The Canadian Investor - 2024 Has a New Meme Stock and Nuvei Goes Private

Episode Date: April 4, 2024

Join us on The Canadian Investor Podcast as we dive into the latest market trends and financial news.  This week, we cover the announcement that Nuvei is going private and the implications for shareholders. We also cover the sentence handed down to Sam Bankman-Fried (SBF) as a result of the fraud he committed while at the head of FTX, the former crypto exchange.  We also explore the recent merger of Trump Media and Technology Group with DWAC and why it could be the latest meme stock. We also cover the recent earnings results from BRP and a look back at Cineplex earnings and why it's still struggling to get back to pre-pandemic levels.   Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

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We should make a friendly bet on when we think we'll both be feeling good for recording, friendly bet on when we think we'll both feel be feeling good for uh recording but it feels like it hasn't has had to be at least a month since we've both like feeling good for recording yeah i've never like i typically never get sick but for some reason i've just been this has been the second or third time since i've been on the podcast here i mean i promised to try and not hurt people's ears this week because it was probably pretty bad last week. Yeah, after we were done recording, I could see Dan searching for a piece of his lung on the floor. For me, it's just, you know, that little my daughter, 18 months, and she's just like catching every single thing from daycare, catching it. So I'm just hoping that after this one one i'll be good for um a good chunk

of this spring that's my hope because i guess we're officially in spring now yep it doesn't feel like it here it is not good well speaking of a spring i don't know if it's a good transition but uh i guess it's springtime or looking positive for Nuve who announced that it was going private. So do you want to tell us a bit more on that deal that was announced yesterday? Yeah, so if you were listening the last few weeks, we talked about the possible chatter of Nuve going private, but it had nothing had actually happened yet. But the stock went up like I think it was 35 or 40 percent based on the news. So just like some insight into Nuve, they're a payment processing company.

They IPO'd, I think it was in 2021. Ryan Reynolds is a major backer and they were halted early Monday morning. And it seemed like at that point it was kind of inevitable that a deal had been made. It just depended on, youended on what the premium was. So the deal is for $34 a share, which is a low single digit premium to what the stock is trading at right now. I'm a bit surprised as to why it's trading below the acquisition price, because I don't really see any way that this deal doesn't go through. An article I read pretty much said that the transaction has the support of

shareholders philip philip fair new vase founder chairman executive nova cap and i'm not exactly sure how do you pronounce that cass okay it's the depot placement to quebec which is the um managing arm of the uh qpp so the que Pension Plan, amongst other things. So they manage that money, but other things as well. But yeah, it's CDPQ, if you want to say the initials. It's probably easier, CDPQ, if you want to say that. I knew I was not getting that one right. But yeah, so they represent roughly 92% of the voting shares. And they've kind of said, you know, they're all right with this deal. So typically you would see a company trade at a bit of a discount to the purchasing price if the market, you know, believes the deal may fall through. I'd say the most notable

situation we saw with this would have been when Activision was being purchased by Microsoft. So there was a lot of chance, well, there was a lot of rumors well there was a lot of rumors you know speculation that the deal might fail because regulators may shut it down so it traded that one was a much larger discount i think it was trading at like a 20 to 25 discount to the acquisition price i ended up buying it actually and it ended up being a pretty good play because it kind of maintained that price level throughout the whole bear market in 2022 and And then the deal eventually closed in 23. So while the S&P was kind of taking a beating, this kind of held steady. But this one kind of seems like a done deal for the most part, unless another company steps in and offers more.

But even then, I don't know. I'm kind of confused as to why it would trade at a premium unless it's leveled out today, but I don't think it has. Fair, who is the founder of Nuve, will remain on. Isn't it trading at a discount at this point? It is. Yeah, okay, okay. It's trading at a discount to the acquisition price by, I think, around $2 a share.

Yeah, so probably like around 5% discount, roughly. Let me see here. No, it's actually leveled out. So it has leveled out this morning it's only trading at about a 20 cent 20 cent discount okay to the price so yeah it was trading at a discount but obviously the market is is pretty confident that this is going to go through now so it's kind of leveled out but i mean the point the discussion on just how these companies do end up trading at a discount to acquisition prices is still rings true. I mean,

it's typically when the market doesn't feel the deal is going to go through or there's a chance that it could fall out. So the entire leadership team is sticking around and the buyer is Advent International. It's a US-based firm. They've been making deals in operation for more than three decades. It's expected to close in the latter half of 2024 or the first quarter of 2025 and for many people who purchase nuve it's probably at higher levels than this so for a lot of people the you know the mid 40 premium likely isn't going to be enough to get them into the green unless they you know average down for quite a bit while it took a bit of a beating over the last few years. By the looks of it, they IPO'd at around $5.8 billion in 2020, and this deal looks to be in the low $6 billion range. So it's not much more

than their IPO price, which is a bit surprising. But I mean, overall, there's been a huge reset in the valuation of payment processors. Because at its peak, this company had a market cap of nearly 25 billion. So you're looking at a 25 billion market cap. And I think that was what, probably October, November 2021, to just for just over $6 billion now. But yeah, it seems low to me. I mean, relative to other payment processing companies, I mean, Nuve was profitable. It was growing earnings. It was cashflow positive. Whereas a lot of the companies like say, like Lightspeed is a bit, they're more cash burn right now. But I mean, this kind of sets a precedent in terms of valuation compared, you know,

