘cash only’ auction. All purchases must be removed by 5PM or goods and purchase price will be forfeited From doing these guys last year, I recall vividly how much I appreciate good disclosure. With it, there’s not only many more items to divine the entrails of - it also allows one to get a 3D look at an outfit. Often, business dislikes this for obvious reasons (it signals activities/plans/competitive advantages), but also because many people are uncomfortable taking a shower in public. I took my foot off the throttle though after a certain point with these guys - there’s much more to speak to. All of it negative. I went a little overtime on this one, because I like the idea of a patient-centric Canadian producer. But. If these guys last a year….there’s going to have to be capital infusion, and Note 10 will probably expand to the size of a large city’s phone book. It’s looking as proof that c-suite changes don’t change underlying business realities. And these guys need major changes, in far more than management. LIB - Liberty Leaf Holdings Price Then: $0.48 - Price Now: $0.10
not much cash, all they had seems to have gone into ‘facility equipment’.
Since they don’t seem to have a facility (on their books anyhow) that makes sense.
Appears to have pivoted (the elves always chuckle hearing that word) from aspiring producer, to ‘cannabis business accelerator’.
I read this as that they took a couple of runs at getting a grow op up, but got high centred on the meridian of ACMPR licensing delays (Pivot Time!)
Note 8 & 9 cover their ‘investing activities’. But it’s mainly transactional. If they’re ‘building value’ for shareholders, odd way to do it using paper on non-operating assets, and no apparent uplift able to be predicted.
CEO has gotten some help - he’s gone from ‘Chief Cook & Bottle Washer’ to mainly big chair activities.
SBC of a million dwarfs all other income statement spends
60% of assets is their own paper, issued as ‘investment in associate’
$26MM of S/E? Please meet $26MM deficit in S/E. LIB’s capital is ostensibly only paper, and more paper.
If liquidated on hard assets, company would realize $2MM. I didn't have time to look into unconsolidated subs.
The loading of optionality in 2019? Pretty much all struck. Most of management's fruit has been shaken from the tree.
Whoop. Spoke too soon. Still 5MM of $0.17 options left to go. Looks like there’s still a lot of fruit up top yet
Note 19 is all one needs to read on this thing.
This feels like a squatter-aspiring-to-be-taken-out…..shifted to……business-accelerator-ATM-for-mgmt. The businesses they’ve invested in could use a lot of accelerating btw, they’ve picked ones that are like cars rusting in a field. The blockchain outfit has shed half its value since listing, and the late stage applicant’s business(es) appear to be suspended in amber. They’re also connected to some clinical trials, a retail facing outfit, among several others. All paper, all the time. If there’s a business in here outside of a cashlessly fuelled pitch deck (written on lots of paper), I can’t see it. Perhaps something will happen someday. Nothing has in the last 365 of them. Excepting SBC of course. It's been busy there. QCC - Quadron Cannatech Corp Price Then: $0.38 - Price Now: $0.12
Cash and inventory and liabilities and S/E relatively flat.
A/R shows sales throughput
30% margins. G&A lean. SBC exemplary for industry.
SBC might also be low because share price has tanked.
Sales needed. Slower industry ramp has slowed industry need for equipment. Should be stronger year if the underlying operational capacity begins to expand, and demand for units cranks.
Very clean financials. Not much else to say or see.
This one is dead simple in the financial statements. Love love love. Whether they’ll start extracting revenue, is solely a function of their sales channel. As I’ve learned over the past year - everybody (and I mean everybody) - is in the extraction space. Operating in this industry sub-sector is like being in a sardine can without any oil (pun intended). Crowded space indeed. Cashflow is the core of business, and, if QCC can compete and succeed within what is a very competitive landscape - all power to them (and Canadian manufacturing as well). Calling this a ‘challenging environment’ is an understatement. Sales need to begin growing. Another year in the same general state will test market patience, which, is looking like its' already becoming impatient. Disclaimer - I've met Rosy several times now, and have come to respect her very much. I believe she’s a class act: both professionally, and personally. FWIW, full disclosure. I’m gonna go have some egg nog with the elves and compliment them on their behavior. They don't start drinking until after 1PM most days now. That they get out of bed around noon, it's not really saying much. Still, a big improvement over last year.
Well, their financials are becoming a phone book. And the breadth of their business topology is wide. I haven't been able to do it justice, but, in tandem with the last look - there is a picture emerging. I've been jammed past couple of days.... Straight to it:
Sales ramping, but curious to see A/R expansion. They’ve stopped aging them for some reason - but $3.4MM of it looks to be interco lending.
