Yet Another Value Podcast - Chris Colvin from Breach Inlet Capital on Apollo's attempt to steal Great Canadian Gaming

Episode Date: November 16, 2020

On November 10th, Great Canadian Gaming (GC) announced a deal to sell themselves to Apollo (APO) for $39/share. On the subsequent earnings call, shareholders immediately revolted, with several of GC's largest shareholders telling the company they would not vote for the deal because they thought the deal substantially undervalued the company.One of those shareholders was Chris Colvin from Breach Inlet Capital. In this episode, Chris comes on to discuss why he sees so much value in GC, why he thinks shareholders should vote this deal down, and what comes next for GC if the Apollo deal is voted down.Chapters0:00 Intro1:15 Chris and Breach Inlet's background3:55 How Chris approaches shorting7:40 Why Chris sees value in timeshares and Canadian companies12:00 Great Canadian overview and background20:10 Why Chris thinks GC can earn $6/share in the near future28:30 How the company signaled they were undervalued pre-COVID30:30 Why Apollo's "big premium" bid isn't that big43:15 Why the Apollo deal seems designed to low ball shareholders52:30 GC's economic sensitivity (or lack thereof)55:00 Timeline for Apollo deal and expectations for how it plays out1:00:45 How GC could structure a deal that Chris would vote forBreach Inlet website: http://www.breachinletcap.com/

Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have Chris Colvin, the portfolio manager and founder of Breach Inlet Capital. Chris, how's it going? Good, good. I really appreciate you having me on. Hey, no, I'm excited to have you on. I'm excited to have a really interesting special situation to talk about today. But before we get there, let me start the way I do every podcast. And that's by pitching you, my guest. And, you know, I spend most of my time. looking at, I'd say, smaller, quirkier event ideas. And honestly, when I think over the past three years, I can't think of another investor who I've overlapped with just completely, you know, we'll email each other and be like, hey, are you looking at this? It's kind of interesting.

And the other one will be like, oh, yeah, I've been looking at that for the past week. I can't believe someone else is. There's no one else who's done that more than you, I'd say. You know, off the top my head when I was putting the list together, I think Liberty Braves, Diamond Resorts, Spartan, Amia, Hilton Grand Vacations, and now the company we're talking about today, Great Canadian. So we both run reasonably concentrated books to have that much overlap. It's no mean feat.

So, yeah, I've really enjoyed talking to you over the years and I'm really excited to have you on today. So that out the way, I'll turn it over to you. Why don't you give us some background on yourself and on a breach inlet? Yeah, sure. And I appreciate it. We've certainly had a lot of overlap over the years. And you're a smart guy. So I'll view that as a positive for me if I'm looking at some of the same thing.

So my background is I grew up in Charleston, South Carolina. The firm name Breach Island is actually the waterway between the two islands I grew up on. Started my career in Little Rock working for the Stevens family. I was an investment banking analyst. I also got to evaluate some private equity investments with the family, which was great coming right out of college. I then left there and was an institutional manager and a startup family office and was investing really across the capital structure and the public and private markets. And so I left the family office, the last family office in 16, you know, coming from a family

of entrepreneurs, I've always wanted to start my own business. I was ready to do that. And I also was ready to focus on small caps. And so Breach inland, we invest exclusively in small caps. We are what I call, I've started to say maybe a dying breed, small cap value investors. But my view is small cap is an inefficient market. and you can really capitalize on that by performing value out of research because you have great access to management and the businesses usually aren't extremely complicated once you do a litter

diligence. So focus on small cats, we tend to prefer transitioning companies. So companies undergoing some type of, it can be a small transition or a real transformation. I've found that those are often mispriced the most or can have the greatest mispricings and there's self-fulfilling catalysts because of the transition unfolds as expected. There's your catalyst. And you'll see when we talk about Great Canadian, it's an example that in our portfolio is concentrated. We generally have 10 longs, 10 shorts. And once we've invested, we try to be engaged shareholders. So, you know, we build deep relationships with the management team, sometimes the board, and where possible, we try to add value.

And lastly, I'd say is we spend most of our time investing in companies with multi-year horizons, but we also have a short portfolio. And I think the key is we're very disciplined shorter. We only short for profits, an absolute return. And we've been fortunate to do that over our first, almost five years since launch. So that's kind of a brief background on me and what Breach Island is looking for. No, that's perfect. That's perfect. And I'm just going to ask a couple questions on your background, and then we can hop into Great Canadian.

So let's just start. You ended up by talking about your 10 shorts and you short for profit, it, not for hedging purpose or anything, but are your shorts generally kind of related to your longs? You know, like, we're going to talk about great Canadian. It's a, it's a casino company, right? Do you generally try to go find a overvalued casino company to short against it, or is it completely isolated between the two? Yeah, Esoterra, completely isolated. If there is, we've had instances where they are related, that's just kind of upside. So an example is, if you think about where we get our ideas. One is from guys, sharp guys like yourself, guys and gals to our network. We've got

a watch list of over 500 companies and that comes from our network and then mining investments. So we were invested in a hospital services provider a few years ago. And from that research, we decided or determined that hospitals are not a great business, especially for profit. And so we ended up shorting a over levered hospital based in rural. So that was one where the thesis, there was a thesis specific to that hospital that was attractive, but the other upside is it was somewhat of a hedge to the long, but we won't ever short anything just for a hedge. We short, if you look at our portfolio very oversimplistically, it's let's buy companies that are growing profits and let's short companies that are shrinking profits. We don't want to bet on multiple

expansion for longs or multiple compression with shorts because I think that's where you get in trouble. So we want a short kind of melting ice cubes are businesses that historically had been good, but now face some major shift in the competitive landscape. No, that's perfect. And I was more just wondering because I do some shorting, not as much as they used to, but I've generally found the most profitable shorts for me have been, hey, I've done a lot of work into the cable sector. And here's a cable company that I think is overvalued or facing headwinds based on all my work on the long side, right? So I do this tiny short on the side in the same sector. But it sounds like you're more, that can happen, but you're more, hey, I found this

isotoric short invests, short thesis, let's do this. Are you short any of the, have you shorted any of the popular shorts? You know, if Tesla comes to mind, beyond meat, have any of those been shorts in the past? No, like I said, I think where you really get in trouble shorting is when you start talking about valuation. And it's hard to argue those companies won't be growing. So, and that in, I don't know beyond me when I initially came public. but certainly now, I mean, we're just small caps.

So we stay in the $200 million to roughly $3 billion range. So anything that we look at where top lines growing pretty aggressively and really growing at all, if we're going to short something growing, it needs to be a thesis of, okay, they're growing the top line, however, they're giving a margin to do so. And that top line growth can't be very aggressive because something that trades at 50 times earnings as we've learned in this market can trade it 200 times. Or in today's market, I guess I should say, seven, you know, 10 times revenue. Now they trade for 30 times revenue.