relative to others. But it's a pretty interesting deal. It was actually, you know, it's a pretty big payment processor here in Canada. Yeah. And so I have a chart here for a joint TCI listeners. So I have in purple. So you have the returns, total returns of Nuve. And that's the tsx right so it kind of

varies depending if you're looking at us or the canadian listing just because it's dual listed and obviously the exchange rate has an impact on that but purely looking at the tsx listing it's down pretty much or flat like it's down one percent total returns because clearly they've been paying i think a dividend for a couple quarters now which doesn't make all that much sense to me but it is what it is and that's compared to if you just take the xic which i believe is the tsx60 fund which has returned much better i mean it's returned less than the S&P 500, but since the IPO, it's returned close to 51%. So unfortunately, for those who bought it around the IPO, like you said,

they're down on their investment and they're definitely trailing the index, but also the S&P 500 or even the NASDAQ, if you want to compare them to a bit more the same kind of tech companies. I'm assuming it's even more pronounced for the NASDAQ. So it's definitely interesting. I think for me, what it tells me is that there might not be that premium anymore for these type of payment processors that people are willing to pay. And I think we talked about that where I think it just becomes more and more a commodity. You have a couple of big player, I'll say it time and time again like a visa mastercard i guess you can put amex in that category although they're kind of a hybrid between like uh visa amex

and a bank i would say and they're much smaller than the two so you have those that are kind of the staples and then you have all the other payment processors at least that's the way i view it yeah it's just and the competition is just so like there's so much competition in the space that i think you know i'm kind of curious as to why valuations got so high during the pandemic i guess it was just kind of i mean low policy rates fueled by just kind of bit speculative investing i guess because, the company, so Nuve sold, it looks to be trailing 12 month EV EBITDA of 22X. And during the pandemic, it was over 40. So you're looking at like almost half the valuation. And it's just like, a lot of people expected these to kind of return to higher

valuations. But I mean, I think think just overall the competition in the space like you said like visa mastercard that in crazy moats that they have i mean it's just i just don't think investors are willing to pay these higher valuations for these companies and i mean it like if you look at the company it's sold for like i said practically it's ipo price and it traded for it traded on the market for what would that be like almost four, it's IPO price. And it traded on the market for, what would that be, like almost four years. It's crazy. And they accept, like almost unanimously accept a deal for pretty much what it IPO'd at. A good, nice little round trip they did.

Yeah, exactly. Crazy. It'll be interesting to follow, like you mentioned, I think it was last week, Lightspeed, whether that has an impact on them. It was last week, Lightspeed, whether that has an impact on them. I just don't know how much of an appetite there would be to take Lightspeed private just because of what you mentioned. They're not profitable. And typically from the research I've done for private equity, they tend to focus more on profitable companies.

So I think there might be some, I don't know if the demand will be there is what I'm saying. If, you know, Dax is hoping for a similar kind of deal for his business. Yeah, I just don't see it now. And then even then, like, it just seems I figured that if Nuve got a really high premium, that it would impact Lightspeed's share price. But I mean, I think this was probably a bit lower than, you know, a lot of holders would have wanted, especially those who bought it in 2021 and paid like 120, $150 a share.

That kind of hurts to accept 44 now. But yeah, it's an interesting deal. I wonder if this will spur any other deals in that space, but I kind of doubt it. Yeah, yeah, I'm definitely in the same idea. I think we'll have to see uh which i'm missing the name but which company that's private can you you know like um they do the payment processing for shopify you know which one i'm talking about they're a super large company

i know they're planning to go uh public somewhat soon you must i mean i can't uh yeah i think it's the cold i just can't remember the name yeah no i'm not i can't think of it either i'm trying to look it up here okay well maybe when i do your next segment i'll probably uh look that up because i'm about to to start something new that's. I think people will probably be screaming knowing what company I was referring to. But I know all that to say, I know that their valuation going public is definitely less than they were expecting this mysterious company that I can't think about right now, but that's okay. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online

broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more

than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building and people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you, go on there and follow me.

Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the App Store, and I'll see you there. We'll transition to something else, I guess, in the payment space, but a bit different. So SBF, Sam Bankman Freed gets 25 years in prison.

So in case people are not familiar with the story, I'll just do a quick overview. Because if you're in the finance world, I'm sure you're aware of it. But if you're new to the podcast, you may have heard of this guy or an FTX but you might not quite know the whole background so FTX was founded by Sam Bankenfried also known as SBF during the last crypto bull market FTX became one of the largest crypto exchanges in the world Alameda Research was a crypto hedge fund primarily owned by SBF, started using FTX customer funds to cover losses resulting from risky crypto and venture bets. It's really hard to know exactly when the problem started occurring, but it's probably safe to say that they started having issues in late 2021 when crypto and unprofitable tech started going down. when crypto and unprofitable tech started going down.

