The Canadian Investor - The Gildan Short Report and Lessons From 7 Other Canadian Short Reports

Episode Date: June 22, 2026

In this episode of The Canadian Investor Podcast, Simon and Dan break down the latest short report targeting Gildan Activewear and the major allegations around channel stuffing, receivables factoring, and whether the company’s recent growth may be less durable than it appears. They also look back at some of the most notable short reports in Canadian market history, including Shopify, Dollarama, Canadian Tire, Home Capital Group, Exchange Income Corp, FaceDrive, goeasy, and others. Some short sellers were completely wrong, some were early, and a few ended up being surprisingly accurate. To wrap things up, Simon shares a stock on his radar: Intuitive Surgical. He explains why the company’s robotic surgery platform, recurring revenue model, large installed base, and potential AI advantage make it an interesting name to watch after a pullback. Tickers discussed: GIL.TO, SHOP.TO, DOL.TO, CTC.A.TO, EIF.TO, GSY.TO, ISRG, FFH.TO, BIP.UN.TO, LSPD.TO Questrade custom indexing contest: This information is for educational purposes only. Not intended to be financial advice. Paid partnership with Questrade. Not financial/investment advice. The creator is not a registered adviser. Views and experience shown are the creator's own; results are not representative. Custom Indexing is a self-directed product; Questrade does not recommend securities or assess suitability. Investing involves risk, including loss of principal. FX and other fees may apply. Past performance is not indicative of future results. No purchase necessary. Open to Canada (age of majority). Skill testing question required. One Prize: 3-night Nimmo Bay (BC) retreat for 2 + 10 annual payouts of $7,000 CAD to winner's non-registered or TFSA account. ARV: $100,000 CAD. Odds depend on entries. Terms apply. See full rules: https://www.questrade.com/disclosure/remix-your-life-contest---terms-and-condition Subscribe to our Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! 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  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai 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.

Smart investing doesn't have to be complicated or time-consuming. With BMO all-in-one ETFs, you get a complete diversified portfolio wrapped up in a single ticker. It's easy. Whether you're conservative investor or more aggressive, BMO has an all-in-one solution for you. And now, it's even more cost-effective. BMO has cut management fees to just 0.15% on select asset allocation ETFs, helping you keep more of what you earn. Simplify your investing today at bemoetifs.com.

Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own cyclicals, don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time.

Welcome to the Canadian Investor Podcast. I'm Simone Belajem back with Dan Kent. We're back for a Monday episode, and this will be a fun one. We'll be going over the most recent short rapport that was published on Guilden Activeware. And of course, I'll be going over that one because Dan has trouble pronouncing Jehoshaphat research, which is the same firm that did that. the short report on Go Easy. So I'll go over that. Then Dan, you'll go over a recent history of short reports in Canada and also finish with a stock on my radar. So company that I looked at in a while

valuation is getting more attractive. So I'll go over why I'm seriously thinking about starting a position here. Yeah. And on the short report front, there is, when I initially made this segment, there was a lot more than I had remembered. This happens quite often in Canada. If we were to go over every one we would be ours. So I picked out the most prominent names and I kind of have an honorable mention. So if you owned one of these and it happened when you owned it, sorry if we didn't get to it, but there's just, there's way too many to go over. And I'll kind of explain why when I start, why this happens so often in Canada. And the fact that you're, you're not imagining things that these always seem to pop up on, you know, midcap Canadian stocks for the most part.

Yeah, exactly. So let's get started. So Joe Shafat research. like I mentioned, the intro released a short report on Gilden Activeware. This is the same research firm released the short report on GoEasy. The core allegation is that Gilden's recent growth may not be as strong as it appears. And the main thesis here is that Gildon is pulling forward cells through various methods and that this year, Jehoshaphat believes that sales could fall massively short of expectation and guidance. And of course, this would in turn likely lead to. a sharp drop in the stock's price.

So the short seller claims Gilden has been using channel stuffing. So what does that mean? It means they're selling too much product into distributors, customers, pulling future demand into the current period, making near-term revenue look better than the underlying demand. So in other words, just trying to prop up the current revenues by potentially impacting future sales. The report focuses heavily on DSOs.

So they sells outstanding. And this measures how long it takes a company to collect cash after booking a sale. So Jehoshaphat argues that Gilden's DSOs look much worse once you add back receivables that were factored off balance sheet. Factoring is something we touched back in the fall. I think it was, can't remember the exact company, but there were some private equity or private credit loans that went bad for those companies, if I remember correctly. Yeah, well, that's why I had reached out to you and I said, what was the company that we were talking about back then? Because it's kind of the exact same situation here where, yeah, go ahead and explain what it is. There you go.

Those were the companies. I looked at our text messages. Yeah. I was like, okay, yeah, that's right. Because I had looked it up when you texted me. And essentially, yeah, factoring is when you sell accounts receivable to another party for cash immediately, typically to a bank. And for example, let's say you have $100 million of accounts receivable due in 90 days. And you sell those accounts receivable to a third party now for $98 million in cash.

So essentially they pocket the difference, but they also take on the risk of collecting that money. In essence, you get the cash faster, but you also collect a bit less. And their view, so Joseph has reached, is that factoring has made the receivable situation look cleaner than it really is, because it goes off the balance sheet. So Gilden reported 78 days on the balance sheet while Jehoshaphat claims that it should be closer to 129 days when adding back in that factoring. The report alleges Gilden has been giving distributors

and customers incentive to take more inventories. So longer-term payments, rebates, quarter-end incentives to make the numbers look better when they report their quarter. In some cases, allegedly, 9, to $1,2202,000. 20-day payment terms. And this isn't unheard of, to be clear, for large customers. But the key question is whether these receivables are simply normal extended terms for large distributors or whether they reflect product being pushed into the channel ahead of real demand.

