Yet Another Value Podcast - Sophon Capital's Thunderbird Entertainment Thesis $TBRD

Episode Date: September 12, 2025

In this episode of Yet Another Value Podcast, host Andrew Walker speaks with Franco Chomonalez from Sophon Capital to analyze Thunderbird Entertainment (TBRD). Franco shares why the microcap Canadian animation and media company—trading at just 1.6x EBITDA—fits Sophon’s investment criteria. They discuss Thunderbird’s three revenue models, its role as a low-cost production partner for Disney, and the competitive advantages stemming from Canadian tax credits. The conversation also explores failed M&A efforts, AI disruption risk, shareholder tensions, and the upcoming TSX uplisting as a potential re-rating catalyst.Sophon Capital's site: https://sophoninvest.substack.com/_________________________________________________________[00:00:00] Andrew introduces Franco and Thunderbird[03:23:00] Franco outlines Sophon’s microcap thesis[06:17:00] Overview of Thunderbird’s business model[09:54:00] Discussion on Thunderbird’s cheap valuation[11:39:00] History of Thunderbird and key players[16:05:00] Studio advantages: tax credits, location[18:07:00] Is Thunderbird’s work commoditized?[24:26:00] Disney outsourcing versus in-house strategy[29:36:00] 80%+ IP pitch success rate explained[30:21:00] AI risk: upside and private equity fear[39:32:00] Can AI make animators obsolete?[42:49:00] Why hasn’t Thunderbird been sold yet?[47:08:00] Debate: reinvest or return capital[53:59:00] TSX uplisting as a near-term catalystLinks:Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer

And you're about to listen to the yet another value podcast with your host, me, Andrew Walker. I'm over here doing a big stretch. Today's interview is with Franco from So Fun Capital. We're going to be talking about Thunderbird. You know, listen to the full disclaimer at the end. But Thunderbird is a very small, again, that carries risk. Listen to the disclaimer. Canadian company that has been very, very popular among value and investor investors for the past four years.

You know, the stock has been, let's say, left for dead. because it trades very cheaply. And, you know, I think a lot of the answers to the questions is why has this worked all this sort of stuff is, hey, it trades really cheaply now. Like, this is one of the cheapest companies out there. So really interesting company to discuss. I think you'll find a lot of interesting tidbits in this interview. So we'll get there.

But first, a word from our sponsors. Today's podcast is sponsored by tritrata.com. Look, Tritrata is expert interviews on the byside. It's two bysiders who are talking about stocks that they know. and I really, really like the product. It is just a fantastic way, you know, I'll look at a company. I hop on. They cover hundreds of companies at this point.

I look at a company, I think it's interesting. I hop on and I see two sharp by-siders who know the names, sometimes skeptic, sometimes bull, sometimes bears, debating the key points that are relevant to the company. I read a call in 10, 15 minutes, and then I know, hey, is this company interesting or were the risks that are just no-goes for me? So I think it's fantastic. If you want to go try it, try trotta.com slash TBRD.

I worked with them. There's a Thunderbird interview. That's the topic of this podcast. There's an interview on there, and you can go kind of see what an expert interview on Trotter looks like. I think it's really awesome. By side for expert interviews, I think it's fantastic. And by the way, do you want to talk to me about an expert interview? I'm on there.

You want to go talk some cable companies? You want to go talk some beaten down microcaps. Boom, go find some of the names I'm interested in. And you can, it's not uncommon to hear me on the other end of the interview. So I know if you're a regular podcast interviewer, you're always hearing me in your ear anyway. But it's just another way to, you can connect with me. You can connect with people a heck of a lot smarter than me. Try trota.com slash TBRD.

That's try trata, T-R-A-T-A dot com slash TBRD. And I think it's just a fantastic research resource for getting up to speeds on names. I think you're really going to like it. All right, hello, and welcome to the yet another value podcast. I'm your host, Andrew Walker. With me today, I'm happy to have on for the first time from Sopon Capital Research. Franco Shomenalez. Branco, how's it going?

It's going great. It's a huge honor to follow the footsteps of one of my close friends and my former boss, Nathan Sachetti, who was on your podcast multiple times. So I just wanted to give a shout out to Naden and Papyrus Capital. I'm really excited today to talk about Thunderbird Entertainment. I know you usually do your standard disc later. Wait, you got to let me do the whole intro, man.