Obviously, Nuve is an example, although I think they were profitable at the time. But we saw a lot of growth in the stock market, but also crypto started going down from the peaks in late 2021. And then on November 2nd, 2022, Coindesk, which is a publication that focuses on the crypto space, was able to get the balance sheet of Alameda Research, which hedge fund, was filled with this kind of created cryptocurrency that was issued by FTX, and there was a lot of intermingling between the two. And from that point on, it took only nine days for FTX to file for bankruptcy as it was not able to repay all of its customers' deposits.

I mean, if you're interested in the store, I do encourage you. There's tons of documentaries on YouTube that are free. Really interested that kind of details, details in order, the events that happen. And I know I'm struggling with some words today, just kind of hard when you're all stuffed up. And also, you know, with my French accent, i do apologize for that now last week sam bay sbf was convicted of seven counts of fraud and conspiracy by jury last november so in 2023 it was actually almost like almost to the day uh compared to that uh story when it came out about the balance sheet issues a year prior to that. And last week, SBF received his sentence from Judge Kaplan, who was overseeing the case to 25 years in prison. Now, the sentence was

a bit kind of in the middle between what the prosecutors were asking. So they were asking 50 to 60 years while his defense was asking in the middle single digits. I think they were asking about like five, six years. The defense was arguing a softer sentence because they said FTX customers will be paid in full. Now, that's very misleading. And I listened to the All In podcast, which is very popular with, you know, Shamath and David Sachs and the two others there, Friedberg, and I'm missing one. And I think they, you know, I definitely like hearing what they have to say, but I think they were really wrong when they addressed this because customers are, yes, they're being paid in full, but that's in fiat terms. And fiat is just like, you know, money that we use every day but for customers who had bitcoin

and ethereum for example it won't be the case that's because the amount owing is in usd so meaning that the people will receive the equivalent of what they had in crypto in usd value at the time of bankruptcy well the issue is that bitcoin at that time was below $20,000 US. And now it's above $65,000 as we're recording this. So a big chunk of the money they were able to recover. Was simply appreciation in the various cryptocurrencies. That FTX, the estate of FTX following the bankruptcy had access to. Without that price appreciation,

even if it remained like flat from that time to right now, they would not have been repaid in full. Obviously, they made some venture bets, including there was one in an AI firm that did quite well. But again, to me, that would not be a valid reason, even if you're trying to argue that customers will be paid back in full, because you're kind of, you are, but you're not really, right? Just based on what the customers would want back, you're not giving them the choice of having it back in whatever, you know, whether it's in USD or Bitcoin, right? So I think that's a bit misleading. Definitely. When, you know, you start seeing that, I wanted to provide some context on that part specifically. Now, anything you want to add before I continue and just take a breather from my stuffiness?

No, I mean, I actually didn't know that it was only being paid back in USD. I figured it would be in the cryptocurrency, obviously. But yeah, clearly, I mean, Bitcoin has gone through the roof. If it was still in the tank, it's probably a very different situation. Yeah, and just to make it simpler for people who are trying to wrap their head around it, just take it this way. So when they file for bankruptcy last, like about a year or 18 months ago, let's say I had money on FTX.

So I had one Bitcoin on FTX. They filed for bankruptcy. The one Bitcoin was worth $20,000. And now, you know, 18 months later, they're saying, well, we're paying you back $20,000. So we're making you whole, even though that Bitcoin's worth $65,000 now. So I think, you know, whatever you think about Bitcoin and not, I think that's debatable whether people were made a hole or not. So that's why I think you see the headlines and stuff and it doesn't bring a lot of this stuff into context.

There's been other bankruptcies. I think depending on the bankruptcies, they do give people the option or not. I think there was the Genesis bankruptcy that was also blockfied. So it's not the only one not i think there was uh the genesis bankruptcy that was also block five so it's not the only one but i think some of the other ones uh they did it a different way to establish the value and now just to finish on this the judge did recommend that he put sbf in a medium security prison in san francisco instead of the one in new york where he was being held that because of his vast wealth,

his autism and social awkwardness, which would make him especially vulnerable in a high security prison. In a statement, the judge said SBF committed perjury, was evasive and repeatedly dodged question during his trial. SBF apparently spoke for 20 minutes but did not seem to be remorseful of his actions and put some blame on others which is pretty consistent with what we've heard from the trial because it was just accounts from reporters that were attending the trial and the judge definitely did not seem to appreciate the fact that he wasn't willing to take responsibility. His parents said that they will continue to fight for their son. And for those of you who are not aware, his parents are also facing some legal troubles

relating to their involvement with FTX. So that's a whole other story that maybe we can visit at some point. And my thoughts here is that I am happy to see that he got a tough sentence and hopefully it'll, you know, act as a deterrent for people to commit white collar crime. You know, whether people want to, you know, paint this with just being specific to crypto or not. I mean, there's a litany of white collar crimes in the traditional financial markets. I don't think it's anything new. My big thing is that, you know, they need to set an example for any type of white collar crime because it just it's hard to quantify how it affects people.