And Joseph Hatz said that it interviewed former employees, customers, and distributors who described Gilden asking customers to take extra product near quarter and tell Pits sales target. The short seller estimates that there could be roughly 500 million of excess products sitting on the channel, sitting in the channel, and they even said that some distributors were offered to take product and only pay when it was sold. So while Gildian was booking debt at sales. So essentially that would be, I guess, like, that practice, it's not, if it's said, if it's presented cleanly in your report, it's fine because that would be like consignment, right? That's pretty much, yeah.

Okay. But they're not obviously saying that it's consignment. And of course, these are all allegations. And their concern is that if distributors are already full of inventory, future sales could slow sharply as that inventory gets worked down because, you know, why would you increase your orders, buy more from Gilden if you still have a whole lot to sell? and that creates a risk that Gilden could miss revenue expectation, especially in the back half of 2026. The other thing the report is also skeptical about is the Haynes Brand's acquisition.

Can you remember when that was? I can't, I don't remember. No, I didn't get into this part of the short. I mostly focused on the, on the meat of it, which would be the kind of receivables manipulation, or sorry, yeah, accounts receivable manipulation. I didn't even know they bought, like that would be Haynes, yeah? that would be. Yeah, Haynes Brands. Yeah. Yeah. I didn't even know they bought that company.

Yeah. And I'm just looking at it by. So it would have been. Oh, 2025. Yeah. It's pretty recent. It kind of recalled something. I felt like we talked about it on the podcast.

But I digress. I was just kind of curious. And I didn't, I forgot to look it up here when I did my notes. So back to the Haynes Brands acquisition, Joseph had argues that Gilden is combining two challenge apparel businesses. They mentioned that these types of. brands have been declining in sites, Fruit of the Loom, the Berkshire owned the business. They believe that the deal with Haynes Brand increases execution risk for Gilden.

Leverage is also now higher than Gilden has historically carried. Another key part of the thesis is historical. The report argues that past spikes in Gilden's DSOs were followed by painful resets, and they point that the prior issues around distributor, the stocking and guidance cuts, essentially the higher DSO, the more likely that the distributor have maxed out on their inventory and that they will reduce future orders. And I'll just finish with this, and this is just an overview of the report, of course, look it up, it's publicly available if you're interested in reading the whole report.

I think it's about 60 pages. But just as a reminder, it is a short-seller report. They do disclose. I think they have like 4% short interest or something. something like that. They do put it on the report, so I will give them that. Yeah, short interest of 4%. But again, they have vested interest in the stock going down. But nonetheless, I don't think it should be overlooked. And at the end of the day, we'll have to see, time will tell whether the DSO receivable factoring payment terms and distributor and vendory questions are really, you know,

the smoking gun here. Based on this, we'll probably know by the end of this year, if the numbers get truly bad. It'll be interesting to watch next Guildden's upcoming earnings report and just see what management says in response to that. But yeah, I wanted to mention that. Of course, short reports should be taking with a grain of salt. But again, don't dismiss them. I think a lot of go easy investors learn that the hard way after they outright dismissed it.

And we were talking about it on the podcast where there were certain things that they were mentioning that were verifiable in the financial statement. So to be continued. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience too, until we switch to the new EQBank business account.

Now, every dollar earns high interest with no monthly fees and no minimum balance. You also get free everyday transactions like EFTs, payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up, quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at eCubank.ca slash business. There is an old saying in investing.

It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom. They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing. With no commissions on stock and ETF trades, you don't have to wait until you have thousands of dollars saved up to me. make a move. You can contribute small amounts regularly and keep your portfolio growing consistently,

removing the stress of trying to time the market. And they keep making it easier to build a well-rounded portfolio. Soon, you'll be able to trade precious metals through Questrade, giving you even more ways to diversify. Questrade makes the whole process seamless, allow you to focus on what really matters your investment strategy, not trying to avoid fees. Ready to invest, head over to Questray.com, open and fund your account with code TCI and receive $50. Conditions apply. You know that moment when you're on the couch, shopping online, ready to checkout, and then you realize you don't have your credit card nearby, and you have no idea where it is. And then you see that purple button.

That's ShopPay from Shopify. It completely changes the experience. One tap, and you're done. forms no hassle. Honestly, it's happened to me plenty of times where I just abandoned the purchase because of that extra friction. From a business perspective, that really matters. Less friction means fewer abandoned carts and higher conversion. But Shopify isn't just about checkout. You can build your store with customizable templates, manage inventory and payments all in one place, and even use built-in AI tools to speed up product uploads and content creation.

Plus, you can run marketing campaigns directly through the platform to reach customers where they already are. See fewer carts abandon and more sales go, chiching, with Shopify. Sign up for your $1 per month trial today at Shopify.ca. Go to shopify.ca. That's shopify.ca. Cheching. Now, anything you want to add before you go into some recent history of Canadian short reports? Yeah, I guess the one thing for, like, people would probably question why they do this, why they sell those loans to the bank.