So you can really get in trouble. Agreed. What about are the shorts mainly kind of valuation melting ice cubes? Are you looking for fraud shorts as well? I've learned if there's a fraud piece to it, that's just kind of icing on the cake. Yeah. I think you can get in trouble when it's just fraud. And we have. We had one where it had a secular issue, but probably our worst short.

I'm still convinced that it's, ultimately a fraud, but that can take time for others and regulators to take notice. So I'd rather short things where I can look and say, here's the thesis of why profits are going to, going to shrink. I agree. And a fraud, you know, if a fraud, if it's ultimately worth zero and today's trading for 10, there's no reason they can't go to 2,000 on the way to zero, right? Like a fraud can just get bigger and bigger and bigger. So you mentioned, you mentioned that you look for things that are undervalued, mainly in the small cap land. And the two areas that I think you and I have overlaps of the most in and that I've seen repeat plays from you, right, are

timeshares with Diamond Resorts in Hilton and then Canadian companies, right? We mentioned Amia, the company we're going to mention today, great Canadian. Is there anything about those two in particular, like Canadian companies in general and time shares that you think the market structurally overlooks? Or are these just, is it just is it just is it sort of happenstance that you've invested in these things. Yeah, that's a great question. I think on the timeshares, as you know, I think they are misunderstood. The two I have owned was Diamond Resorts, which was bought by Apollo. Again, I think a low price, but not as low as this one. So pudos to them. And then Hilton Grand Vacations today. But I think those businesses are misunderstood in the sense

that half their profits roughly come from an earning stream that's fairly recurring, almost very recurring. And there's this view that the only people that buy time shares are people that get scammed into it in their 50s and 60s. And that's that's that's not the case. I think with Hilton, what's so interesting is they've been able to continue to grow their member base. And they had a comment on their recent earnings call talking about those under, I think it was 50 or 40 was a large chunk of their sales. So they've been able to continue to attract new members. So I think there's several other pieces that is misunderstood. The other. one I can think of off the top of my head with timeshares is they're actually very high cash flow

businesses, Diamond Resorts in specific because they built nothing. But even Hilton, they've learned to partner with folks and make it much more capital light. So I think that's what it attracts me about the timeshare business. As far as the Canadian, you know, great Canadian and Mia, as you mentioned, a third one, ECN Capital. Those are actually three of our four biggest positions right now. we don't we didn't intentionally go looking in Canada but these opportunities have come up just where we found the valuation are very attractive so it's not that we went to look for for these in particular but I think the reason that the valuations are so attractive is there is less liquidity less exposure but that also results in the opportunity so at some point I think

the valuation gap closes also several of these are looking at listing in the U.S. potentially. And I think it's worth noting of our three Canadian holdings. Great Canadian is actually the only one that really operates. ECN has no operations in Canada. Amia has one JV ownership in Canada, but outside of that, it's really kind of international holdings. And as I mentioned, we target $200 million to $3 billion, but we only look in U.S. in Canada. So, and the reason for that is Canada outside Quebec is same language, very similar legal structures. So it's just, just easier for us. And financial statements, it's easier for us to get comfortable there. And just so kind of happenstances, the most we've had, typically we've had, you know, I guess

great Canadian we've owned since the beginning. So we've generally had one Canadian holding, but right now we just happen to have three. Yeah, no. And then just with the Canadian holdings, you mentioned ECN, which I'm very familiar with. You know, I do think there is something like all the money in the world seems to be going into index funds, right? And if you're up in Canada, like there aren't a lot of Canadian index funds that I'm aware of, you know, obviously the SMP 500 is the one that really attracts all of the capital. And I think we've seen with several companies, they're listed in Canada. They've got a lot of U.S. operations. They're listed in Europe. They've got a lot of U.S. operations. They relist over to the U.S. And all of a sudden, they're multiple, you know,

a month later is 2X what it was before because now they get all that index money and that index and, like, if all your operations are in U.S., the U.S. buyers are kind of the natural buyer. So I do think there is something to that. You know, previous guests of the pod came on and talked about GAN limited, which I'm kicking myself. I missed. But that's exactly what played out there, right? They were UK listed, switch over to the U.S. Two weeks later, they're multiples for X, what it was when it was UK. Yeah. Yeah, it's a great point. Definitely the ETF flows and passive money, I think, gives you that valuation gap between Canada and the U.S. Cool. Okay, unless you want to talk about anything else about your background, do you want to

turn to a great Canadian? Yeah, let's do that. So I'm going to let you handle the majority of this, but I'm just going to give a quick disclaimer before we do this. You know, Chris specializes in smaller cap companies. Great Canadian is a smaller cap Canadian stock undergoing a merger right now. I think it's going to become very clear that both Chris and I think the merger greatly undervalues Great Canadian. But, you know, nothing on this podcast is a recommendation or a solicitation. So everyone should do their own work, make their own decision. We're not recommending anything.

We're just kind of laying out our points of view here. So that's a disclaimer out the way. Why don't you give us, start with a little bit of a background on Great Canadian and what it is? Yeah, yeah. And I guess the echo to P is my compliance consultant, like, like Andrew said, we have a, my firm has a position in Great Canadian. So I am biased in my views and, and as always do your own research. I'll do my best outline what we think the investment case is, but I'll always go do your own research. But yeah, for some background, Great Canadian was started in the early 80s. They now have about 25 or 25 properties, 21 casinos, four race, tracks. The CEO's name is Rod Baker, and he came on in 2008. The business was over levered, and really the existing management team had not done a great job operating the assets. So it came on as a restructuring consultant, became president in 2010, and then in 2011, the CEO actually passed away. So Rod became CEO. So he's been CEO since then.

When we first invested, which was four years ago now in 2016, there was really four pillars to our thesis, which is this is a great business. They had 40% plus market share in British Columbia. They still have. They have a monopoly in Nova Scotia in New Brunswick. They're the only operators there and very wide moats because they have 20-year licenses where they operate these casinos. And the government actually reimburses you for your CAP-X. So it's very incentivized to not build much supply. I mean, in British Columbia, there had not been a new casino added in a decade plus. So they reimburse you for that CAPEX and they want to get paid back as quickly as possible. So they want high returns on capital. So we thought it was a great business. It had a proven leader. Rod,

if you look at the returns on capital, shareholder EPS Kager, shareholder return, they were they were all approaching or north 20% per year when we invested. So great business, proven leader. And then attractive valuation, it traded for under 12 times cash earnings, which was about half the multiple of its U.S. peers and very low leverage, so conservative balance sheet. And lastly, which we'll get into the bigger part of the story is what Intrigue does is we have an existing business, existing base of assets that we think we're buying an attractive multiple. But then there's this huge source of upside because Ontario had started privatizing, I guess stepping back, Ontario had operated all the casinos.