But I did search and there's definitely at least a handful of people that committed suicide because of this. So I know it's not as straightforward as, you know, someone walks into a convenience store and you know kills someone with a gun but the impact that it has on people's lives it can actually be way broader and more impactful than a like like a better term like kind of traditional crime if you'd like and just the fact that sbf is just not remorseful i think it's just i just don't understand i mean the only thing to say and i don't know what's causing it whether whether it's the way his brain works, I'm not quite sure. But how you cannot be remorseful with the amount of pain that you inflicted on people, I just don't understand. Yeah, and that's kind of why I thought, like, the sentence was, I figured he would get more.

Like, if you probably, if you consider the amount of money that a lot of people lost the amount of lives he's ruined i figured like 25 years was pretty soft i wonder can he get out any earlier probably can i would imagine so i don't know i i yeah i had heard that because it's like a federal sentence you can't but i'm not sure i'm not like uh i really am not sure that's what i heard but i i can't say whether it was like you know i'm certain of that or not to be honest i wonder like just quickly do you know what is his parents are facing legal struggles i actually haven't kept up on this story much at all but i'd be interested to see how his parents are involved yeah so that was there's a lot of stuff that came out.

I think it was last year regarding his parents' involvement and just the parents giving kind of legal advice to him. Oh, yeah, I guess because they're lawyers. And charging like high fees, yeah, getting paid through FTX. I mean, I'm just kind of throwing stuff out there because it's been a while since I looked at that. But yeah, there's definitely, and I think one of the other things was the parents involvement in doing like donations to politicians in the u.s and apparently they were not very um they did not discriminate they were

spreading the money evenly across the aisles so they wanted to make sure that you know it was well received regardless of of the allegiance over there yeah yeah i mean he deserves what he got i guess i would figure he deserved more but because i mean the only really the only way you stop this kind of stuff is to come down really hard on people for doing it and yeah yeah exactly so um yeah we'll see I mean, there's been, it's not the only one that, you know, that has done financials crime. I mean, to me, the fact that, yeah, exactly. And the fact that there was, I don't know if there was any conviction, maybe there was one or two from the great financial crisis, but I know there was no major convictions. Very minimal. There was no major convictions, very minimal.

And I think it's time for, you know, people to be a bit more accountable when there is like egregious cases of fraud like that. Obviously, I know it's not always easy to, you know, to be able to prove that. But I think when you have strong sentences, it hacks as a deterrent for sure. Yeah, for sure. And before you move on to BRP, so the company I was talking about earlier for the payments is Stripe. Oh, well, yeah, I figured. Yeah, for sure. And before you move on to BRP, so the company I was talking about earlier for the payments is Stripe. Oh, well, yeah, I figured. Yeah. Yeah, Stripe payments. But there's Shopify's main payment process. So that makes sense. Yeah, I believe so. They haven't officially announced an IPO date. That's the latest I can tell. But I'm assuming that they're probably

keeping an eye on something like Nuve. I know they're much larger than Nuve, but... Oh, way larger, yeah. From what I've been reading, last year I did some reading on that, and their valuation was significantly down as well. So that's another example. It'll be interesting what the IPO for, whether kind of what we're seeing with Nuve may translate to a larger company like Stripe if they decide to IPO or not.

Yeah, I was just looking up articles now. They figured like a $65 billion valuation. That's just off a quick serve. So you're talking like 10x what Nuve just sold for. I don't know how. But again, they're in the same space. I know they kind of serve different clients, but I'm sure that it will be part of a potential comp if they're trying to base some prices for an IPO in the future.

Yeah, and I mean, they're integrated across so many things. Like you can pretty much put a Stripe payment gateway on anything you can imagine, really. And yeah, I don't know how. Yeah, it's definitely. I don't know how neither of us didn't think of that. No, I don't know. I was just like, you know when you have that, it's at the tip of your tongue, but you just can't think about it. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so

many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details.

That is questrade.com. Calling all DIY, do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like

learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Enough about that. Let's talk about some Ski-Doos and and seadoos. Yeah. So BRP, which is Bombardier Recreational, like no main relation to the Bombardier stock. They're separate. They've been separate for

20 some years, I think. So they reported revenue and earnings that missed expectations on both the top and bottom lines. So this company is pretty well known for topping expectations. So it was a bit of a surprise. And then in addition to this, it downgraded its guidance. I'll get to the guidance in a bit. You would think the stock would have taken a dive post-earnings when in reality it went up by 6%. It was up another 8% on Monday. And then this morning, as of Tuesday morning, it is up another 3% today.