Just to have a Nitton's awesome. I'm glad you mentioned him. Shout out to Ninn. just before Franco dives into everything. I just have to give a quick disclaimer to remind everyone, nothing on this podcast is entertainment advice. See the full disclaimer at the end of the podcast, but we're talking about a Mori Liquid, MicroCap, Canadian Entertainment Company.

Franco kind of already spilled the beans on what the company is. But just remember, that carries extra rest. You can see a full disclaimer. Anyway, Franco, you spill the beans, but let's just hop into it. What is Thunderbird Entertainment, TBRD up in Canada, and why are they so interesting? Yeah, sure. So Thunderbird Entertainment is a very quirky.

stock. And I would reiterate once again that this is do your own due diligence. This is a highly illiquid stock. It has a market cap of about 75 million Canadian dollars, which I think today equates to about 50 million U.S. dollars. And yesterday, it traded, I think, $75,000, not shares, dollars in volume. So this is a very, very tiny stock. Investors have gotten burned on it. There's a lot of people who are disappointed in how it's performed in the last few years. But really, so, Thunderbird is interesting. It falls directly into what our firm is looking for. We embarked on a project recently.

Initially, to give you some context, we looked at the full spectrum of market capitalization. So we looked at things as large as eBay and things as smallest Thunderbird. Today, we are building out a project called SoFon MicroCap. Atlas, which is our new kind of, it's on substack. It's our new research platform that we're trying to cover microcap companies, which we define as companies, either $500 million in market cap that are investable businesses. So they're high quality businesses, and hopefully we can get them in a fair to great price. When you think about those two buckets, I don't like the dichotomy between value and GARP.

I think it's like, I think everything is value, right? Values what you get, what you pay for. but really we're looking for investments that fall into one of two categories. Great businesses that you can get at a fair price and fair businesses that you can get at a great price. When you think of that matrix or that Venn diagram and you look at the intersection, Thunderbird falls kind of squarely in the middle. This is a business that I would say is very good.

Some might argue that it's a great business, but I'll call it a very good, really good business that you can get at undeniably what I think is an outstanding price. which is less than 2x next 12-month EBITDA, which is, you know, when you look at a valuation like that, the only stocks that I've really seen right now training at those valuations are like, you know, tiny like net nets on the Hong Kong Stock Exchange or businesses that are facing like terminal decline

or not audited by the big foreign people, you know, are set like a Greek shipping company where the owners are enriching themselves, something like that. This is a very well-run management, managed company. I'd say it has, we can discuss later, kind of they had an activist, a proxy battle, and there's a whole history over the last five years of the company. But this is a company that in my mind has very good corporate governance. Let's just pause. So that was great

background, but let's just pause there. I don't think we've said what Thunderbird is and what it does. Yes. Let's just back up and say what Thunderbird is, what it does. Sure. Thank you for guiding me. I feel like I'm going in different tangents. Thunderbird is a very simple business. It's a TV and film content production studio. It is headquartered in Vancouver, Canada. It has a presence in Toronto

and it also has studio facilities in Burbank, which is in Los Angeles, and Ottawa in Canada. This company, and I'll provide a history on it if you would like, but this company works under three economic models. The first economic model

is service work. And so this is work in which Thunderberg gets hired by a TV network or a streaming platform to do production work in exchange for a fee. They don't retain any ownership of the intellectual property, and it's very low-risk fee-for-service work. Thunderbird gets their costs, except for labor cast load throughout the production process. The next model is owned IP development. So Thunderbird also makes its own content, which it pitches to the networks and streamers. And, like, it's a little Hollywood studio, and they retain the value of the IP, and they can monetize it via licensing deals, consumer products, and other revenue streams.

Just like, you know, J.K. Rowling has the rights the IP to Harry Potter and can make money off the sale of pillow shams with, like, Gryffindor in Blazendon. So they do both, right? And the third economic model is really a hybrid of those two, and it's partnership work. And so partnership work, in partnership work, Thunderbird literally handles the entire production for their network or streaming platform soup to nuts. They do everything from the pre-production to the writing, to the animation, which is less common in the, it's not the case in the service work. And service work, they handle a big part of the production, but they don't handle all of it. Partnerships, they handle pretty much all of it, and they get paid even larger fee in exchange for that work.