Inventory detail very good. Benchmark as far as I’ve seen in sector.
Doing a lot of things everywhere. More focused than CGC, but still. Many, many balls in the air. Speaking of air, Battley’s gonna have a million air miles on his loyalty card by third Q.
Notes 11 & 12 - relatively good disclosure. And given the breadth of their interests…..sigh. Poor me. I again asked the elves for an assist, and they just left for the bar.
Good to see their structuring around the CanvasRx deal in Note 12a. Performance tied, and even has floors to prevent Canvas Rx from owning ACB xD
LIQ investment of $100MM contains $66MM of goodwill.
Speaking of goodwill, I’d mentioned CanvasRx’s addition last time. But now there’s almost $900MM of it on the balance sheet. $800MM of that came from the $54MM in CMED assets they bought. Yeesh. I need a cold cloth.
I need an Rx to approach Note 17. Don’t care what the Rx is for either, I’ll take anything.
SBC: 1.5MM of sub $1 options, 25MM of others (15MM sub $2),multi year warrants….etc etc. SBC isn’t going to subside anytime soon. $150MM to come as is. Years of optionality left as well.
$9MM/q G&A, $6MM/q sales and marketing. Heavy load. Look to consumer product segment spends for comparable. This is 3x higher than for co’s with existing sales over $100MM. Ramping might be a rationale, but I’m befuddled by this level tbh given some peers at this stage of the industry. Maybe just aura and brand establishment, but still….
$1.1MM is in sales force wages alone. Per quarter. That's a 40 headcount to me. Wow.
Spend ramping in CanvasRx, it’s going to be their poster boy
Non-material: but seriously - a $400k loss on forex? I just don’t get this. Take the exposure out people….it’s easy. Honest. Call a trusted friend, or just call me.
Note 6(v) - eye bleach. This is the problem when you buy shovels during a gold rush. Companies aren’t exempt from it. Recently, I noted that the best asset Namaste has is it’s alignment with ACB. Shittiest asset ACB has on it’s books is the deal with Namaste. Good thing the option valuation they did came in at $300k, otw they’d take a far bigger bath
Ok. I’m going to wait for a couple of events before commenting further. There’s alot more to say, but, there’s a ton of contingencies in here on sales flow. Even more than other industry participants. In the totality of this, they are lining up to a moment: it being when sales go live. Anything I’d say would be preemptive to some degree. There is a few things I can opine on though. The numbers around this company - from share count to goodwill to subs/JV’s are bracing. I mean, an appropriate adjective for it eludes me at the moment. Only comparable would be CGC in terms of ‘wow’ factor here, but ACB is much simpler in several respects. Their risks centre around sales numbers, which will need to support a high nested cost of capital, and to realize the goodwill they’ve been accumulating faster than actual assets. I’ll say their disclosure is very good, and frankly, a tip o’ the cap to accounting again (hi guys….<3). I don’t know about aggregate quality of the balance sheet though. I’ve heard Cam say it’s strong, but perhaps he’s seeing it with earnings required to support it. I see a lot of earnings required to support this as is. If the balance sheet is strong anywhere, it’s in the legs required to hold it up. Lots of promises of cashflow need to come to support it. Let alone share price.
I'm doing a tribute to the 24 days of Christmas by going over the financial statements of 24 companies that are considered downrange, speculative, and just plain high risk. The legal cannabis industry already has a ton of risk in it - but this stuff - is only for thrill seekers. All opinions are my own, and certainly not a recommendation for or against any of them, or to buy or sell. I've limited myself to 45mins to each, and kept to most recent financial statements You'll likely know more about the company than me if you're following them. This is only my reactions with a brief commentary about what I see in their financial statements. I haven't been consistent in following them all over the past year: some I have, others not. The second one of this year.....is here CMM - Canabo Medical Inc. Scratched! Guess there’s another slot open for a Dive in this year’s Crawl! I did take a run at Aleafia’s financials a few weeks ago though. Their ‘merger’ with Emblem hadn’t yet been announced. Alefia ‘Just Said No’ to cultivation by the looks of it. Best choice for them, at least on the face of it. ISOL - Isodiol International Price Then: $11.50 Price Now: $1.71
Has taken cash and turned it into receivables, inventory, prepaids, and fixed assets. Looking good here.