The government did. The government entity called OLG. They determined, okay, we can make a lot more money if we allow private operators to operate these, where we have no expenses and we just take a cut of the revenues. And they're going to be able to generate far more gross gaming revenues. So Ontario had started the process of privatizing their casinos. They had split it into eight bundles. When we invested in 16, Great Canadian,

already won the first bundle, which was called the East Bundle. They had also bid on, and I guess I should say, the East Bundle numbers had not flowed through your Bloomberg, right? So when I say 12 times earnings, it was even cheaper when you look at the potential of the East Bundle. Going a step further, they had bid on Central Toronto and West Toronto. Central Toronto is known as the GTA bundle, which is greater Toronto area, and then there's the West GTA. So they had bid on those, and we know that, I shouldn't say no, but it seemed that Canada government preferred to have a Canadian operator. And there's really two operators in all of Canada, two main operators, at least in British Columbia and Ontario.

And that's Great Canadians, number one. And number two's Gateway, who is not as good of an operator if you look at their profits and had more leverage. So we thought Great Canadian had a good shot at winning one of these bundles. Well, fast forward to today, Great Canadian ended up winning both. the Central Bundle and the Central Toronto and West Toronto in 2018. The Central Toronto bundle, they actually wanted with a 50-50 JV with Brookfield Asset Management that most folks are probably familiar with. And the game plan was let's take these bundles and deploy close to $2 billion a capital.

We're going to add at least one casino. And then the other seven casinos, we're going to expand them and add amenities to give kind of a snapshot of what the assets they bought, like one of the key assets in Toronto, Woodbine, you're basically looking at slot machines and a Starbucks. So they said, okay, let's take this, let's add hotels, let's put entertainment venues around it, let's add tables. So there was this huge opportunity there. So that's kind of the, it was the initial thesis, and then, you know, fast forward to today. And yeah, that's hopefully a little background. on. No, no, I think that's perfect background. So, you know, just to sum up great Canadian

on a bunch of Canadian operations, I think when you first started investing in them, they just want a couple bundles and the economics weren't really flowing through. You know, previous people have done, including me, I think the economics on their bundle bids were very, very, very favorable. And then if we fast forward kind of to, let's say, 2019 pre-COVID, all of that CAPEX was just wrapping up. and those bundles were just starting to flow through their financials. I think 2020 slash 2021, you can correct me up wrong, we're going to be the years that all those economics really flowed through and I think we started to see the fruits of their labor.

Yeah, yeah. I think you're summarizing it well. Maybe to put a little more color in detail on it. So in 2019, they generated almost $4 per share of cash earnings. Now, because it's IFRS, which just changed, and they have a joint venture partner, bridging gap earnings and what is the cash earnings, the GC shareholder. I'll try to do that.

And the way to do it is if you look at their reported ebidah, take out minority interest, and then take out lease expense. But remember, the JV partner has to cover a portion of those lease expense. So you add back a portion of lease expense. So basically what you get to, rough numbers, in 2019, they did about $350 million of, G.C attributable EBIDA after minority interest and after lease payments, which until 2019 was actually just counted as rent expense. Now it's in the cash flow statement. So that's your baseline, $350 million. Maintenance CAPX is about 3% of revenue said differently, 9% or 10% of EBDA. When you take

out the CAPX and they had about 30 million of interest that's attributable to the GC and then taxes at 27%. You get to almost $4 per share in 2019. They had bought the Central Toronto and West Toronto assets in 18. As you said, they paid, I want to say like $300 million for those two. It was a very attractive price. I will say as part of buying that, they were required or are required to go spend capital. So the headline multiple is better, you know, it's like one times EBIT or something. It's not that attractive.

The government knew they were going to spend capital. At least I don't think it's going to be that attractive. but it still should be very attractive multiples, i.e. returns. And I think a big piece of that is because they really were the only true option, especially when you consider central Toronto, where not only do you have casinos, but you have a bunch of real estate around there. And who better than Brookfield to, I think, down the road develop that real estate, which is a piece that most people I don't think realize. So start with $4 per share of cash earnings. At that point, they had, if you go look at their third quarter, 2018 MDNA, they actually tell you there's planning to spend over $1.8 billion on top of the

acquisition price in central West Toronto. So rough numbers 1.8. They had spent, we'll call it, about $100 million on the CAPEX and 18. So let's just assume that's already in the 19 numbers. So to get from 2019 to what I think their run rate, kind of 22 earnings would be, I get there three ways. And I get to $6 per share cash EPS to jump to the conclusion. But how do I get to $6. First, they're going to spend, they've already spent half of it, actually, as of the third quarter of this year, but they're spending called $1.7 billion since 18. Half of that's already been spent. Take 1.7, I assume they're going to generate a 20% pre-tax return on that. So, EBITDA, 1.7 times 20%, gets you $340 million of gross EBITDA. Now, to back up that 20% assumption,

in the East Bundle, the first bundle they won in 2016, I estimate they generated about a 35% pre-tax return. If you look at Great Canadian before Ontario transactions, Rod is CEO, they generated about a 25% return. And then Brookfield just pull up their latest shareholder deck. They've compounded after-tax. So their after-tax return to shareholders, after-tax returns, and then shareholder return is annualized at 20.

And so I think 20% pre-tax, again, gets you to 340 gross EBITDA. Then when you take out the minority interest piece, that gets you to about $200 million to GC when you run the math. It ends up being about 60%. So they get 100% of West GTA, 50% of GTA. So take 200 million of incremental EBITDA GC, add that to the 350 for 2019. If you recall, I said in 2019, their actual EBITDA is about 350 when you take out minority interest and lease payments. So take 350 plus the $250,000, gets you a $550 million of fully baked 2020 EBITDA. From their maintenance cap X, as I mentioned, call it 9 to 10% of EBITDA that's $50 million of maintenance CAPX.

They had $30 million of interest in 19 that was attributable to them. let's just assume they financed all of it. And so that basically doubles your interest. That's going to be conservative because these things generate a ton of cash when they're open. They actually generate cash when they're not open, which we'll get into. So take out $50 million of cap X, $60 million of interest expense, and then you have about $90 million of taxes coming off to $5.50 a EBITDA gets you to about $350 of after-tax free cash flow. 56 million shares gets you north of $6 per share of earnings.

So you say, okay, that's a lot of assumptions there. 20% pre-tax return. The second way you can get there is there's actually an Ontario government affiliated report. If you Google FAO report OLG, in that report, they outline how much the GC is going to grow slots and tables. And they also tell you what their assumptions are. And you can do a little math and you get to gross gaming revenues being over two and a half billion just in the GTA.