It's like with a retailer, one of the biggest warning signs you'd see is if accounts receivable just kept ticking up and up and up and up. And they weren't getting paid. So they do this to get it off the balance sheet and it doesn't look as bad. So, you know, eventually, but eventually you will. will have your distributors who can no longer throw enough inventory in a warehouse. So they won't take any anymore, which is kind of why they mentioned in the short report that there will inevitably be a revenue cliff for this company because it just can't do this anymore. The one interesting thing about this is they were eerily accurate about the numbers that GoEasy was

going to report. Like I think they even said that GoEasy had it was like 300 million or 300, 30 million in delayed charge-offs. And what did Go Easy report? It was like 350 million or something in that charge-off that they reported in a single quarter. So they were very accurate in that regard. And a lot of the stuff they posted in this is, again, like justifiable, as you had

mentioned, with numbers. So it's not just like some sort of former employee saying something is going on. Like they're actually predicting actual numbers. And the other thing is, is you're going to find out very quickly whether this right or wrong because they had mentioned that they expected it this is going to happen in the back half of 2026 so they think it's going to happen like right away so it'll be interesting to see if that happens but again like you said it was kind of similar to the go easy right they yeah they said it was soon the next few quarters would be very tiling and they they were right so you got to give them credit

what credit it is do it was definitely due for a go easy and we'll have to see for this one they could be wrong they could also be wrong on the timing right when you're sure you're sure shorting in stock. It's not just being right or wrong. It's also having the timing right, because if you're right, but two years down the line and the stock does pretty well, their short could become very expensive. Yeah, exactly. You could be, well, we'll go over one of them in this short report history, but where somebody was right, but they were very early. So I thought this would be a good time with Gilden having this to go over a lot of short reports in Canada over the last, I think I did like 10 or 15 year time span. There wasn't a lot of

them. There was maybe one of them that was 15 years ago. But as I had mentioned, I know I won't get to all of them because there was just way too many. And if you're, if you're an investor who is noticing that these all seem to come down on Canadian traded equities, you're definitely not imagining things. Our regulations are much softer. I think they actually have rules in the US that prevents these types of short reports on falling stocks. I couldn't confirm that, but I think there is particular rules. There's a lot more liability in the United States. If you are caught lying in reports like this, like if you're making stuff up, which I'm not saying these guys are, but in some of these short reports, like they've just been blatant lies.

So the regulations are not as good here. So as a result, we get a lot of these companies. and most of them are U.S.-based firms that issue short reports on these mid-cap, low liquidity, like not, you know, low-float companies. So it is more prevalent here in Canada. However, there are a few situations where the short sellers have come after kind of the big boys in Canada, and for the most part, they've been absolutely wrecked on that front. But they have done very well with some smaller companies. So the first one I'll get into, and is probably the most popular one,

would be Shopify, and that was back on October 4th, 2017, and it was by Citron research, which is Andrew Left, who was just found guilty, I believe, of securities fraud. So he was found guilty for a lot of this stuff. What I do remember back in the day, because I owned Shopify is a lot of it was just pure drama. I think a lot of it ended up being fabricated in this report. But the, the meat and bones of the report was that Shopify's merchant base was pretty much imaginary. So they said that upwards of 90% of the merchant base couldn't be accounted for. So I mean, the way I took it back then was they were effectively saying they had fake merchants on the platform and it wouldn't last. And they definitely took it on the chin on this one.

So obviously they wouldn't have held the short position for this long, but Shopify is up over 1,300. percent since the report. If I were to guess, though, what ended up happening is they quickly close the short position because the stock did dip quite a bit post short, but it ended up being absolutely fabricated. Shopify is now contending with Royal as one of the largest companies in the country. So the other one would be dollarama. That would have been in October of 2018.

And that was by Spruce Point, who still does the odd short report now. I think they were the ones behind the one with light speed as well. which ended up being right. I don't have that one on there, but that was one where they definitely did very well. And with this one, I would say it wasn't really... Wasn't the lightspe been more of a like discompetence

way way too richly valued? The light speed one was, no, the light speed one, they went into the fact that they were lying about customer counts and, uh, that they overpaid for a bunch of acquisitions,

which was ended up being 100% accurate. Like light speed was writing down a ton of, like that light speed was writing down a ton of, like that light speed. That was like 20, that was like peak to like. Peak COVID, yeah. Yeah, peak COVID like variations. I ended up buying the dip on that one and I paid the price. But the dollarama one was just kind of a bearish call.

It wasn't anything outlandish. But a lot of the spruce point short reports I found are kind of, you know, they're rooted in fundamental downside, whereas Andrew left was typically just, it was a lot of bogus information to scare people. but they mentioned that Dollarama's margins were fabricated. Traffic would continue to decline and hedging against foreign currency. So they used to hedge against foreign currency. And that was one of the main things that was propping up profits, not actual business operations. And they pretty much said that the company was oversaturated with pretty much no room left to grow. They said the Canadian segment would peak.

And back at this time, Dollarama did not have any exposure outside of Canada. They hadn't bought Dollar City yet. They hadn't done any of the, well, the reject shop. would be recent. So it was a Canadian play. I don't remember the stock ever taking that big of a hit because of the short report. But the one thing about this is the short report came out and I remember this. The next quarter that dollar M reported, they reported a relatively bad quarter. Comparable sales were soft and that caused the stock to bomb quite a bit. And I think it was a combination of the soft quarter and maybe people looking back on this one, the short report and

be like being like oh my god are they right but the dollar am is done very well i think it's up around 500% since again they they might have made some money i imagine they close their position you know when the stock did go down quite a bit the next one would be kind of one of the bigger names canadian tire same company that would have been spruce point that was in december of 2019 and the company accused canadian tire of some pretty skeptical accounting that was boosting profits they noted that leverage was way too high. The company was using buybacks as kind of a headline grabber instead of de-leverging. They pointed to their poor credit card practices, which I mean still exist today.