Except for the $110MM added in goodwill/intangibles. Entrance fee to explore the world of LATAM and vape pens I suppose.
Significant inventory build. 50% margin YTD.
That 50% margin - of $9MM YTD, is supporting $21MM of operating expenses over same period.
Wages and salaries have exploded. As has SBC (which has eclipsed it no less for last period).
As has advertising and promotions. Doesn’t bode well for margin maintenance
Professional fees same. ‘Detonated’ applies as an appropriate adjective as well.
Intangibles/goodwill now 76% of all assets. Up 10%. Less than the rest of G&A is a good thing?
Per Note 19, of the $143MM in these as Canadian assets, they have $0 in revenue attached.
US/UK - far better. Provided that goodwill can be leveraged somewhere…..
Kure Corp eye watering in cost. Hella price to pay for a vape manufacturer. $36MM cash too. Sellers weren’t taking (rolling) paper.
Share price blast radius is notable.
Well then. International operations do attract cost (their G&A is bracing), as does business dev. Especially in Brazil. When a company with a net book value of $2.7MM costs $36MM (takes me back to Canopy buying 2 money losing greenhouses with a net book value of $6MM for $86MM at the time). ISOL’s still shopping too. Round Mountain looks like ISOL tossed them a life preserver. One will have to trust mgmt as to quality/fit of underlying assets. I didn’t detail, it’s only a half million, they bought it for what looks like working capital, I assume it saved them from insolvency. A pretty sweeping and broad horizon is presented by these statements - in a company looking internationally. They’ve got a clean professional presence (I’ve seen them at pretty much every trade show I’ve attended), yet, $12MM in op costs per quarter based on $8MM in sales for same….sheesh. Margin relatively static as well. That needs to improve, and sales need to triple+ to support ops. They lost $6MM per quarter this year, sales modestly up Q over Q. IMH - Invictus MD Price Then: $1.40 Price Now: $0.81
Salaries at $2.5MM, professional fees $1.5MM. To the latter, these have been abating as companies get up and planing. Not here.
Op expenses high, $13MM this quarter. Ouch.
Margin seems erratic. Might be operational stabilization, might be a very dark cloud.
Note 15 explains where their cash came from, along with a 40% increase in shares o/s
Warrant strike prices are all over the map. Relatively modest in options. Despite $2.5MM in SBC this quarter, don’t look like it’s going to be as high for awhile. I’d need more time to confirm that.
Related party transactions…sigh. Compelling business reasons are great. Anything less....more than simply poor optics. Can’t tell either way, in any of these without going deep. Note 16.
Getting a rock star as a front end ain’t cheap. Added $7MM in goodwill, from an $11MM spend. Remainder was expensed in sales and marketing. Well then. Note 10.
Note 11 - ran out of time.
Few things here. While I don’t get the warm and fuzzies from this (what the elves are taking these days apparently does give you that & they swear by it), it looks better than it did last year. I have concerns over sales, margins, and the assets in subs. Wrote one off this year. Only 9 months to find out it’s a mutt? Honestly, this company requires far (far) more time to get a handle on. Will do on website. Needs a full once over to be fair. MDM - Marapharm Ventures (now: LIHT CANNABIS) Price Then: $0.92 Price Now: $0.17
50% of assets goodwill. Full Spectrum indeed. Better be some good gear.
70MM warrants o/s
Shares were issued for 2018 include (clears throat): cash; assets; services; debt; warrant execution; stock options; bond bonus; RSU’s; and even some for the treasury. Whew! Note 14
The 10MM warrants issued at $0.20 look like playing catchup. Share price dump has been….unhelpful in that regard.
Revenues anemic, laying missionary on 30% margins. Blech.
Wrote a gain on a ‘bargain purchase price’ regarding Full Spectrum. Sheesh. After booking the rest as goodwill?
Would show heavy losses if it wasn’t for that $7MM up write.
Good disclosure on commitments (Note 16). And in segmented reporting (Note 17).
Note 21 (subsequent events) is busy. Operationalizing the US.