And on top of that, they get some of the back-end economics from mainly the consumer product sales. And so then there's, I appreciate, I've watched your podcast so many times that I kind of like, know the format. I know I'll be entering a line of fire of questioning, but there's so many ways we can go with this stock. It's interesting. At the first time, it's a very simple business. So it's not a difficult business for people to understand, but there's a lot of history. with it. And the one last thing I want to say before we dive in, and I'll leave the floor to you, is what I described earlier is kind of our framework, our bottoms up framework for looking at

stocks. We also are very interested in investing thematically in stocks that have a compelling set of top-down themes. And I think we have our own view on the state of the streaming wars. I won't pretend to be an expert on the streaming wars or what's going on in that arena. but I do, I'm informed about it. You probably know, have more informed views than me, but I'm informed enough to have my own kind of contrarian view that the streaming wars are going to re-accelerate. And Thunderbird, if that happens,

Thunderbird's in a unique position. It's really a pick and shovel. It's a pick and shovel trade because you're not betting on any one of the streaming platforms specifically. They have 15 partners currently, everything from Nickelodeon to Netflix to Max to Disney that they all work with. So they work with all the players.

And they have 24 productions with those 15 players. So it's really, you're getting, you're betting just, you have a pure play bet on content production going forward. It's a much cleaner play than betting on the stock of paramount, to give you an example. Well, stock of Paramount, there's issues there too. But let me try to back up and make my bones as a podcast. So look, Dunderbird has been a, despite the small cap size and e-liquidity, it has been a very popular play among smaller value in that event people for years. And you mentioned the,

you mentioned the proxy fight. People can go look at the history there. You know, I think that's subtle business, but we can talk about any of that. But it's been a popular play for a lot of the reasons you laid up, right? People say, yeah, people look at this and say, hey, it's really cheap. EV to EBTA is low single digits, the mid single digits, depending on the day and the time you buy it, right? But it's a low single digits, very low single digits. It's very cheap. People, People have mentioned the picks and shovel play, like I've been hearing about the picks and shovel pay for a while on Thunderberg. So I guess there was, I think Trotta, one of the ways I prepped, if I had to guess, I would believe you were one of the two analysts on the Trotta call. But don't confirm it and I because Chaud is anonymous.

But, you know, I read this call and there was a, you know, Toronto calls have all sorts of stuff, bulls, bears, skeptics, people learning. You know, it was clearly a bull and a skeptic. And the skeptic kept saying, hey, you know, he was kind of expressing what I was going to. Express on a podcast. He was like, look, I was there. I was bullish. I was bullish Thunderbird two years ago at four, and then were two years later at $1.50. And I guess my question to you just would be, look, a lot of what you laid out, the partnerships, the picks and shovel streaming play, all this sort of stuff. I have thoughts on all of it. But if I just took that away and just said, hey, this has been the case for four years. Like, why hasn't it worked?

What's going on that for four years, you've heard picks and shovel play, cheap stock? And it's just it's gotten cheaper. It hasn't grown that much. Why hasn't this work? already. Okay. So I think that's where the crux of the conversation lies and where I can probably add the most incremental value. You're right. This has been circling around value investor clubs, sum zero. It's not a new idea. And I would tell our leaders to, our listeners to refer to those sources, those publicly available sources to get up to speed on the business, which hasn't really changed. Thunderbird has been going through a period. of extreme transition.

And maybe I can give a little history on the company. I think that's really going to be helpful to understand how it's evolved and what the different actors at play. It's almost like kind of a Shakespearean drama, like what's going on there over the last five years. So Thunderbird actually was founded over two decades ago in 2003 by the former president and CEO Tim Gamble. They initially had the goal, which I think is interesting because it speaks to what

the CEO's aspirations are. They initially had this goal of investing and exploiting intellectual property and helping build major global brands. So from the very beginning, they had an IP-driven strategy. Over the years, the business started moving towards more production, the actual production work. And then in 2011, and buying IP, 2011, they had a big pivotal moment when Frank Joostra, who was one of the main players that I'll discuss. regarding why things have changed with Thunderbird. Frank Juster is a former, I believe, mining entrepreneur from Canada who founded Lionsgate Studios, and he basically provided an investment.

Today, he's like a 10%, his foundation is a 10% shareholder in the company, and he provided an investment that was used to acquire the IP, the rights to the Blade Runner franchise. And that was a big moment for them because they're starting to acquire actual IP. And then the business further transformed itself through a series of acquisitions in 2014. They bought Great Pacific Media. GPM is the division today of Thunderbird that makes what's called factual content. So live action content that's unscripted like reality TV and documentaries, some of which have been, it's low cost, high margin productions that they can do.