Like Canadian Tire is often criticized on their credit card side of the business, but they were a bit more, I don't really know the word for it, like kind of panic driven about how bad the credit profile was. And then they had mentioned that e-commerce growth was also very poor. They ended up being wrong on this one again, but they kind of got lucky because just three months later, COVID hit. The market absolutely crashed. Canadian tire went down a bunch. If they closed it there, they probably made quite a bit of money, but that was nothing due to fundamentals. That was just, I would argue, very good timing. You could have probably shorted any stock at that point and made some money.

And it's weird because all of the stuff that they had mentioned as the bear case actually ended up turning into a bold, case moving through COVID. So obviously e-commerce activity launched. Credit card applications went through the roof, all that type of stuff. I don't really think Spruce was wrong here about Canadian tire. Like growth is slow. Again, the credit profile is not good. And the leverage is still quite high.

But these first three Shopify, Dollarama and Canadian tire, if you sold them on these short reports, generally it was a pretty poor idea. But I don't know if you have anything to add before I move on to the one probably the biggest known one yeah yeah you move i move on to the next yeah not not too much i think you're doing good job here so the next one is home capital that would be mark cohotez i don't think he runs does he run a firm i can't remember is he just kind of a he probably has some sort of

colorful on uh his disdain for canada on twitter yes that i know yes he is this was probably i mean there's probably a lot of listeners who might have not been investing back in 2014 probably a mix, but this would have been quite a while ago. And not only did he issue a short report and had a short position in the company, but he ended up suing the directors. And the reasoning is absolutely wild. So I believe he made the report shorted the company and this would have been back in 2014. And then Home Capital issued a pretty upbeat statement in 2015.

And I believe he had to close his short position. so when the truth came out that it wasn't really as good, I believe he sued them for their lies that forced him to close out the position early. So he, I believe he sued them for the difference of whether or not he would have held that position longer if they hadn't have come out with, with the report in 2015. And this one played out a very long time because I think he did eventually, he went short in 2014, but investors kind of dumping the company didn't really happen until about 2017. and what ended up happening, home capital back then, I think, was one of the largest subprime mortgage lenders in Canada.

And I don't know the exact story because even I had only been investing for probably four or five years back then, but I'm pretty certain he was accusing the company of having way too many mortgages that were issued on the back of just simply deposits, savings accounts, GICs, effectively money that could be removed from the institution the next day. And then in addition to this, they had a bunch of liar loans, which ended up being true. So essentially, mortgage brokers were feeding home capital with bogus information so that they'd get a mortgage, bad income statements, whatever it be, like fabricating people's people's income. So fraudulent income verifications. Yeah. And I believe home capital, like home capital wasn't actively engaging in this.

Like they weren't actually like going out and doing this themselves. It was the brokers that were feeding them bad information. but I believe what ended up happening is home capital got caught got wind of this happening. They got rid of the brokers. Growth slowed and they concealed the reasoning as to why. So they didn't mention that there was any sort of fraud going on underneath the surface. And that's why growth was slowing. They kind of made up some other reasons.

So they got charged by the Ontario Securities Commission, I believe, for kind of hiding that. And the thing here is the majority of home capital's loans were just fine. it was kind of just an element of lost confidence. The market got spooked that they covered up something like this, so it kind of sold off. And this is why ultimately the company was saved by Warren Buffett. He came in, I think he gave them access. Well, he bought a chunk of the company, I believe, and I think he also gave them access to funding. So he gave them access to a line of credit.

So obviously, I think when you have somebody like Buffett coming in and buying a chunk of the company, it kind of restored investor confidence, things like that. And this one is very interesting because he was right. Everything. Well, I don't want to say everything because I don't know 100% of the report in detail, but a lot of the core aspects he was saying was happening were happening. The only thing you could say he was wrong about is the stock did not go to zero, but it would have been interesting to see what happened if Buffett did not step in.

It could have very easily gone to zero or at least continued the drawdown because a lot of people were spooked about this one. But yeah, which kind of goes back, right? Like, you can be right about your assessment, about the thesis, but either wrong on the timing or the company will try everything to delay it as long as possible, which can make it a pretty bad bet for you as the short seller, which is why shorting a stock is so tricky. difficult to make money doing that. Yeah.

It's a similar situation to go easy and that report about how they were kicking the can down the road and eventually, you know, go easy probably would have known how bad those automobile loans were, you know, underneath the surface, but nothing was ever surfaced. The charge off rates were maintained and then all of a sudden the whole thing blows up. So we'll see what happens with that because I'm still like, I still have trouble believing that they had no idea, especially when you factor in all the, I think what the CEO left for health reasons, which could very well be true. The CFO left earlier than that. Like all these departures happening when the company is about to blow up, lack of better words, it just seems

a bit weird that they would not have known. And they're saying that it was just for this one part of the company. I can't remember what the name is of that. Lent care. Lendcare, which accounted for like half of their loans altogether. Like, okay, so you don't know half of your business. There's just stuff where it's almost like sheer incompetence and then saying there's a new CEO, so he's good and blah, blah, blah, but he was still president of GoEasy. So I don't know. To me is just something smells off.