Sigh. Another that needs more time. Where is Quadron when you need them? Nothing stand out - at least in terms of company differentiation or size. Boring. And leveraged. The Full Spectrum thingy hits their financials like landing an 8 ft fish in a 7 ft boat. I’d need to deconstruct that ‘asset’ to get any strong utility out of this. I’d really want to have a handle on it - and management - if I was to go anywhere near this outfit. Doesn’t look unfairly priced. Unless you ask the people who placed at $0.865, $0.70, and $0.50 during the year. Ugliest thing I see is them issuing shares for $0.38 and $0.04 to retire debts, when the share price was $0.80 and $0.40 respectively. If I was one of those in the private placements, I’d be coming out of my shoes on that (Note 14). Even if it was only $40k. Speaks to quiet desperation at one point. Whether there’s a viable business in here….tune in next time for another episode of ‘Dive Bar Pub Crawl’. As I see it….this would take far too much time for the level of interest I have in it. Unless Full Spectrum is a home run….. ATT - Abattis Biocuetical Corp. Price Then: $0.48 Price Now: $0.08 Man, what a difference a year makes. I’ve largely avoided looking over last years’ Crawl as reference, except to skim for major points. This one remains clear in my memory…it looked like a complete mutt then. Only thing they looked good at was producing press releases. They’re still kicking, as is the rate of news releases/month. They have begun paying a formal IR front end, so maybe this will slow down. Or perhaps speed up. Can’t tell. Ah well, latest fins I can find are somewhat old (Sept release. Amended too :( ). New ones should be due pretty quick.
Sales in first quarter of this year: $237.00. Yep, that’s dollars.
Expenses: $6.9MM same quarter. $3.3MM in consulting fees alone.
Note 13 details the consulting fees. The note is also titled ‘Related Party Transactions’.
Share float increased from 159MM to 406MM YoY. There are no words for this.
Net loss for year end, $24MM on $5,900 in sales. There are fewer than no words for this. Like, an empty set of words.
Well, at least there’s $1.3MM in PP&E. Woot!
And….$51MM in intangibles.
And….$10MM in blockchain, via investment in some sort of clearinghouse to provide liquidity for the crypto-tokens they’ve invented (some sort of Active Health/CanNUMUS spit swap).
* “Token burning will also act as a low‐friction method of returning value to token holders”.* Well, there you go. You can rich, and be frictionless whilst doing so (Note 7).
Gonna stop there. I’ve got a stitch in my side, and a headache. If I ever get my hands on the mug who suggested this one….the elves heads are collectively a ‘bag of cats’, and the little buggers staged a walkout. They’re outside singing Woody Guthrie songs and burning pallets. This totally sucks. As does Abattis’ financials. They offer low friction on tokens perhaps, but any cash put toward this thing will probably have the friction of a canvas bag re-entering the atmosphere. Poof. My personal choice for ‘Dive Bar of the Year’. Curiously, it’s not an easy title to take. IN - Inmed Pharmacuetical Price Then: $1.47 Price Now: $0.37
Plenty of cash. Not much change in assets, or anything else for that matter over the year.
Expenses flat, R&D up, as is SBC. Nothing earth-shaking
Easy to look at from B/S - Income Statement perspective. Loving pharma co’s in this regard.
Active in placements. Steady amount of funds coming in, even if down-raising. Shows interest.
50MM in options and warrants o/s. Share price trajectory has taken a lot of them out of play for the moment.
R&D expenses mainly salaries, nominal amount to patents. In pharma, investors need to have a handle on viability of the research, quality of the management, etc. doing these is kinda fun as the financials are a dream compared to… oh….an ‘Abattis’ let’s say.
TGIF - Friday Night Inc. Price Then: $1.20 Price Now: $0.37 I looked at these guys as recently as July. I also met up with them at MJBizCon in Vegas. I asked for a look at their facility….they never did get back to me. I won a laptop bag and some nice swag at the booth on a business card ‘draw’, it didn’t help getting a tour tho. I really wanted to see it…the financials got me curious in last year’s Crawl, and I strongly get the sense I’m missing something of note in them. Seems an incomplete story tbh. Maybe just some mild indigestion. And….for a region notorious for $70 eights in top shelf, I was also curious why they were recording sub $5 revenue on grams. Got the annuals now….
$6MM in gross margin, $11MM in expenses. Ramping.
Forex and translation (assuming Fx) $1.1MM. A correction, or, an acquisition conversion to native currency.
Modest forecast for sales price per gram ($4.16). I really want to know why their sales price sucks this hard. Outside of scope for the Crawl (time, and, I need an answer from the company. Guys?)
Good disclosure largely, Notes 8, 7, and 11
Writing up forex accretion on goodwill, ptooey.
Still 22MM of in-the-money warrants and options. ~=$4MM live.
Marginal adjustments to cap structure through secured lending. Marginal though.
Related party transactions relatively good compared to peerset.