So it's gone up quite a bit. I'm not exactly sure why for the big escalation in price. I mean, that amount in three days, but the company said that the warmer winter is no doubt having an impact. And I'm starting to wonder if maybe investors are treating this as a bit of a one-off and the results actually aren't as bad as they seem because you know that warmer winter might just be offsetting earnings for a single year because that is pretty much the only segment you're seeing struggling right now is things like snowmobiles so much so that when you exclude the snowmobiles snowmobile numbers from the overall company numbers like considering the circumstances, you know, economically that we're in like sky high policy rates, you know, lower spending, like they're still growing earnings

and are sorry, revenue. So earnings are declining and sales aren't growing as fast as they were. But I mean, again, considering, you know, the situation we're in, it's really not that bad. So overall sales in the fourth quarter showed a decline of 10%. But when you strip snowmobiles out, revenue only declined 2%. So on the year, total sales grew by 8%. And if you strip out the decline in snowmobiles, it actually grew at a 12% clip. So this is pretty much a pure recreational vehicle company. So I mean, the fact that they're

still selling right now, as mentioned, is pretty good. And they issued their 2025 fiscal 2025 outlook. So this is one of those companies that is kind of like half a year ahead in terms of fiscal years. So their next quarter, which will be the second, the second quarter of, you know, the calendar year 2024 will be their first quarter fiscal 2025. So it's just a bit of a weird year end. So that's why you're seeing these types of years. But they expect revenue to be in the $9.1 to $9.5 billion range, and earnings will come in around $7.25 to $8.25. So this would be declines of 8.3% on revenue and 25% on earnings. However, it states that the warm winter will be impacting the start of fiscal 2025 as well. And they figure

it'll hurt earnings by about $1.25 per share throughout the whole year. So if we were to kind of look at this as a one-time event, you could possibly see how a return to normal in terms of winter conditions could pretty much result in a pretty big jump in earnings almost right away for the company. So I mean, it seemed like most of the declines in earnings were already priced in. In terms of other notable items on the guidance, so it expects CapEx of around 500 million, in in terms of other notable items on the guidance so it expects capex of around 500 million which would be a 86 million dollar reduction from last year and it expects to close out fiscal 2025 with a share count of 76.2 million so this is about a three percent dip and if you followed brp for any amount of time like it buys back shares like crazy. So over the last 10 years,

it's bought back 37% of its total shares outstanding. 22% of those buybacks have come in the last five years. They've started to return more money to shareholders through dividend growth. They kind of slowed down dividend growth and even, I believe they even halted the dividend or at least reduced it during the pandemic, but they raised it this quarter by 17%. It's getting back on track to becoming a pretty strong dividend growth stock. And just overall, it's like if you were to look at strict declines in numbers, it's really not all that good of a quarter on the surface. But in reality, they're operating pretty well considering how much of a struggle it's been for a lot of consumers. I mean, right now, I don't even know who's thinking of, like, what are you financing a snowmobile or a boat at? Like 10% right now? I just can't imagine. Yeah, I mean, do you know if they're working through a backlog?

Because I know they had a big backlog during the, I mean, 2020, 2021, 2022, 2021 2022 right yeah and then they had like 2022 they had like supply chain issues and all that kind of stuff that was impacting them i mean it's been a crazy few years for the company but they have huge market share i believe i can't remember what their market share is in the snowmobile space it's over 50 i think it's it's pretty crazy and it's continuing to grow so yeah it was pretty good and it's continuing to grow. So yeah, it was a pretty good quarter, all things considered. Yeah. I mean, I don't know exactly what the valuation is on here, but to me, it's something I would approach with caution. I mean, it's not too bad. It's only trading at 10.9X expected earnings. Okay. That's not too bad. Yeah. I mean,

as long as the earnings go yeah go the way as they hope right yeah i mean if you look at this is just 10 year median price to earnings ratio of 20 20x and right now it's trading at 10.6 so i mean it's a lot different of an environment i think like you know it was a pretty good pretty good bull, what would that be, 2014 till 2024. So yeah, I mean, they're only trading at 7.3x. They're trailing free cash flow. So I mean. That's not too bad.

Yeah, I think it just obviously the overhanging thing is if there is macroeconomic headwinds in North America, that could definitely impact the results. And are they, my other question? I don't know the company super well, but you know, how, how much was the backlog masking a potential decline in demand is probably the other question I've had for the business. Yeah. It's, I mean, that's definitely something to consider. They, they do expect a slowdown again this year but then they like just if we look at analyst numbers but it's really really hard to actually project into 2026 2027 it's pretty much a guessing game at that point but they do expect you know 2025 to be relatively

rough and then rebound again in 2026 and 2027 which i mean kind of lines up with how you'd figure you know policy rates and everything go if we expect you know rate drops end of this year early next year i mean that could spurs more spending because again like i would imagine the financing rates on these things are not cheap and the products just aren't cheap either i mean i don't know who could afford one right now but uh i mean it was relatively easy during the pandemic which is why they saw some pretty crazy growth but i mean i the the fed put baby yeah that's what that's why you got a bank on but no that that was interesting i mean i know brayden follows this one it closely. It's one I go on, I guess, too. I own a pretty small position in them.

So, I guess. Yeah. No, no. I think, I mean, Bonbardi was once a darling in Quebec. And they just managed to sell off every good part of the business. Yeah, exactly. They did quite well. Yeah, they did quite well.