I do hope there is an investigation into that, whether there's culpability or not. It just still rubs me the wrong way. Yeah, whatever, even if there was. I mean, it takes Canadian regulators are notoriously slow for looking into this type of stuff, like consistently. I'll get to a company later on that was, it was wild. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest

on the cash you need for day-to-day operations. That was our experience, too, until we switched to the new EQ Bank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance. You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money

work harder while keeping operations simple. Check it out today at EQBank.ca slash business. There is an old saying in investing. It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom. They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing, With no commissions on stock and ETF trades, you don't have to wait until you have thousands of dollars saved up to make a move. You can contribute small amounts regularly and keep your portfolio growing consistently, removing

the stress of trying to time the market. And they keep making it easier to build a well-rounded portfolio. Soon you'll be able to trade precious metals through Questrade, giving you even more ways to diversify. Questrade makes the whole process seamless, allow you to first free. focus on what really matters your investment strategy, not trying to avoid fees. Ready to invest, head over to questray.com, open and fund your account with code TCI and receive $50. Conditions apply. You know that moment when you're on the couch, shopping online,

ready to checkout, and then you realize you don't have your credit card nearby, and you have no idea where it is. And then you see that purple button. That's That's ShopPay from Shopify. It completely changes the experience. One tap and you're done. No forms, no hassle. Honestly, it's happened to me plenty of times where I just abandoned the purchase because of that extra friction. From a business perspective, that really matters. Less friction means fewer abandoned carts and higher conversion. But Shopify isn't just about checkout. You can build your store with customizable templates, manage inventory and payments all in one place, and even use built-in AI tools to speed up product uploads and content creation.

Plus, you can run marketing campaigns directly through the platform to reach customers where they already are. See fewer carts abandon and more sales go chiching with Shopify. Sign up for your $1 per month trial today at Shopify.ca. Go to Shopify.ca. That's Shopify.ca. Chechain. The next one is exchange income corp. So this was by the same guy, Mark Hodes.

And I was kind of pumping him up for being right on home capital. So I do have to bring him down to earth on this one. Smacking them to hurt. Yeah. Yeah. So he went short on exchange income court. Actually, I don't know. I would imagine he went short.

But he released like kind of these reports. I don't know if he actually had a short position. I would imagine he did because he was putting this type of stuff out. But he was typically a bear on both these companies. And this was 2017. So this was pretty much right after the blow up of home capital. And back then, Exchange Income Corp was kind of a high yielding monthly dividend payer. And I say back then, because it's definitely not high yielding now because it's gone up so much in price.

So this one was more so centered around the fact that the dividend was unsustainable. So he mentioned that the company was. kind of an accounting mirage. Like once it spent all its KPEX to keep the planes flying, the factories running, etc. It had no cash left over to cover the dividend. And he mentioned what they would do is kind of split their aircraft maintenance into two segments. So they would have maintenance Kpex and growth KPEX,

even though the growth was still capital expenditures. And then it calculated what exchange income does is it takes the maintenance Kpex and kind of takes it out. And that gives you the dividend coverage ratio. So it would make the dividend coverage ratio look better. And he pretty much said that this was fabricated. He said even went as far to say, I believe that the whole model was kind of a treadmill. They had to keep borrowing and issuing new shares to acquire and grow. And if this ever stopped, the business couldn't really stand on his own.

But the core around it was the dividend was unsustainable. So this company did pretty much the exact opposite of GoEasy. So when Go Easy had that short report going on, they ended up pushing back earnings. You remember how they push back earnings to effectively like the last day that they could possibly file. Exchange income kind of faced it head on. So they called it bogus, but what they ended up doing was pulling their earnings report forward to kind of stifle the rumors, kind of get ahead of it. So they reported earlier than expected so that it wouldn't hit the stock price as much. And they ended up revamping the disclosure on maintenance and growth KPEX.

So they had probably line items in the appendices that you could go into and actually see how the math worked out, how they calculated the dividend payout ratio, all that type of stuff. And it ended up being pretty reasonable. I did not own the company back then, so I don't exactly know how they broke it down, but they gave investors some clarity on that report on that front. And then exchange income is up. Which, by the way, since 2017, it's total returns 434%. So I don't know exactly when in 2017. But just based on the chart, it probably, it probably could have been more than that, depending on when in the year. Yeah.

The short report happened. Yeah. It's done exceptionally well over the last while. That's kind of why, you know, he was definitely right about home capital and he was, he was wrong about exchange income. The next one is probably one of the wildest companies I have ever seen in Canada. We talked about it in the early days of the podcast. Yeah. We talked about that one day.

It was just like, it was this crazy. Yeah, we couldn't believe it. Like, it's, uh, no, like clearly a pump, uh, pump scheme pump it up. It was, yeah, it was, uh, well, I mean, the company is bankrupt right now, or at least they were delisted. I would imagine they went bankrupt. Yeah. Yeah, they changed their name after three times.

Drive. Yeah. Yeah. Yeah. So the company is face drive. And if you were investing, if you had started investing like peak. pandemic. This was the Canadian company. I wouldn't say to own, but definitely to trade. It was absolute madness with this one. So the people who put out the short report were Hindenberg

research. And I will say this is the only short report on this list where I thought they were without question going to be correct. And, you know, everything else I was a bit. Steer, steer technology. Yeah. They changed to after. Yeah, they just flipped around like. And then Argo Corporation. Okay. Yeah. Yeah. Like usually I'm a bit skeptical about these, but when this one came out, I had a

very good feeling. This company was a complete fraud. Did I short it? No, because I don't short anything, no matter how bearish I am. I just don't do it. But if I was going to short one stock in my career, this probably would have been the one that I would have shorted. So it happened in July 2020.