More good disclosure in segmentation (Note 19).
There’s a reason price softening is lower in this one compared to others - at least they are in production & they have a product suite (at least in their booth at MJBizCon). No retail frontage (?) would explain the shitty sales price. I have somewhat of a soft spot for Canadian business, and I’d hope that relatively early movers would be seeing this start to ramp. As my trip to the US revealed - the US is a hyper-competitive compartmentalized environment. I do believe vertical integration is requisite for a company with this breadth and spend. Gonna sit in on the next call on these guys, and try and get a (the) story. Looks like false starts in build out, and challenges ramping. Sales are growing. They don’t look to be peddling a ’take me out’ story or stance…but….I have blind spots on this one. Because of Abattis, the elves are now wearing balaclavas and carrying home-made gas masks. Told me they are going for a stroll. I gave the RCMP a heads up. Gotta keep up good community relations and all.
I thought it a good time to revisit ACB's prior convertible debt issue, in lieu of their share price advances and further convertible dumps. For background, at the bottom is a post I did in June 2017 that pulled their debt apart, and tried to make some sense of it. This is what ACB has done since. There's millions more outstanding, I'll consolidate and update at some point. They'd triggered an earlier tranche debentures at trigger of some $25MM, squashing that bug earlier this month. They'll be booking a $2MM charge against income in Q2-2018 for this. As well, given share price of today, the accelerated 17MM tranche @ $3 will be executed in December. While it's cash proceeds of some $50MM, they'll be taking a charge against income of $90MM for it in Q2-2018 as well. Yeah, convertibles can become very expensive money. One view would be that ACB is doing it now, because it's just gonna become waaay more expensive later on. And, they can deploy that $50MM to build hard assets. If shares soar, it'll be seen as having been prudent. One way or the other, they've just paid $1.75 for a dollar, 50 million times. There's more issues as well: 1.9MM 5yr @ $2.76, 1MM 5yr @ $2.39, and.........drum roll... 150MM of 3yr options and warrants for $75MM cash, priced at $3 & $4 respectively in Q1 2018. I'm gonna need some time and a quantum computer to hash this out. On the face of it, this all makes the phrase 'holy shit' seem a quiet understatement. Ima gonna do a long haul on this and post it - mainly because the totality of it is so massive relative to the company. Stay tuned... ***Deconstructing Convertible Debentures - or - How to Quietly Shift Massive Costs onto Shareholders**** - June 2017 I've made references to this before, but, I think a 'Dick and Jane' primer on the subject should be done. Despite the big words in the title, this stuff is really straightforward, and the math is grade 9 level. It's all about financing. That is, it's just like you going to the bank for a mortgage or a car loan. You need money you don't have to buy the shit you'd like. So. You're likely not gonna issue debentures for that Maserati (or that creamy lil' Ford Focus you simply have to have), but you will need to pledge some capital or use your credit worthiness to get financing. Businesses do the same thing. There's just more ways for them to do it. I'm not gonna go into them all - innovation in credit and credit-related derivatives is holy-fuck level complex. Fortunately, we don't need to go anywhere near that heady stuff (google 'interest rate call swaption' if you've got a finance fetish. Or maybe you're an applied mathematician/financial engineer temporally hedging your long dated forex book at a macro level). Some complexity does play a role here though, but awareness is all that's needed. First - Definitions:
Letter of Credit - cash deposit placed in trust on behalf of a company. Can be 100% (or less) depending on the industry. Sort of like a deposit.
Commercial Paper (CP) - short term financing, usually <1yr duration. Typically linked to cash, A/R, or some other liquid asset. Usually cheap, because it's tied to an asset.
Bonds - Long term financing, usually tied to specific long term assets. A power company might issue bonds and link a specific generating station to them. Or a manufacturer might pledge property plant and equipment. Think 10 years or more.
Debentures - can be short or long term, but, there is no specific asset pledged in case of default. Being riskier for lenders, it's usually an expensive way for a company to get financing. Businesses in this category may not have much (or any) assets, but they might hold a patent, or the lenders think they have a great idea.
Debt Covenants - obligations within the contract that specify behavior of the signees. An example of this might be that the borrower can't issue more debt to pay interest costs.