But let's move on to something more entertaining. I thought that was a good transition. So, Trump Media IPO. So last week, the merger between DWAC and I guess it's Trump Social Media Group, something like that. Let's just say Trump and Truth Social was approved. DWAC was the SPAC that was announced that it would eventually merge with Truth Social. was the SPAC that was announced that it would eventually merge with Truth Social. The announcement had been made more than two years ago, but was delayed because of an SEC probe that was eventually settled for $18 million last July, and that would need to be paid should the merger happen. Now,

for those who are newer to the podcast or not familiar what a SPAC is. So that's a special purpose acquisition company. We talked in 2021 how there was a lot of euphoria in the markets. A lot of valuations got stretched while SPACs were definitely part of those because they traded pretty pricey, didn't really make much sense and a SPAC is basically a shell company that IPOs with the sole purpose of acquiring or merging with a company and during the pandemic like I said we saw a lot of these SPACs IPO and the hype around them was just crazy they would go up and it was just just on the rumor that they might merge with a specific business without any concrete evidence. That's how crazy it was. And they would typically list for $10.

And then you'd see the SPAC kind of go crazy during the 2021 boom. And if you look at the SPAC and new issue ETF ticker SPCX, it's down close to 30% since its highs of February 2021. I think it started trading around that time, if I remember correctly, that ETF. Now, if we go back to the WAC merger with Trump Media and Technology Group, so that's the official name. But, I mean, it just has one brand underneath it as Truth Social, which is Trump, you know, social media platform. Truth Social, which is Trump, you know, social media platform. And the stock now trades under ticker DJT, which is also the initials of Donald J. Trump and is now known as again, like I said, as Trump Media and Technology Group. The company had a net cash position of $245 million as of December 31st, 2023. They had a bit more than 4 million in revenue last year.

So that's quite the year in revenue. You can probably hear my sarcasm here. They lost 58 million. They had a net loss of 58 million on that 4 million of revenue last year. And although the company hadn't reported user metric, the estimation I've seen was that they have around 5 million users per month globally and 1 million user per month specific to the U.S. And for comparison, Twitter has over 350 million monthly users worldwide and over 50 million the US alone. So it's not even close to what Enix or Facebook or, you know, name your social media platform that's well known. And there is also a key individual risk here to the business. Obviously, if anything happens to Trump, if Trump doesn't use the platform as much, I mean, he's not young either. i think he's in his late 70s at this point like is is he like 78 or something like that yeah i think when he was president he was like 74 75 so

yeah he'd be he'd be up there yeah he's 77 so i was pretty close so he's 77 um obviously i mean i don't know what his health is and whatnot but that's definitely a key risk for this company that's so reliant on this one person. I mean, the brand is literally built around him. And at the same time, it could be a really interesting stock just to look at from a social point of view, I would say, because, you know, whatever you think about Trump, I think it's fair to say that he has a very loyal following who may want to buy this stock simply because they believe in him, regardless of what the business does, just to show his support for him. And, you know, I think it's probably going to be a bit of a meme stock, but with an added element of loyalty to the shareholder base because of that. to the shareholder base because of that. I think it'll be fascinating just to kind of see how it looks like in the coming months, especially when the lockout period comes up, which Trump owns a lot of the stock.

I can't remember exactly what the numbers are, but right now what's happening is there's a very small float. So that just means that there's not that many shares that are available in the public markets. And when the lock-in period ends, there's going to most likely be a flood of new shares coming to the market. And what will that have as an impact on the existing shares? I don't know. But typically, if there's a lot of people selling, obviously, if the demand is not there to buy those shares, then it will pressure the stock price down. So it'll be interesting to see what happens. I mean, obviously, people who invest in this are not really kind of investing in the company.

I think they're more gambling. I think that's fair to say. But again, I think there's just so many dynamics at play. I just don't think the business is that relevant for this stock, to be honest. It's rare that I say that, but I just don't think it is. Yeah. I mean, you're talking about shareholder loyalty and it seems like you would have to be pretty loyal because they have 4 million in revenue and their market cap from what I'm looking at is $6 billion. Yeah, I think you're right. Yeah. I mean, it's probably fluctuated

from a billionaire to in the last couple of days anyways. I mean, these SPACs are just crazy. I do remember it back in 2021. It was absolutely crazy. I remember they even had, oh man, I can't remember the name. They had a guy on YouTube. They actually called him, well, he called himself the SPAC man. And he had like a little logo. I think his logo was like the Pac-Man guy and he was like eating the word SPAC. What was a big one? Oh, it was Tattooed Chef, I think. They were a big SPAC and I think they went bankrupt not too long ago. I'm pretty sure they were SPAC. Yeah, that was just complete euphoria. This seems to be nothing short of the same. I mean, what did Twitter sell for? It was 42 billion or something

yeah something like that yeah and they have 70 times the user base as this yeah and there's and advertisers and you know like uh much more active user base and i think that's the issue right what if trump stops you know true thing whatever that's called, the true thing on the platform, posting on the platform. Obviously, that's a big risk. Advertisers may not want to advertise there. I mean, some may be reluctant because they, you know, they don't want to be seen as partisan or something like that. So there's definitely a lot of things to take into account. account nonetheless i mean they may be able to tap to the public markets pretty easily if again there's this loyal following for trump that's ready to put money in it it's just i just find

it fascinating there's just so much in terms of the social aspect around it oh for sure like he's pretty much the entire thing like if he isn't around i mean who's what's the point of of going on the platform really i mean crazy times g d j t g a r so donald j trump jr that would be oh yeah true yeah yeah yeah oh man oh i think enough about this meme stock i think we've uh we've covered it enough um you want to go over in a valis uh reit earnings and we're definitely talking about some smaller names uh clearly earnings season is winding down yeah so this one i had thought about because last quarter we talked about it and it was just the reit is in in some pretty rough shape so this is they're pretty much a European office REIT.