When you add in the rest of the Ontario assets, you get to over $3 billion of gross gaming revenues after this capital's been spent. So $3 billion of gross gaming revenues for rough numbers. In 2019, they reported $2 billion. So that's $1 billion in incremental gross gaming revenues. If you look in 19, the casinos took 43% of those because there's a cut that goes to the government. So we'll use that. So 43% of a billion is $400. 30 million. The other important piece of this is, as I mentioned before, it's a slot machine with

a Starbucks. There's not a lot of non-gaming revenues. In fact, non-gaming revenues, what's known as the hospitality, food and beverage, was only 1% of gross gaming revenues last year. If you look at their Vancouver casinos and you go look at U.S. casinos, you know, international, generally these non-gaming revenues will be north of 15% of gross gaming revenues. So you take, they're going to grow that by 14%. So non-gaming revenues is going to go from 1% to 15. So take that 14% expansion times the $3 billion of gross gaming revenues. Because you're going to have $3 billion of gross going to revenues and we're collecting an extra, you know, 14% of those. Use 14 or 15. That gets you another $420 million of revenue. Okay. So growing gross, gross gaming revenue by a billion

$430 million is going to come back to G.C. and its partners. Then we're going to grow the non-hospitality revenues. 14% times $3 billion gets you $420. So all in, that's $850 million of incremental revenue, rough numbers, assume 40% margin, gets you about $350 million of gross EBITDA, which is exactly the same number that I said in the last valuation if you take 20% of 1.7. The third way to get there, the less calculations, just write it on a napkin, is if you look at Vancouver gaming revenues per capita versus Toronto, and you have to dig through some government reports and make a few assumptions there, but I get to that Vancouver right now generates 65% more gaming revenue per capita than Toronto. It's certainly north of 50. So again, if you're starting with $2 billion of revenue in Toronto, gross gaming revenue, which is what they did in 19, and you think they can grow that by 50 to 65%. That's another billion dollars of gross gaming revenues, which is what I outlined in the last two assumptions. And then you can do all the math on the margins and everything. So that's how I triangulate. It's not perfect because the company doesn't give guidance. They only speak to analyst and shareholders on the calls, but they do give pretty detailed MDNAs. And there's some decent

through just looking for government articles and government reports. You know, I think that that's kind of always been part of the opportunity here is there's few people that have probably done all the work. But when you do that work, you realize that this thing's got a lot, a ton of earnings power. Yeah, the only other thing I'll say on your assumptions, and you can correct me wrong, but when I think Toronto per capita gaming versus Vancouver per capita gaming, like I think Toronto is a little bit more of a tourist destination. You know, I think Toronto, if I remember correctly, I'm kind of doing this off the top of my head. It's a little wealthier.

Like, I don't see why it should actually be the same per capita. It should probably be a little bit higher per capita, right? Yeah, I 100% agree. I mean, Toronto is the fourth largest city in North America. It's one of the fastest growing. The opportunity there on a per capita basis should be much larger because you do have the tourist aspect. And in fact, if you go look at Rod's past comments,

the CEO of Great Canadian, he's always talked about, we're going to have our international casinos. And that's the one they just finished building, which just finished, so it's not in the numbers at all because it finished after COVID. That's Pickering.

It's going to be known as Durham Live. You can get Google and see kind of all the plans they have there. The casino piece is done. And then Casino Woodbine, which was the main casino, that's where they're doing a huge expansion. So these will be international casino. knows that should really be able to attract, to your points, more gaming revenues per capita.

Perfect. Okay. Nope. That's exactly what I'm going to say. So your numbers, I think the listeners might need a calculator. They might appreciate that back to down the map there. But your numbers have, hey, in 2019, this earned $4 per share. In 2021, 2012, I think this was going to earn $6 per share, right?

Pre-COVID, and we're going to get to the Apollo bit and post-COVID in a second. But pre-COVID, I think a lot of listeners might look at this and say, oh, the stock traded four. to $42 per share, Apollo bid $39 per share, and we'll talk Apollo in a second, but, you know, maybe that's a fair bid. I think both the company and you were sending out a lot of indications that the pre-COVID, $40-ish per share number, undervalued the company at this, you know, 10 times trailing cash flow, maybe seven or eight times forward cash flow number. Can you talk about all the ways that the company pre-COVID was showing that their share price was undervalued? Yeah, great question. So they, uh,

2018 and 19 bought back $350 million worth of stock, and they paid up to above $51 per share is what they were buying. On average, it was kind of low to mid-40s. Then this year in February, they announced that they were going to buy back 20% of the company, a half a billion dollar tender, it up to $46 per share. So that tells me, and if Rod's historically the CEO of Great Canadian has, you know, when he's bought back stock, it's been a very good investment. It's not because he thinks it trades at a 10% discount. It's because he thinks it's very undervalued. And so I think that tells us that he was buying stock above 50, went to buy 20% of the company in 46, that certainly pre-COVID, they thought this was worth well north of 40 for sure.

Perfect, perfect. Okay, so let's fast forward. So the company fortunately, well, not fortunately, for the world, but for the company, COVID hits beginning to mid-March, and they actually managed to cancel that big tender that we're talking about, right? So they preserve a ton of liquidity. Their share price, along with pretty much every other gaming stock in the world, falls on COVID. They have to shut down all their casinos. I believe they were hoping to reopen some, but I believe they all remain close. So their share price is drifting along, you know, around $25 per share. And then last week, Apollo announces a $39 per share tender offer for the company. And I think a lot of people might come to you and say, hey, the stock was at 24 before, before COVID, it was, you know, around 40.

You're getting a really big premium. All their casinos are shut down. There's a lot of casino uncertainty here. Apollo's paying you $39 per share. Why not take the bird in hand here? Yeah. Yeah. And I can definitely appreciate for someone near the story and seeing that coming from that perspective.

And what I would say is if you go look at the stock price, it was at $30.25 the day before they announced second quarter earnings, August 12th, I believe, or the day of, because they announced them after the close. Those earnings, second quarter, all of their casinos were closed, yet they still generated positive EBITDA and positive operating cash flow. And you say, how is that possible? it's because the government, number one, pays fixed fees, and so they were still collecting some revenue despite the casinos being closed. The government was also helping to cover cost, and they have a much higher variable cost structure than you would think, especially when the casinos are closed. So when you saw that, I thought this stock is going to take off. But Rod, during the earnings call, he was, and he's generally very conservative, which I'd appreciate, as a long-term shareholder because it's resulted in opportunities to buy back stock.

But he was extremely, I would use the word, I would say that he was even negative, not just conservative. And for those that don't believe me, listen to the call and form your own opinion, but I will tell you that he used the word challenging seven times and the word, this is a, the phrase marathon, not a sprint seven times. Yep. In fact, I asked him in the last earnings call, if Apollo approached him before then, for obvious reasons. He said they did not, which we can get into.

But you had a stock at 3025. Since then, the U.S. gaming companies' share prices are up over 30% on average, which would, you do the math, this should be a $40 stock today. Or I should say could be a $40 stock. Instead, they report good numbers. Commentary, I would say, was conservative at best. stock falls from 30 down back down to 24. So I think that that's the first piece to keep in mind. And then I can get into if you want kind of more specifically why I think a $39 per share offer is way too low.