Second - Options Options are a derivative that is comprised of two values: intrinsic and extrinsic. Third - What's a convertible debenture? It's debt taken by a company, and given to a lender. It's simply a promise to pay. The lender asks for interest to be paid on the money lent (like CP or bonds), usually at rates higher than a secured loan. Sometimes the companies can't afford the interest rates. So, they get creative to entice lenders. One way is to offer nested options around either the company or perhaps future cash flows. Aurora (ACB) recently issued some convertible debentures to finance the Sky expansion. Cool. CMED issued some a year and a bit ago. Ok. Let's look at ACB's in detail, and find out what it cost them to get financing. I'm only gonna do a napkin calc. I could do the deep one, but, I don't want to spend 2 hours to get called names by the non-contributing lost stockhouse vagrants in here. Honestly, you can do the math too. And I'll point out where the complex is, so you'll know what you don't know. Knowing what you don't know is really useful in life. And business. I've seen a bunch in online boards say how great that 7% interest rate ACB got on the $75 million. Is that the actual cost of the money? No. It's not. They're paying a whole lot more than that. And if you're a shareholder, you should be really fucking pissed. I would be. I've never held them, or if I did, it was some short term swing trading last fall. If I can't remember, it wasn't much to remember. Fourth - ACB's Convertible Debenture Issue The $75 million lent is repayable on May 2, 2019. 7% interest, payable semi annually (June, Dec). I'm gonna ignore compounding, and do a straight calc. Materially, it won't matter. The debentures also have a call option nested in them. They also have a put option in them. Both of those options have value. Both extrinsic and intrinsic. So, the lender is not only getting interest on the cash, they're also getting free options from ACB. This was likely needed to sweeten the deal enough for them to do it. There are models out there that value options. They hold up really well. Mathematical laws and all. Simplicity and elegance. Fifth - Total Financing Cost Annually, ACB is paying $5.25MM to service the debt. Total interest cost before they have to repay the principal is $10.5MM. Right? What about that option value they gave up? ACB could've sold warrants/options, and used the premium received as financing too. Instead, they gave to to the financiers. What did they give? Using a $2.20 market price for ACB (today's, not May second), 2 years duration, 100% vol, the call option is $0.96. The put option is $3.20. So, effectively a call option on ~= 20 million shares, and a put on some ~= 15 million shares - assuming full strike on the $75 million. If ACB had written options themselves and sold them, they could have collected the dough, issued contingent treasury shares as a reserve on the balance sheet, and kept the premiums as recompense. I mentioned that there is some complexity in this. The hair on this is in the continuous conversion of the options (open to exercise at any time subject to 30 days notice - also known a a 'European' option, rather than an 'American' option). It's also got debt covenants within the debentures that prohibit ACB from further dilution (this is a failsafe for the lender, in case ACB decides to crash the stock by issuing another billion shares). And - the lender keeps their downside intact (recall, if ACB goes tits up, they've got no asset to grab), the lender will short an equivalent $75million in stock. They'll take the money, and invest it in short term money markets while waiting, topping up their 7% nominal interest. It's called a credit box. Despite it being a debenture, the lender is effectively fully securitized. So, how much did that $75 million cost them? Well, it's all there. I encourage you to look at this and work through it. I hope you have questions. The CFO at Aurora will have the answers. TLDR: Aurora is paying more than 37% in effective interest rates on their May 2 debenture issue. EDIT - a couple of more links inserted and a clean up of my shitty writing. EDIT 2 - at the bottom of this all is the impact on shareholders. What I assume is the obvious - I never did actually state. If the lender exercises, ACB will have to book a loss on their income statement for the difference between the strike of the call, and market. Potentially, it could be lots. If ACB hit $5 before May 2019, they'll take a $50MM hit to income. Probably wiping out a half year (or more) in sales. That's really the bottom of this all. Just fyi.
Your PM US Stocks and a whole lot more news that you need to read: US stocks close lower, pare earlier losses on Brexit progress
US Markets End of Day Snapshot
US stocks close lower, paring earlier losses as news of progress on Brexit helped markets late day
Oil closed higher for the first time in 13 sessions, WTI broke its longest losing streak ever
Federal Reserve Chairman Jerome Powell will speak tonight at an event being hosted by the Dallas Fed discussing national and global economic issues
The S&P 500 finished down 0.76%, Nasdaq Composite is down 0.9%, and Russell 2000 is down 0.81%
The S&P500 closed lower for the fifth straight day and is at its lowest level in 2 weeks
Telecom (+0.46%), Real Estate (+0.04%), and Energy (-0.11%) stocks were the top performers in the S&P 500 today
Utilities (-1.13%), Tech (-1.29%), and Financials (-1.38%) stocks were the worst performers in the S&P 500 today
Investor sentiment for US stocks finished negative with the advance/decline ratio for the S&P 500 closing at 0.5x
44 stocks in the S&P 500 hit 4-week highs while 28 stocks reached 4-week lows
14 stocks in the S&P 500 closed overbought while 24 stocks closed oversold according to the 16-day RSI Measure
49 stocks in the Nasdaq Composite hit 4-week highs while 202 stocks reached 4-week lows
124 stocks in the Nasdaq Composite closed overbought while 339 stocks closed oversold according to the 16-day RSI Measure
The VIX closed down -20.02 points today to 0 after closing at 20.02 yesterday
Stocks Trending in the News
Click name for Q-Factor rating and financials data.