So I'm pretty sure they have a lot of exposure to France, Spain, Germany, I believe. So where it all started to go downhill for the REIT was, I believe it was in 2020 or 2021. So they bought a sole occupied building in Paris for $51 million. By sole occupied, I mean there's one tenant that occupies the entire building. So it was meant to improve FFO funds from operations per unit in the high single digit range. But in 2022, the company got noticed that the tenant would just not be renewing its lease and it would be leaving the building completely. So they bought a sole occupied tenant building for $51 million, which is quite considerable considering the size of the REIT. And the tenant had a two-year lease left on it. And it's a sole occupied building. So the tenant left, the building is down to 0% occupancy.

So I mean, the company is down 82% over the last three years. It halted the distribution. So I mean, it was trading pre-COVID at around $11.20 a share, and it's now $1.20. And again, as of right now, the occupancy rate is 0%, over 334,000 square feet of space that is just not getting leased. I took a quick look at their occupancy rates in their annual report. They just put their average occupancy rate on France properties is just over 50, with one building being at 32%.

And of course, the acquired building being at 0%. The company has around 37% of its leases maturing in the next few years. I'm pretty curious as to whether or not they'll be able to drive rent increases considering like, I mean, you got to imagine if you're in a building they offer and it's 37% occupied. I mean, you're probably, you have so much leverage in that aspect of things. But but yeah they they reported adjusted funds from operations of just a penny on the quarter so this is down from 11 cents when we look to q4 last year and overall adjusted funds were down 20 the fair value of its investment

properties for the company has declined by 6.5 debt Debt to gross book value is up. Weighted average interest rates on its loans have increased from 1.93% to 2.75%. Considering the company's average loan to maturity is just 2.9 years, it's probably safe to say the company needs rates to come down. Interest coverage ratios dropped from 3.5X to 2.4X. So I find Invalis interesting in a way because it highlights the fact that often where there's smoke, there's fire. This company traded very cheaply for quite some time. But I mean, it was probably just a result of the single client leaving its Paris building. It's been downhill all since. Another thing is this company had a very high yield for a long time. So if you did

a quick screen on REITs, you'd probably find this company at a very low valuation with a very high yield for a long time. So if you did a quick screen on REITs, you'd probably find this company at a very low valuation with a very high dividend yield, but it kind of looks like, like obviously the writing here was kind of on the wall and it still just kind of blows my mind that the company would make it, make an acquisition that large on a single building with a single tenant that has less than a couple of years left on the lease. So, I mean, the pandemic didn't really help all that much. And I would imagine if this was pre-pandemic, they probably filled the building a little bit easier, but I mean, it was a risk nonetheless. It kind of shows you that these management teams on any sort of company,

they're human. uh they make some pretty big mistakes at times yeah yeah i mean it's uh yeah when did they do that purchase for that building it was it was either late 2020 or 2021 let me look it up well they were uh bullish on working from home trend not continuing i I guess. Let me see. Yeah, and sometimes too, you'll find management just feel pressured to do something to make the company grow. But sometimes, I mean, it's better to be patient, especially when you get into leverage

because let's be honest, like REITs are typically pretty highly levered. I think it's around 60, 65%, I think, for most REITs in terms of leverage ratios. So if you take on more leverage, I mean, you better be sure that it's a good move because Dan, Fosh, and I will have an episode coming soon about real estate. And that's one of the things we talked about, right? Leverage can really magnify your gains but it can completely crush you if it goes the wrong way both ways yeah just quick search it looks like i mean it looks like it was the worst timing ever because it was in late 2019 so i mean you're talking like they didn't do it during the

pandemic it was prior to the pandemic but i mean god that's just horrible timing yeah january 23rd 2020 it was announced and two months later global pandemic yeah yeah i mean i guess management can be forgiven a little bit there just because obviously if the pandemic doesn't happen it probably looks way different but again i think it's still something to keep in mind when you have just one tenant or any other kind of business, when you just have one customer or just a handful of major customers. If you end up losing one of those, it can really impact your revenues. And I think that's one of the things that we talked about in NVIDIA is, you know, most of their revenues are coming just from three, four key customers. And at the end of the day, that's a risk.