And again, everybody back then was stuck at home. The stock market exploded. People started getting into investing in a wide variety of, themes. So you're talking like back then the big things would have been renewable energy, electric cars, food delivery, like ESG investing in general. And FaceDrive pretty much had its marketing hands in every single basket of these, which is what made it so wild. Like this was a ride sharing company. And then at one point it was it was a COVID contact tracing company. Like it seemed Like, they always tended to go where the hype was and develop some sort of business model that that was, you know, the popular thing at the time.

I think at some point they were like renting EVs. So instead of like renting a Tesla with Tesla, you could go and rent it with them on a month by month basis, which made no sense. I think it was like more expensive than renting it from Tesla. Yeah. It made, yeah, it made no sense at all. Yeah, well, they started out as like a ride sharing company. But they were, they were like a green company. So they were kind of against Uber and the fact that, you know, they were EVs.

They planted trees. They only used, yeah, hybrids EVs, kind of feel good branding. And Hindenberg, like they didn't say this outright, but they pretty much said the whole thing was a sham. So FaceDrive used to say that it had like 13,000 drivers or something absurd like that. I'm kind of estimating those numbers. But I remember it was in the five figures. And Hindenberg came out and said, like these guys have 500, 600 drivers max. and the company, the wildest thing out of all of this is the company actually got up to a $1.4 billion valuation, and they had annual revenues of $38,000. So that kind of shows you how wild this situation was. That's more stretched than SpaceX. Yeah. That was probably one of the most stretched valuations we've ever seen in the country. One of the main reasons I know this so well is we were offered a fat,

check to promote face drive on our YouTube and to our to our audience. So it was not just us. Like face drive was paying literally everybody they could to talk up the stock and promote it. I'm sure if you go and search on YouTube, if people have not deleted these videos, you can probably find some of the paid promotions that FaceDrive used to be, used to be compensating YouTubers to promote the stock. And like even weirder money was being funneled to like shell companies in the in the British Virgin Islands like nobody knew where the money was going or who was getting paid and then in addition to this more than 25% of the company's operating expenses were being sent to companies that the CEO owned himself so yeah it was it was one

of the wildest stocks I think we've seen in Canada and I mean the the funny thing is and this is exactly why I will never ever short a stock myself is it didn't really work right away. Like the stock continued to go up. I don't know if you can still find a chart of FaceDrive, but they issued this in the summer of 2020 and I'm pretty sure it launched after that. Like FaceDrive was, I think it really started to collapse in early 2021 when kind of the meme stock situation kind of fell away. Yeah. No, I'm trying to find it. It might be hard to find a chart. Yeah. Eventually reality caught up to it. Face Drive collapsed 98%. The company was pretty sure it was de-indexed. They were charged. The CEO took a multi-year ban from running a public company,

which I think it got off easy, I would guess. Like, it was, yeah, it was bad. But yeah, I don't know if you have any more comments on this one. Yeah, I mean, it just goes to show, I think that's one of the problem. I don't think all the other companies were TSX venture, but I think that's one of the issues with the TSX's the venture is just, I'm pretty sure there's other frauds there right now. I don't know which one. And obviously there's legitimate companies too, but for whatever reason, a lot of these like frauds end up going on the TSX Ventures. So we got contacted. I don't remember if it was Fage Drive, but definitely other kind of sketchy companies trying to get some stock promotions. And we've always said no. Like that was, uh, yeah, that was just a

big no-no for us. We've always said no. And you're right. Like, they offered like quite a bit of money to do that stock promotion. It's usually a market. It's usually a market. marketing company that has compensated shares from say company like FaceDrive. So they own shares. They want you to promote it. And then I mean, if you look at the disclaimers, they pretty much say they're going to sell their shares after after the stock goes up after the promotion. So, uh, yeah, that one was pretty notable. And then the final one I'll go over because he already talked about Gilden would be the go easy one. And I won't really speak on this much because we've talked about it quite a bit, but 2025 it happened. They claim go easy.

was funding, fudging delinquency numbers, charge off rates by pretty much utilizing every single lever that alternative lenders have to kick the can down the road. So like skip payments, paying interest only, all that type of stuff. But they did mention that eventually, you know, the can would no longer be able to kick down the road. Delinquencies would skyrocket. Company would lose a ton. And they also mentioned that the interest receivable, Go Easy was booking a bunch of that, adding it to earnings, but it was very unlikely to collect the interest. And they did, they estimated, I believe, around 300 million in chargeoffs that were going to hit the company. And I think GoEasy did, I think they reported like 380 million or something.

But the numbers were not, not that bad. And I mean, in my entire investing career, I would say this short report on GoEasy was probably the most accurate one I've seen because they hit the mark so early. Like they released that short report and within two quarters it happened. I don't even think the short report, it happened. Report expected it to happen that quickly, but GoEZ was what high 200s a few summers ago and now we're probably sitting at at sub 40. And then the final one, well, actually, I just have some honorable mentions that I don't have time to talk about. So we had CanTrust and HXO, which were the weed companies. And I think they ended up. Oh, yeah, XO. What happened to XO again?