Yeah, why don't you just keep going with that? Apollo's here paying $39 per share. You know, I think Apollo has a reputation that they are, they bid low, they pay value multiples and they stuck with that. We talked about diamond. They went and bought diamond for five or seven times. And what they do is they buy assets with hair on them for low traditional value multiples. They turn them around and then they IPO them in three to five years. Sometimes they, you know, they buy assets with a little too much hair on them, I would say. But for the most part, paying value multiples for assets when there are them has made sense. So I'm just going to have that like kind of tainting

all over you. But please continue with why you think $39 per share is too cheap here. Yeah. And I guess one thing I want to say is some of their casinos did reopen right in September, early October. Some of those they've reclosed with the casino or with COVID cases spiking, but they still have a few open to my knowledge. But the crux of them are shut at this point. But obviously with the vaccine news, I think if we look out a few quarters, these things will be open and doing very, very, very well. So specifically why I think the offer's too low. There's really three things I want to dive into. First, valuation. Secondly, the process itself and then the, what I would call misenliament of incentives with the board. So on the valuation, yeah, starting with that.

So they're paying what would equate to about 10 times 19 earnings. And remember, 19 earnings doesn't include the fact that they just spent $800 million in CAPEX over the last seven quarters. When you take that, plus the CAPEX, they'll spend the next few quarters, as I outlined before, I think they get to $6 of EPS. So it implies they're paying six times the out-year earnings. This is a company that I think has a, I would argue in many ways, is a better asset than U.S. peers. They have a monopoly on the fourth largest city in Toronto. They have a monopoly in Nova Scotia, New Brunswick, and they have a duopoly in British Columbia, where the other player gateway, as I mentioned earlier, is over levered. In fact, they just had to take out a $200 million plus loan from the government,

which added to their leverage, but they needed liquidity so bad. So you've got effectively monopolies across Canada, huge growth potential with this Toronto assets. And then, of course, it generated positive EBITDA, positive operating cash flow with all assets closed, which I think very few companies can say that. So that's the first data point. It's just talking about the quality of the asset, should have trade for 10 times and really more like six to, you know, eight times, kind of where the earnings power of the business is today. Secondly, as we talked about, look, they were buying back stock, tons and tons of stocks, $350 million worth in 18 and 19, look to buy another half a billion right before COVID

at higher prices. And I would argue that COVID has not impacted the long-term value of this business. And the reason I say that is because you haven't burned cash outside. of spending on CAPEX to build out facilities. Also, if you look at the U.S. peers, most of them are now reporting profits higher than before COVID. Now, part of that's going to be some pinup demand for sure, but I think U.S. peers are showing that these assets are not impaired. So the third thing is I'll say is, okay, let's look. Can I just add one more? Yeah, I just want to add one more thing there. You know, I think a lot of people are going to say, oh, why not take the, you know, there's COVID risk right now. Why not take the burden hand? Like these casinos are

there. These are brand new built casinos, right? And as you said, you look at U.S. companies, like, there is no impairments to the casino's earnings. When they open, they're pretty much almost immediately right back to what they were earning, right? This is not cruise ships where the assets are sitting in saltwater, depreciating massively. They're losing value by the day. People are terrified to go to cruise ships. Like, when these things open, they're pretty much, you know, I'd say, especially once the vaccine comes out, they're going to be back to full bore earnings almost immediately. So it's not like you really need to say, oh, maybe the future is really impaired. Like we've seen evidence that these things are going to be able to earn at least what they were

earning previously. So if you have anything else there, please go ahead. But I just want to drive that point home. Yeah, I think that's a great point. It reminds me a few things I want to touch on is so the reported earnings was was profitable, even third quarter. So I should say the second quarter of each year, they get a reimbursement for the government on CAPEX. So you get this this big fix fee. Okay, we'll look at third quarter. They were still profitable on a gross EBAA basis. And then if you listen to the call, third quarter call, Rod said, now that with just a 50 person limit, EBIDA is now growing in the Ontario casino. So they're positive EBDA, they're growing. And another very important point, which I think was mentioned on the call,

but it's definitely in the MD&A of the financials, the OLG, the Ontario. Crown Corp that governs these casinos gave them improved the terms. So they now get the fixed fee plus the variable they were getting, but an incremental variable. And they get those improved terms through the pandemic. So as long as there's capacity restrictions plus three years. So all those numbers I gave you earlier are going to end up being low because the numbers in 2022 are going to be higher than that because they're getting these incremental terms. And I think that tells you how a the government is. One of the things I'll touch on later is the threshold that people fear. The government is showing that they're very much aligned. This is their largest source of non-gaming

revenue. They want GC to do well. They already have to deal with the fact the gateways are levered with liquidity issues. They don't want to create a problem with GC. But yeah, I think it is, you know, I think this is a better asset than appears in many ways, but obviously it's important to look at comps. On the call, I did say it's being valued at six and a half times EBDA. I was taking the gross EBITDA because that's the quick math that people can do. I do think the more appropriate way to look at it is the attributable EBITDA to GC and the attributable debt to GC, which when you do that, it implies they're paying still less than eight times 2019 EBITDA. If you look at the US casinos and take their historical averages, they traded 11 to 12 times.

Again, I think these are worse assets without monopolies and barriers to entry. 11 to 12 times would imply that this company is worth 58 to 64. And if you look at M&A in this space, quality assets have traded for over 10 times. And again, I would argue it deserves a premium because we're basing it on a 2019 EBITDA. But we're hitting ourselves for all this cap-ex that's been spent and not giving any of the benefit. The other thing, so that's the first point is the low valuation. The second thing I want to talk about, which is arguably the most, important point is this is a failed process from my view. And what I mean by that is number one,

it was rushed. Rod, the CEO, again, a great Canadian, stated on the call that Apollo approached them after the second quarter earnings call, which means that in less than three months, Apollo, who had very limited access to information like all of us, given the lack of guidance and commentary and everything we talked about, in less than three months, Apollo was able to do all their diligence and the board was able to come to a conclusion or sign a definitive agreement. Those have been involved in M&A on private deals. That alone can take two months to negotiate agreement. So that tells me this was a rushed process that the diligence and agreement was done.

Secondly, Rod admitted they did not run an auction. Third, not only did they not run an auction, but it sounds like they did not contact any other buyers. He specifically stated that Brookfield was not, or indicated that Brookfield was not part of this process. And as you mentioned earlier, and I talked about Brookfield is your 50% partner in your core asset that represents 40% of Evadda today, Central Toronto. I find it hard to believe that Brookfield would have no interest in buying Great Canadian. And the other thing I would tell you is Caesars, Penn National Gaming, and Genting. And there was actually a few others, but those off the top of my head were all bidding on the central Toronto assets. So they

certainly have an interest, at least in that asset, and I presume in having the dominant Canadian operator. So the process, I think, was a failed. There really was no process. And the last thing I'd say on why the valuation is low is let's look at the incentives. So excluding Rod, Great Canadians Board owns 0.3% of the shares. There's not the alignment that you would hope for. Now, when I bought this, I got comfortable because of Rod's history. And his family had owned a bunch of stock. They sold a good chunk.