People may think that it's not a risk or they might dismiss it, but they're wrong. It's still a risk. Will it materialize? Maybe, maybe not. But the concentration of that customer base is definitely a big risk. Yeah, I mean, in this situation, I mean, it seems to me like if you were to go and purchase this building with that short of a lease, you think you would maybe try to negotiate

prior to the purchase. In advance. Yeah. In advance because it just killed them. It was... So yeah, I just thought it was interesting to talk about because um like i said i think it was maybe even two quarters ago we talked about it and uh it hasn't gotten any better it's actually gotten it's gotten worse yeah yeah i guess uh you know buyer beware

well on this note i think we i think i'll have time to do a quick recap so we i had done these earnings a while back and I figured it would be a good idea just to look at it because speaking of pandemic, this was a name that was pretty affected. So Cineplex, they came out with their earnings about a month ago. I'll do it quickly here. So total revenues were up 26% to 1.4 billion for the year. Box office revenues were up 30% to $600 million. Food revenues up 27% to $483 million. Media revenue was up 6% to $119 million. Amusement revenues were up 20% to $97 million, and then other was up 34% to $91 million. Net income was positive, but that was only because of deferred income taxes. They had an operating loss of $9.5 million versus $10.4 last year, so essentially

unchanged from that standpoint. The good news is that they generated $157 million of free cash flow for the year, which is almost three times that of the previous year. Free cash flow per share has been slowly trended up since 2020, but still well below pre-pandemic. And that's kind of the thing. The theme here is a lot of the things are still well below pre-pandemic level. Management said that they were pleased with the result, especially despite having box office supply challenges in 2023. especially despite having box office supply challenges in 2023. If we think back of 2023, there was the, I think, the actor and the writer's strike, which affected the quality of movies, if you'd like, that came to the big screen. And according to them, they outperformed their North American peers by 795 basis points for box office revenue growth.

They have now over 14 million members of their Scene Plus Loyal program, which, you know, I'm one of them and I haven't used it in forever. So we'll take that with a grain of salt. And they expect 2024 to be strong, especially now that, again, the actor and writer strikes are in the rearview mirror. One thing that's not so great for cineplex is their interest expense has grown 27 percent over a year and has increased from 122 million to 155 million they also announced that they had issued 575 million of senior secured notes at a rate of 7.625 percent So, I mean, it is interesting. I know one of the things I had looked and I forgot to add,

I guess I was working off a spreadsheet here, but their revenues and the attendance is still significantly down compared to pre-pandemic level. There's a big gap in the drop in attendance and the revenue compared to pre-pandemic levels. So the revenues are closer because they're clearly charging more, but the foot traffic is just not back just there yet. So I don't know whether that will pick back up, whether people are just deciding that,

you know what, it's not worth it to spend money on that or not. So it'll be interesting how it actually evolves in the next couple of years. Yeah, I think the foot traffic is probably down. I think maybe because of just the lack of good movies that are coming out recently. I mean, maybe because of the, that probably would have been a bit, but because of the strike, I mean, we had Oppenheimer and then, what was that other one that was big? Barbie.

Barbenheimer. Barbenheimer. Barbenheimer, yeah. And then we had, I think, late last year, I don't know if it would still be impacting them this quarter, but they had the Taylor Swift. I think you could go there and see her concerts or whatever. So that drove, like, I remember that was a huge chunk of their foot traffic. But they're just, like, I'm somebody who's, so my wife has a scene card. Okay. And she uses it all the time like i don't think we've paid for a movie in 10 years because we don't go very often and when

we do like it's always on the house but like there's been absolutely nothing say yeah what you're you're richer than yeah exactly scene points yeah it's uh yeah i mean it and i i was able to find the the difference so they had essentially the attendance is down about like 28 over that time frame so 2019 to the most recent year and then the revenues are down 15 so they were able to i guess charge more but again the foot traffic is just not back yeah yet so it'll be interesting i mean we haven't gone but i think for us it's uh it's more a reflection of having an 18 month old yeah you know and finding a babysitter and all that stuff i'm sure we'll try to go when we have a chance yeah the movie gets a lot more expensive when you gotta pay for all that yes

yes interplexes god they've gone they used to be one of the like i'm pretty sure they're one of the faster growing canadian stocks for a while and then i believe they got like a buyout offer from i can't remember what that cinema place was yeah but it fell through or something and then it just ended up bombing yeah i think it was so they had a buyout offer cineworld i want to say right before the pandemic yeah yeah it was right before the pandemic and then they backed out because of the pandemic oh yeah and i think there were it went to court or some yeah i'm just going based on memory that was a while back but uh yeah 2.8 billion dollars billion they got. The offer was for $2.8 billion. Okay.

And right now Cineplex has a market cap of $450 million. So that's, yeah. Yeah, that's a good move. That is a very good move, yeah. By Cineworld or whoever, yeah. Even though they probably had to pay some fees, I'm sure it has been more than worth it for them to dodge that bullet yeah exactly well i think that's it for today i think it was still

a good episode i appreciate people bearing with me despite my stuffiness and difficulty pronouncing certain english words but i think it should be better next week although i suspect i may be coughing a little bit that's usually how it goes for me. I get a cold and then turns into a cough after. But if you haven't done so, you know, make sure you give us a review. We do appreciate it. It helps us, you know, it helps people find us, talk to us about, you know, to a friend, family member. That helps as well.

So give us a review, Spotify, Apple Podcasts, or wherever you listen to us on. You can find me at fiat underscore iceberg on Twitter slash X and Dan at stock trades, stock trades underscore CA, right? Yep. That is it. Thanks for listening, everybody. The Canadian Investor Podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.