Hexo, I think was the story behind it. Unlicensed growth facilities, I think. I think CanTrust was the same thing. Like they were growing in facilities they shouldn't. But during the weed boom, these things were for short sellers, probably pretty easy short just based on valuations. Yeah, you could have shorted every single one of them and made money. Yeah. We have Badger Daylighting. I didn't really dig into why that one was shorted.

Manu life, same thing. I didn't get time to dig into it. We had Fairfax. That one was recent. I think that was like last year and I can't remember why they ended up shorting them. But Nuvei, which is no longer even traded. think that was taken private, private equity. Yeah.

But they ended up falling 80, 90%, light speed. We talked about a bit. Cargo jet. And then probably the most notable one on the honorable mention would be Brookfield infrastructure. That one was probably a few years ago. Yeah, I remember talking about it. And they pretty much, yeah, there was some, again, a lot of these are like deep rooted in

in accounting situations. I think Brookfield was just because I think in essence there was a lot of private assets that they said it was difficult to while they were saying the company was lying about the profits the cash flowed they were generating and then distributing more to shareholders which kind of flowed a lot of it to the parent company then you know they were actually generating but again this was more on employee second account like it was very hard to verify because a lot of these companies are just private entities so they're either fully owned by Brookfield or they're not publicly traded.

So there was a lot of that stuff happening. I think it was, yeah, that was, I think, the main thesis, if I remember correctly. Yeah, the value of the assets and the actual cash flow generation of the assets. That's right. Yeah. So if you look to all of these, like historically, probably the 15 or so that I have on here, five of them were pretty much flat out right. Seven of the short sellers, if they did not close the position, got pretty much run over.

And then three of them are either kind of in between. between or, we're probably too hard to be determined, like the Gilden situation right now. And, uh, yeah, I mean, for the most part, you have been better off holding, especially when you get into the larger names, like the, the Dolaramas, the Shopify's, the Canadian tires, things like that. But the one thing I do like, and I'm not necessarily saying they're right, is the ones on Gilden and the ones on GoEasy do have a bit more quantifiable numbers. Like, say, the one with Shopify about, you know, 90% of their merchant base not being

accounted for. Like, that one kind of seemed outrageous to me. Like 90%. It was, but this one, I mean, you, like the Gilden one, you could see it. And they kind of set a timeline as to when it would, when it will happen. So they do expect it in the back half of 2026. So there's a bit more clarity on those. But we have no idea whether.

or not it's true. No, exactly. I think, I think to me, like over time, that's a big takeaways with short report is just a lot of stuff you won't be able to verify, but at least look for like one or two, it's hopefully kind of a smoking gun, a bit like the interest receivable for Go Easy, where you can actually verify that yourself in the financial statement. So when you can verify the smoking gun, then I think there's a lot more weight that's put on the thesis, not that I would go ahead and short something because it is very dangerous like we talked about. You have to be right on the timing even though even if you're right on the thesis. But when you're considering as maybe a potential opportunity because the stock got hit

or it's a company that you own, I think that's the one thing I would look at is just, okay, is the smoking gun actually verifiable because employee accounts and all that stuff? I mean, you can have disgruntled employees that just want to get back at their former employers. So it's hard to put too much stock into that. But that's usually what I'll try to look to get a sense where this could have more mirrored than not. Yeah. I found so a prime case of what you had mentioned by you could be right, but your timing is off. So when they shorted Face Drive, it was around $9 a share and it went all the way up to 35.

Didn't it go to like 60 at some point? This is kind of just a chart I grab from Globe and Mail. It says around 9 to 35, but either way, like, they were 100% right and they were deep, deep in the red if they had held this short to, yeah. So, yeah, you can be the smartest person to be absolutely bang on right about a lot of this stuff and you can still lose a ton of money. No, exactly. Well, I think this was a fun segment slash two segments to do. Okay, so now the stock on my radar. Intuitive Surgical, so this company has been on my radar for quite a while.

It's taken to care, ISRG. It's one of Braden as home for quite some time as well, so I'm not sure exactly when he bought it, but I know that he's handed for a while. So Intuitive Surgical is a medical tech company, best known for robotic assisted surgery. Its core product is the Da Vinci system, which helps surgeons perform minimally invasive procedures with more precision. It's a razor and blade type of model, so think of it. You're buying the razor, and then you constantly need.

need to purchase the blade as it needs to be changed. Once the hospital buys the system, once the hospital buys the system, they need to buy instrument and accessories to do proper maintenance on it, which brings recurring revenue like for ASRG. And the DaVinci installed base has almost double since 2020. So I'm going to share this for our joint TCI subscribers here. So you can really see the install base. Yeah, it's been constant on the way up. And what's been nice, too, is the revenues have been increasing at quite a pace. So revenues have been increasing at 18% annually since 2020. And the number of procedures perform as grown at a rate of 20% per year since 2020. Very impressive for this company.