Adyen (AYDNA DC) shares are falling today after notable index compiler MSCI refrained from adding Adyen to its MSCI Europe Index benchmark. According to an analyst from Bryan Garnier, who maintains a ‘Sell’ recommendation for Adyen with a price target of 490 euros, some investors were surprised by the news. Adyen is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
Amazon (AMZN) will see the first protest in New York City today over its new campus planned for Long Island City in Queens. Some local politicians want guarantees from Amazon that it will do all it can to benefit the citizens of Queens and plan to demand that today. They complain that the area cannot handle 25,000 new people, especially given the state of the subways, saying Amazon is building a helipad while residents are stuck with overcrowded trains. Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
Apple (AAPL) was downgraded at Guggenheim today to neutral from buy. The note cites supply chain cuts and the lower deliveries of phones it implies. Apple was also had its price target lowered at UBS to USD$225, also citing supply chain concerns. Apple is rated “Attractive” in both our US Large-Cap and US Information Technology Global Top Stock Ideas.
AT&T (T) reiterated guidance for 2018 today. AT&T expects full year EPS in the range of USD$3.50. AT&T expects full year revenue of USD$21 billion range. AT&T said the first full quarter with WarnerMedia integrated saw it accretive to earnings by USD$0.05 and AT&T reiterated its expectation of USD$2.5 billion in run-rate synergies by 2021. AT&T is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
Canada Goose (TSX: GOOS) shares are soaring after the winter clothing manufacturer reported earnings that topped analysts’ estimates for the seventh straight quarter. Canada Goose generated FY2Q2018 adjusted EPS of CAD$0.46/share while analysts’ consensus called for CAD$0.26/share. Canada Goose’s profitability also surpassed analyst expectations, reporting FY2Q2018 gross margin of 55.8% while analysts expected 52.8%. Canada Goose is not rated in our Global Top Stock Ideas.
Caterpillar (CAT) was maintained as a buy at Credit Suisse in a note to clients. Caterpillar’s price target was updated to USD$183 as well. Caterpillar saw October machines sales rise 18%, this follows a 21% rise in September. Caterpillar is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.
Facebook’s (FB) turbulent year is bleeding into employee morale with several key measures of internal sentiment taking a turn for the worse this year. Amid a falling stock price, troubled leadership, and harsh media coverage, only about 50% of Facebook’s 23,000 employees said they were optimistic about Facebook’s future, down from 82% the year before. Meanwhile, 53% of employees believe that Facebook is making the world better, down from 72% in 2017. Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
Iliad SA (ENXTPA: ILD) shares are trading higher following FY3Q2018 financials that contained shreds of optimism after the company’s stock has lost half of its value so far in 2018. Specifically, investors were pleased to see strong performance in the company’s Italian unit. Raymond James analyst Stephane Beyazian, who maintains a ‘Strong Buy’ recommendation for Iliad, wrote in a note that FY3Q2018 contained the first signs of recovery for Iliad. Raymond James is rated “Unattractive’ in our European SMID-Cap Global Top Stock Ideas.
Bloomindale's, a unit of Macy's (M), is adding high end appliances to its store in New York City. Bloomingdale's is following other retailers in adding appliances to its offerings. The Macy's unit will offer USD$7,000 refrigerators from LG and washing machines that automatically figure out how much soap is needed. Bloomindale's hopes to spark sales by adding the new products. Macy's is rated "Neutral" in both our US Large-Cap and US Consumer Discretionary Global Top Stock Ideas.
L Brands’ (LB) Victoria’s Secret lost its head of lingerie, according to a report in Bloomberg today. Jan Singer ran the lingerie division at Victoria’s Secret, a unit with USD$4 billion is annual sales. Victoria’s Secret has been criticized for not adapting to shifting tastes in lingerie. L Brands had no comment on the matter, Ms. Singer has been with the company for 2 years. L Brands is rated “Unattractive” in both our US Large-Cap and US Consumer Discretionary Global Top Stock Ideas.