Now he owns 75,000 shares. That's it. However, he has 3 million options, which I always viewed as a positive on why he's going to, most of them timed us so he doesn't get him for a few years. But if we look out three years, that's really going to motivate him to get to that earnings power we talked about and share price. But on the flip side, he could not wait three years because his change of control allows him to get access to all those options, which when you're on the math, he gets basically a $30 million payday. If they sell the company, which I'm meant to

start this, it still has to get shareholder approval, which we'll get into. We'll talk about that. He'll either get a $30 million payday or what I think is more likely is Apollo probably is going to keep him on. Again, I don't know that on the call. He said that they haven't discussed anything with Apollo, but I suspect they have plans to give him a chunk equity that's going to be worth substantially more. And he won't have to deal with being public, which I don't think he enjoys. Just to me, this situation, you know, what originally attracted me to this was a deal during the pandemic where they said they didn't shop it, right? Just to me, and I think this is why he was getting out in front of this on the call, this deal screams, hey, Apollo

went to you with an offer that said, hey, take this private, we'll restrike all your options. You'll get all these options priced at, you know, pandemic level earnings and stuff. You let us take this private. And then when you grow this post-pandemic, you're going to become a hundred millionaire because the earnings, like everyone can see this. And I feel like to me, and again, you can jump on it. Like you've got Brookfield who U.S. investors may not realize this is the second largest company in the world in terms of asset management, right?

It's Blackstone and then Brookfield. These guys manage $500 billion plus. If they're your 50% partner in your most valuable asset, like I don't know how you can do a process without shopping to them. And then it's not lost on me that the Pfizer vaccine news comes out November 9th. And then November 10th, the company announces a deal process that seems extremely rushed, right? Like it seems to me that they said, oh my God, like casino stocks are about to run. Everybody's going to have line of sight into us reopening and kind of getting our clean.

earnings. We need to get this deal done now, start rushing it, start pushing it through. You know, the record date, we're taping this November 16th. The record date is November 17th, and we haven't even seen a circular yet. Like, it seems to me that this was a plan to get to, I'm going to say steal this from shareholders, restrike everything and kind of realize that upside from themselves. I don't know if I'm being a conspiracy theorist here or if you agree with me. Yeah, I mean, it's, you know, we're speculating. I can't save for sure that that was the plan but but everything you said i mean it is true that it was announced right after the Pfizer news uh now it was announced in conjunction with earnings which actually

were initially going to be the call was going to be that day of Pfizer they delayed the call to the next day and then came out and said they're getting purchased so yep i don't know that those are the facts people can do with them what they want i mean the last thing i'll say and this isn't specific of this deal this is more kind of um just something i think it's comical when the they say there's a fairness opinion and it came for the same banker who was advising him. So, of course, it's fair. They want to collect their, their banker fee. But that's kind of something I think wrong with just fairness opinions generally.

But, but yeah. Yeah. Let's see. Anything I should want to talk about here? There's some other, like, kind of listener questions and stuff to that into the is there anything else you had to say before we go into this? No, there's some things I want to touch on. But if, well, let's get into the questions.

And if we don't touch on those, I'll get back to him. So, you know, I think a lot of the list of your questions, you mentioned Rod on the deal came and said, hey, I don't have a deal with Apollo. I don't know if I'm staying or not. You know, he said this was a, this was Apollo approached them post Q2 earnings and they did this without shopping it. I think a lot of the questions centered on, why did they do this deal? And a lot of the things Rod said on the call, which I can go into it. But, you know, if you had to sum it up right now is why they did this deal, you think Rod ultimately stays on and gets rich, or do you think it's something else? Again, I hate to speculate, but just based on when you see these sponsored deals get done, you have a CEO that's been there a long time, and he's still in his 50s, I thought that this was always, his goal was to show that he can make Toronto a casino market that's bigger than any other in Canada. So I imagine he wants to see that through. If not, again, he gets a payday a lot quicker.

And it's no secret that, you know, I don't. think he loves being a public CEO. Again, that that's just based on the fact that they won't talk to shareholders outside of earnings calls, not even analysts. So I think maybe that has a piece of it, but I'm perplexed other than that's the conclusion that I can, that I reach is that that that must be the reason they're selling. I believe it was on the Q3 earnings call. Rod suggested that Toronto's economics were deteriorating. Do you think that was. self-serving in trying to push shareholders to vote for this bid? Or do you see anything that would back up that statement? Yeah. And on the call, yeah, he made in response to one of the largest

shareholders, he said, you know, maybe this, the Toronto package isn't as attractive as it was. And I'll go back to my first point, which is I don't see how the assets have been impaired, given the fact that they're still generating, operating cash flow, U.S. assets are doing well. And I think to be more specific, I want to just read two quotes from Rod. Go ahead. After buying the Toronto assets, this is the second quarter of 18, he said, and this was around this time, there were some short reports that were claiming the thresholds. Because the way it works, I should step back and explain this, is the government gets a fixed percentage.

So if it's $3 billion of gross gaming revenue to make up numbers, government says, okay, we get a billion dollars off the top. Yep. Everything above billion, so between the $1 billion and the $3 billion, so there's $2 billion, they get a cut of that. G.C. gets a cut. Yep. And so there was a short report that came out, I think maybe several speculating that the thresholds were going to rise really rapidly and ultimately this was going to be unprofitable. So Rod, who tends to not, I think Rod to clarify that those short reports were inaccurate. He said on the second quarter call, people need to understand that the threshold commitment level is and will be materially lower than the gross gaming revenues under virtually any possible scenario.

Okay, so he said that. Then the next call, because there was still speculation, because at this point, you know, and they were buying back shares, if I recall, you know, the stock's at 50, but I think he still thought it was low because they were buying back a ton of stock in the high 40s and 50s. Just checking, yeah, it was a $50 share on then 40s at least. He said, the next call, third quarter of 18, he said, I'm pleased to report that our current gross gaming revenue run rate already exceeds our peak threshold level that will occur in four years from now, which when you run the math implies that the threshold is certainly north

of, for the GTA asset, certainly north or south of 1.4 billion. So he's saying we're already above those thresholds. Then the next, or then fast forward to the first quarter of 19, GTA originally had three assets. one of those was the Ajax slot machines and they were going to just close that down and replace it with Durham Live, which is in Pickering. And that's the casino that's ready to open, but COVID happened. Yep. But people on the Ajax were in that area were complaining. And so ultimately the OLG said, you know what? You can just keep Ajax and we're not going to increase your threshold. In fact, they put in some more variables that says, okay, if it's taking one,

longer to build something, your threshold doesn't rise as fast. So third quarter of 18, he's telling us it's way above the threshold. There's no scenario where it's not going to be above the threshold. Virtually no scenario. Then they get another asset added and even better benefits on the threshold. Fast forward to today, as I told you, the OLG just gave them even better economics. So I think that's the first, all those factors tells me that this kind of bogeyman of the thresholds and deterioring economics, I think, were self-serving comments. That's my leaf. And I think the other thing is you go back to, if you don't think anything's changed for this casino or these casinos, why was Ebon trying to buy back 20% of the company of $46?