Just for context here, these machines cost between $1.5 and $2.5 million US dollars each. So these are not cheap machines. And it's a company that is not trading cheaply. It's training about a Ford P of 3637, Ford Price of Free Cash for 33. It's down more than 25% year to date, but probably as a result of all the AI hype and healthcare not being the most favorite sector right now and a lot of money just being funneled to AI, people selling some of their other stock to buy. SpaceX, for example, or some of the big AI plays or some of the sales. my conductors here, but it's definitely essentially the cheapest it's been in about 10 years. And there is some competition in this space, but it is a sticky business because when you think

about it, the training required for physicians and surgeons to be trained on these machines, it does, it's not cheap. It takes some times. The cost of the machines are pretty substantive as well, like I mentioned. And it has a market cap of around $144 billion, 145 as were recorded. this. It's down a little bit today, so it may have changed, and has $4.5 billion in cash on the balance sheet and absolutely no debt. And the kicker here is that I think it's being overlooked as a potential benefactor from AI. So the amount of data that ASRG or Intuitive Surgical has

acquired over the years could really give them a massive edge over competing products, because there are some competing products from other medical device companies. Think about it. So better surgeon training with all that data, procedure optimization, real-time surgical assistant, better product development, and create a longer-term mode for them over some of the competitors. Dan, anything you wanted to add as you were getting some issues with your audio there? Yeah, sorry, we've taken a while to record today.

So my AirPods died and it's all messing everything up. But no, this, I've looked at them like briefly over the last while, but they always just kind of seemed kind of expensive to me. Like, this is a company that usually, like, it's trading at 30x, 36x forward earnings now, but this is a company that usually traded like in the 45 to 50 range. I'm definitely going to be digging into it after this because I didn't realize it was down. I think it's down like 30, 35 percent from highs. And it's, yeah, it's a very sticky business. it's probably on on the maintenance side probably similar to a company like asml like you're probably your maintenance is kind of strict because of the machines are so specialized i guess you could say

i would imagine that's and the training and all that type of stuff so it's an interesting business one i'm definitely going to do a bit more digging into yeah yeah exactly so i think this is a really compelling name right now i think again it's just i don't think there's anything wrong with the business, sure, there's some risk. There's a bear and a bullcase, but for me, it seems really attractive right now, especially if you're concerning how expensive the market is and really a company that could benefit from AI because if you're thinking about AI, I mean, having the data that other competitors don't have, it's a huge hedge because you can train it, you can help it get better. And like I mentioned, all the different uses. And it's, in hindsight, I kind of

wish I had put in the hidden AI winners custom index that we built for QuestRate, but not because it's obviously an obvious AI company, but again, because it's, it would be a hidden winner. But I guess that's the beauty about custom indexing. And obviously, the partnership that we have with Chris Rate is that you could definitely add it to the index if you want it, if you want to remove some names that we put on there. We do have some names that are not the most sexy businesses either that people may wish to swap out. Maybe you want to swap it out with some more obvious winners from AI and kind of balance it out.

But I just wanted to mention that because I think it would have made sense. And the hindsight is 20-20. And a quick reminder is that the Quest Trade Contest, it's still open until July 15th, 2026. And there's the prize of three-night, nine-o Bay Retreat in BC. And of course, the 10 annual payouts of $7,000 Canadians into the winners TFSA or non-registered account. So kind of a little bit of an update on the custom index, TSI custom index that we did at the same time. But definitely a company that I'm really considering seriously at starting a position here, mostly because the difficult thing will be to decide what I would need to sell.

Because I have a bit of cash on the sidelines, but given how expensive markets are, at least pockets of the markets are right now, I do want to keep some of that cash allocation and treasury bills. but I'll have to dig in see if maybe I can trim some of their positions and start something into intuitive, surgical, maybe make it a percent or two of my portfolio. Yeah, that's kind of the same situation as I'm in right now. I don't hold any cash, but I kind of refuse to own any more equities than I do right now. So if I see an opportunity, I've got to move on from something else. But yeah, I'm definitely going to dig into it. It has, it seems like a business with, well, as you had mentioned, a pretty large,

mode, especially when you can use AI to better your process. And if you have access to all that data, you're ultimately going to be doing it much faster than any sort of competitor. But yeah, that's all I got. Okay. Well, I think this is a good, at a good point of the podcast to end it. Thank you so much for listening. We appreciate all the support. We will be back with the news and earnings. We always record these on Wednesday. So I always messed up a little bit on when is when. So news and earnings, earning seasons a bit down. But again, we keep getting news every single week. So I'm not too concerned that we'll have some material there.

And for those who like the Canadian macro investor YouTube live format that I do with Dan Foch, we will be back on Saturday with our regular YouTube live. We had some conflicting in our schedule. So we just weren't able to do it last week. But we'll be back this weekend. Of course, we'll be talking about Kevin Warsh, the new Fed governor. Not governor, I think, is it the Fed governor? I can't remember the exact title.

But the guy who is replacing the chair, there you go, the chair of the new chair of the Federal Reserve, replacing Jerome Powell as the chair. See what he has to say. We'll be talking about that. We'll obviously talk a little bit about the SpaceX IPO and how it's affecting on the impacts of the market. A couple other topics as well.

So make sure you tune in, there'll be plenty to talk about on the macro fund. Thanks for listening. This episode was produced in paid partnership with QuestRate and is for educational purposes only. It is not financial or investment advice. Simone, Braden, and Dan are not registered advisors and any views or experiences shared are their own and may not be representative of others. Custom indexing is a self-directed investing product. QuestRate does not recommend securities or assess suitability.

All investing involves risk, including loss. of principle. Foreign exchange and other fees may apply. No purchase necessary. Contests open to Canadian residents who have reached the age of majority. Skill testing questions required. There is one prize available, a three-night Nimo Bay BC retreat for two plus 10 annual payouts of $7,000 Canadian to the winner's non-registered or TFSA account. Approximate retail value, $90,000 Canadian. Odds of winning depend on the number of eligible entries receive. Terms and conditions apply.

A link to the contest's full rules can be found in the show notes.