Merck (MRK GR) cut its full year adjusted ebitda forecast while raising its net sales guidance. Merck expects full year adjusted ebitda 3.7-3.9 billion euros, down from 3.75-4 billion euros. Merck now expects organic net sales to grow 4-6%, up from 3-5%. Merck said adverse forex effects will lower adjusted ebitda by 8-10%. Merck is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
Mediaset (BIT: MS) shares are trading higher after reported FY3Q2018 financials the pleased investors. Mediaset reported an EBIT loss of 9.1mm euros in FY3Q2018, an improvement from their 42.2mm euros EBIT loss a year prior. Mediaset’s failure to retain football broadcasting rights, however, caused advertising revenues in October fell 1% y/y. Mediaset is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas.
PG&E Corporation (PGC) shares are spiraling downward, falling over 25%, as investors are fearing the possibility that the company’s equipment started the wildfire(s) raging through California. PG&E also announced that it has exhausted all of its revolving credit lines, speaking further to the company’s financial stress. “The risk of bankruptcy is very real for these guys,” says Bloomberg Intelligence analyst Jaimin Patel. PG&E is rated “Attractive’ in our US Large-Cap Global Top Stock Ideas.
Snap (SNAP) shares fell amid confirmation from the company that the Department of Justice and Securities and Exchange Commission is investigating its IPO. Both are looking into allegation that Snap misled investors leading up to its IPO. Snap said it believes this relates to disclosures it made in relation to competition from Instagram, now part of Facebook (FB). Reports are that Snap was not clear about how much Instagram was hurting its business. Snap is rated “Unattractive” in both our US Large-Cap and US Information Technology Global Top Stock Ideas.
Superior Industries (SUP) was upgraded today to buy from neutral at Buckingham. Superior Industries’ price target was lowered to USD$12 from USD$19, however. Superior Industries’ high leverage ratio was cited as a concern by Buckingham, which also said 3Q results were right in line and that recent weakness in the stock “was overdone”. Superior Industries is rated “Top Buy” in both our US SMID-Cap and US Consumer Discretionary Global Top Stock Ideas.
Tata Motors (TTMT IN) had its outlook cut to negative from stable at Moody’s Investors Service. Tata Motors saw the cut due to weakness expected at its Jaguar Land Rover Automotive Plc over the next 12-18 months. Tata Motors had its rating reaffirmed at Baa2. Tata Motors is not rated in our Global Top Stock Ideas.
Tencent (700 HK, TCEHY) reported 3Q net income that beat the highest estimates. Tencent reported net income of 23.33 billion yuan while 18.39 billion as consensus. Tencent 3Q revenue of 8.6 billion yuan was in line with 80.41 billion yuan expected. Tencent saw 3Q online gaming revenue of 25.8 billion yuan, online advertising revenue of 16.2 billion and smart phone gaming revenue of 19.5 billion yuan. Tencent is rated “Attractive” in our China All-Cap Global Top Picks.
Wirecard (WDI GR) shares are sliding despite raising guidance. Wirecard raised its operating profit forecast and investors have not been impressed. Morgan Stanley noted the increased guidance “a minor positive” given that most estimates were already above that. Wirecard entered the DAX in September. Wirecard is rated “Attractive” in our European Large-Cap Global top Stock Idea.
US 2-Year Treasury Notes are higher with yields down -2.48 basis points to 2.86%
US 5-Year Treasury Bonds are higher with yields down -2.73 basis points to 2.95%
US 10-Year Treasury Bonds are higher with yields down -1.47 basis points to 3.12%
The US Treasury 2s-5s Spread has narrowed 0.25 basis points to 0.09%
The US Treasury 2s-10s Spread has widened 1.01 basis points to 0.26%
US Treasury 5s-10s Spread has widened 1.26 basis points to 0.17%
EUR€ is up 0.213% against the USD$ in after hours to 1.1314
GBP£ is little changed 0.139% against the USD$ in after hours to 1.2995
CHF is little changed 0.131% against the USD$ in after hours to 0.9943
JPY¥ is down 0.193% against the USD$ in after hours to 113.59
WTI Crude is up 1.01% to USD$56.25/bbl with the Brent-WTI spread little changed USD$0.11 to USD$8.65/bbl
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