Why is Apollo, who we know underwrites, they're smart guys and gals. They want very high IRAs. Why are they going to write a $3 million check at $39 a share? Why did Brookfield invest all this money into the GTA if they didn't see, you know, nice returns? So there's no like most things in life, there's no way to 100% prove, but I think given Rod's past comments, the factors we know since then, I think it's very unlikely that you come up with a scenario where the stock's not worth more than 40. And I should say if you just took that math I ran through the beginning of a 20% pre-tax return, that's kind of a key assumption. If you cut that to a 10% pre-tax return, you still get to something earning close to $4.50 per share, $5,000.

per share of cash earnings still certainly worth more than $40. Monopoly business that it's going to be, you know, casinos are economically sensitive, but it's a monopoly business that should, you know, should deserve a pretty high through the cycle multiple, I would say, certainly higher than 39. Go ahead. Yeah, and I want to touch on that. Of course, we've redefined what economically sensitive means with COVID, but outside of a pandemic where you're forced to close your casinos,

one of the things that attracted us about Great Canadian is they actually grew their EBITDA to the last recession. A thing about their assets, at least today, and at that time they were really in British Columbia. They didn't have any Ontario assets. That's more of a locals market. And so unlike Vegas Strip and even some of the regional casinos, their revenue was down very little. And then Rod came in and did some things and actually grew EBITA. One other thing, and I'll just let you add, I'm just going to throw this out there. other thing that I think is interesting is, if I remember correctly, Ontario, the only online

kind of eye gaming for Ontario right now is a government-controlled site, I believe. And I think there's been recent news reports, like I'm looking at a Bloomberg article from the beginning of this month, that a lot of people think Ontario is going to lift that and let some private market players do that. And it strikes me, it's pretty obvious if they did lift that, like, whoever controls the Ontario bundles is going to be the person who gets first crack at that. And that obviously could be a really kind of explosive growth opportunity for them if they kind of got some free online gaming, exclusive Ontario online gaming licenses. I don't know if you have any thoughts on that. That's just another upside. We haven't even talked about. It's not in the numbers. It's

nowhere. But that three years from now, it wouldn't surprise me if they were making quite a good deal of money from that. I think what you said is I agree with everything. I don't have a whole lot to add. I mean, I think Great Canadian hasn't really had any comments on the online gaming. You're right. today the OLG operates those and you're also correct that they have discussed privatizing those who better than the casino company that controls Toronto to not at least have a piece of those economics I find it hard to believe that they would not be involved in that and you know I don't know if they already have a sense of where they fall on that but I think that's just another source of upside that Apollo sees and great Canadian's board should see it reminds me if IAC made this

investment into MGM, the casino company. And they said, hey, we think like MGM today gets basically no online money, but we think the online opportunity for them could be more than their current share price, right? When you kind of think about how big it could be, for these guys, maybe it's not more than their current share price, but you think about how big it could be, they're in a very advantageous position. I think that's a lot of, that's a lot of optionality that shareholders are selling for free if the Apollo deal goes there. So let's talk about the Apollo deal. Record date is November 17th. The vote is December 23rd. We haven't seen a circular yet, which obviously the circular should contain any background shopping info. But I think it seems like there are a lot of

shareholders pushing back on this. So how do you think this plays out? Yeah. And you got that accurate the time frame there. We should see the, you know, the documents here in the next I just expect a week or two. But I, of course, can't speak for other shareholders. But just publicly, you've seen on the call, you've had one of the two largest shareholder, another shareholder. Since then, there was an article with the largest shareholder coming out and saying they wouldn't vote for it. The way I would summarize it is I have not heard one shareholder express support. I've had multiple reach out to me that I didn't know just because they heard me on the call, expressed my kind of disbelief and disappointment in this deal. And just from the

folks that I know you're approaching close to 50%, I think close to 50%, certainly north of 40% of the shares that are saying they're not going to vote through this deal. And you need, my understanding is you need 65%. So from what I know today, it seems very unlikely this deal gets done. And I imagine what happens from here, Apollo can wait. They may be, who knows, what they're doing to maybe try to convince shareholders if they're doing anything. But ultimately, it looks like this is going to get rejected. So why wait until that date and then get embarrassed with, you know, whatever it is? Say 70% of shareholders say no, why wait for that?

And the thing we have to remember about Apollo, which I think is another nugget that's interesting, is they were rumored to be part of the group bidding on William Hill in the UK. Yes, that's a great size deal. they've backed out of that. So it seems they've kind of put their gaming eggs, so to speak, in one basket. So I can't imagine 39 was their best offer. From where I sit, I think it needs to be closer to 60 based on where they were buying stock. All that math I went through earlier, hair cut it as you will, peers, multiples,

which I think they should trade a premium, gets you to $60. But I have to imagine that Apollo can pay more. They want this asset. But we'll see if they wait for the votes. I can only kind of speculate on what they're going to do. But Apollo and then I think Brookfield and other strategics likely have interest. And certainly private equity, it's got to be, you know, some of Apollo's peers have to be, ears have to be perking and saying, wait a minute, this is a monopoly on basically the casino market in Canada, 10 times cash flow, that doesn't make a lot of sense. And actually, much lower than that when you bake in to, as we talked about, they've already built out.

facilities and it's not the numbers. On the call, Rod said, hey, this $39 bid, I think it's the best deal shareholders are going to get. You guys voted, you guys vote it down. I'm leaving, right? And I believe the largest or second largest shareholder said, that's great. We'll find a new CEO if you leave. Do you feel the same way? Or do you think Rod was just saying that to try to kind of bully investors into voting for the deal? Yeah, and I went back to look at the transcript again. And the first, the shareholder said something in the fact that we don't need you. And then Rod said, you know, maybe I'm not doing a good job. And the shareholder came back and said, yeah, we don't need you kind of to summarize.

Again, read the transcript yourself to see the exact words. But I wouldn't have thought this until this week. But I think if this deal doesn't go through, I would be supportive of a new CEO because I feel like he is not looking out for shareholder interest. He's a smart guy. He understands returns on capital. He knows these assets. I find it very hard to believe that he thinks that $39 per share is remotely close to fair to shareholders. And, you know, one of the large shareholders I've spoken to, I think he may already have in mind who could at least some candidates that that could potentially replace Rod if we go that route. So it won't be up to me as a, you know, it's material position in our portfolio. there's much bigger shareholders here. I've got a lot of those. But yeah, I suspect that they're, and they've voiced it publicly, that they're not happy about this.

So we'll see. Maybe things could get worked out with Rod that's, but not my place to say, but I think I would be fine with a new CEO. And I think an important point is there's certainly execution risk to getting that $6 per cash earnings, but a lot of it has happened. happen. You've gotten the deals. You've gotten renegotiated the structure for COVID. You've pretty much complete. They set it on the second quarter call that, you know, if COVID in and tomorrow within weeks, they could open the casino. And that was months ago. So,

you know, there's, and if you look, Rod historically, I think is more of a, his backgrounds like the cost cutting guy efficiencies. And you really are going to need someone to drive growth in these businesses and how do we attract people to really maximize the value of these new assets. So what we'll see where it ends up. But I don't think this will be a public company next year. But if it is, I mean, at a minimum, I think the entire board needs to be replaced with more shareholder-focused boards or at least get a couple shareholders on there. Because to come out with a deal and have basically every major shareholder come on the call

and say this deal is awful, we're voting against it. I mean, a board just can't have that happen. That's an embarrassment. So let me, you said, I think you said, I think a deal needs to be in the 60 range for me to vote for it, right? Let me put some scenarios on the table. We get to December 23rd and Apollo bumps this to $45 per share. Sounds like you're a no in that case, right? I'm a no. Apollo bumps it to $45 per share plus a 30-day go shop and the 30-day go shop comes and goes and nobody does a higher bid than $45 per share. Would you be a yes in that hypothetical scenario? That's a great question.

I think I'd still be a no, because 30 days, is that enough time to really get under the hood, given the limited public disclosures out there? How helpful would the management team be, given they may potentially have economics here, again, speculating, but, and then does Apollo have a, I assume they'll have some type of roofer versus that prevents some other potential bidders? But I think a key here is unless they come out with a $60 price are very close to it, I don't know how you accept the Apollo bid without running some type of process. Now, my view is it's not black and white.

It's not as simple. We're here's the earnings power last year, slap a multiple on it. I think a lot of it we do have to see because COVID happened and now you've got these assets done and you're still finishing up the assets. So, but I can be way off in my assumptions and still get, you know, well north to $40. But maybe the buyers, because there is some kind of wait and see, aren't willing to pay us $60 plus price. So it's hard for me to say, hey, if they run a process, especially if it's a 30-day go shop, which isn't much time, that that really tells us what fair value is. I'd rather them say, okay, this is Apollo's best offer, call it $45.

dollars. Shareholders say no. And then they run a true formal process. Open up the data room and give as much detail as possible. And then let's, you know, run a fair process. And I would actually like to see that process probably have some of these shareholders picking the advisors. And, you know, I'm a little skeptical of the existing board and CEO running any type of process given how this happened. And I think the large shareholders were also going to be a little skeptical. No, that makes a little sense to me. To me, this is just me and maybe COVID does make it a little bit difference, but a go shop, a proper go shop where everyone gets access to the data room. And, you know, Brookfield should be familiar with a lot of the assets and a lot of value here.

Like, I don't, I personally like looking at the numbers would be disappointed with the $45 bid, but if you ran a full go go shop, I would feel a lot more comfortable voting for it. Now, I do think there is, hey, you're selling this in the middle of COVID is now the time to be selling a casino where you've got like $2 billion worth of assets kind of that are going to open up the day that COVID goes and nobody's really seen the clean numbers for these. Is that the right time? Like that's a different question. But to me, the go shop really solves a lot of it. But I do hear you on that as well. Yeah. And I think you articulated that well. I mean, I think that's the trouble. It certainly helps a go shop. But the fact that you're doing this right at the bottom from like a sentiment

and earnings standpoint, and you don't have to. It generates positive cash flow, and we really don't know, the assets haven't opened, so we don't know the upside. We can run some numbers around them. And now not only do we have new assets, but we have new terms for the next three plus years on those assets. So I look at it and say, I think there's a low probability that this is going to be worth less than 60, even put your discount rate on it.

So worth less than call it 80 and discount that back or 70s. So that's why $45 even after a go shop I'm going to struggle with. But that's certainly better than where we are today. So that we have new terms on Toronto. We have, as we mentioned, the upside optionality of online gaming for the private operators coming, which we've just seen the first side of. It's just to me, the key thing is how can you choose to sell this on November 10th when the vaccine comes out November 9th? when you've got the online gaming news comes out kind of November 2nd, like how can you, unless it's for, you know, you were about to buy back shares at the beginning

of the year at 46, if they were getting, as you said, 60, you know, if they were getting a big premium, we said, hey, we think this is on the cheaper side of fair value to pre-COVID levels, but we want somebody else to worry about the headache. You know, we'd rather the burden hand. Like, that makes sense. But for this price, it's just, it's shocking to me. Anything else you think we should be talking about with a great Canadian or anything? Um, no, I think we've covered, uh, I think we've pretty much covered kind of the key, key topics. Cool.

Well, uh, look, I, I've really enjoyed having you on. I've really enjoyed talking to you about this. Uh, you know, for any shareholders who want to get in touch with Chris or I, you know, I'm not going to give Chris's email out on blast here, but, uh, I'm very reachable, Twitter through the podcast, everything. Send me an email. I can get you in touch with Chris. You know, we're, we're not trying to form a group or anything here, but I think both

of us agree this thing's undervalued and we're happy to walk any shareholders through the math and help them make the right decision. Am I putting words in your mouth or do you kind of agree with that? Yeah, I would say, yeah, I would say if they want to reach out to me, they can go through you or there's info at breach inlet cap.com. We've got, you know, the standard kind of one page website, the email there. I'm one of those people that doesn't like to have more than five emails in my inbox, my personal emails, but I do check that that other email and that's where folks have reached out. But yeah, the reader aid, certainly not forming a group.

I'm a small, very material to my portfolio, but still a small shareholder. But happy to discuss because I think it's an interesting investment opportunity with limited downside and some pretty nice upside near term. And if not, you know, my base case is I'm not saying no because I think Apollo is going to come forward and pay more. I think that's a decent likelihood, them or another better. I'm saying no to this price because I think it's worth 100 in two years. And so that is kind of my base case on how this plays out.

No, and that's what I really like here. You know, I've invested in companies before where Bitter A offers to pay 10. And I think if Bitter A walks away, the stock falls to four, but I think Bitter A can and should pay 12 because of the strategic value or something. Like, what I love here is this is a financial buyer, right? They're buying this because they think the only thing they can do is they think this is undervalued and they're going to make a return on their money from stealing it from shareholders, basically, right? And we've got all the evidence. They're buying at a low point, all the sort of stuff.

So that's what I, bad process. That's what I love here. So any last words? No, again, I really appreciate you having me on the podcast and look forward to hearing from other investors. Chris Colvin, breaching the capital. Great having you on. And hopefully we can have you on a couple months and celebrate a $75 per share of Apollo bit and talk about kind of the next interesting situation. Thanks again and we'll talk soon. Yeah, sounds great. Thanks again.