And they're renewed in many cases. And an example would be highway through hell, which is one of the longest running reality TV series of all. all time. And then in 2016, they bought what really has become the crown jewel flagship piece of the business, which is their animation studio atomic cartoons. And I want to talk, I can, I think I have a lot more to offer regarding that division that isn't in the prior write-ups that you'll find on the internet on the company. But 2018, they get almost like a SPAC transaction. They merge, they do a reverse merger with Golden Secret Ventures, which is a defunct mine company. that was a public shell company training on the Toronto Venture Exchange.

This is also important point to make that I will come back to regarding why things are different today. The Toronto Venture Exchange, I don't know, I have never owned another stock in the Toronto Venture Exchange. But looking at the Toronto Exchange, the vast, you have, I think it was, I'm forgetting, there's an Australian investor who I absolutely love. He's pretty high profile, and he's on Twitter,

and he's a hedge fund manager, and he specializes in shorting companies, and he says that Vancouver, Canada, is like the hotbed of financial fraud globally. The Toronto Venture Exchange... Boker Raton might like a word with that, but... But when it comes to publicly traded, when it comes to public, it's funny you say that because I'm right now just outside Miami, this is where I now live, so South Florida is very sketchy when it comes to doing business, but back to the point. Vancouver is a hotbed for financial crime and fraud in the stock market and in public

equities and a lot 50% of the companies on that on the Toronto Venture Exchange are mining companies and there's I venture I'd say there's a sizable percentage of those that probably in some way shape or form fraudulent companies I'm not exaggerating when I say that it's not it's really not a high close lot let's just switch off the so i think i hear you're going and we can come back to the ventures later but i just want to focus on the business for a second right so the big the big driver here is atomic their cartoon division yeah and when i hear bulls talk about it i think the two things i've heard and people can go read their as you said their countless number the picks and shovel play right hey these guys partner right now their big partnership is on

and Spideyness Friends, a junior, a kids' Spider-Man show on Disney, right? They've done several, and I think that's award-winning. They've done several. Let me start here. I know a lot of people like to point to a Pix and Shovel play, the more streaming. And I guess there's lots of ways we could break that out. But I would just ask, like, why does Disney decide to work with them, right? Because Disney has a lot of in-house animators.

And when you say, hey, Disney's working with them, I'd say, hey, that's cool. But I can't imagine that Disney, with all their in-house animators and stuff, is outsourcing to these guys for any type of material profit, right? Like, I think on there, I was kind of joking, Thurderbard, on their last call said, content is king. And then they said cash is king. So I was like, which is the king? But they said content is king. And to some extent. It's not mutually exclusive.

I'll just say, I just want to say something. I read that this in the Q3 call when they say that. I know the paragraph. It's not mutually exclusive. What they're saying is that they, they, I can talk at. so I want to keep it short, but they want to really invest in the business. They don't want to make returns just through financial engineering. I think that's clear.

And that's part of the reason, like, if they were willing to do that, yeah, they would be, and I'll answer your prior question, too, if they were willing to do, yeah. Let me just on that point, like, we can talk about the king of the second, but content is king, and I kind of agree with them. It's content and distribution, but they, in their part, in their atomic division, when they're working, they're not either. And to me, that suggests, like, they're not going to be able to, generate economic returns on that.

So I just asked like, why does Disney choose to work with them? And why should they make any type of profit in that deal? I just want to go back to something you just said because I want to make sure I'm understanding it exactly correct. You're saying that they're doing neither. They're not generating cash. You said something just now that I want to make sure I'm captioned correctly, that they're doing neither.

So I'm saying it, I think like in media, content and distribution. are king, right? So all of the, all of the returns on any deal are going to flow to the person who has either the elite IP, like a Disney, right? They're going to get all the returns or something or who has elite distribution. I don't think Netflix has great IP, but they have by far the best distribution so they can get returns. And when Thunderbird is serving just as the producer, as they would on a Spideon friends or anything, like when I look at that, that is, to me, I look at them and say, it's not a picks and shovel play. That is Disney. is going out and saying, hey, we could make this in-house for $5 million.

If someone else wants to fill up their studio, fill up their work, by making this for $4.5 million, go at it. But, like, to me, I don't think they can really make a profit on doing that. You think Disney will make a profit if it outsources the production? I think Disney will only outsource to Thunderbird if Thunderbird will make it for lower than Disney's in-house costs. So Thunderbird is running a cost of capital game. And not that they're not going to make a return, they're just going to make a sub or at cost of capital return.

I think that's just like a commodity business, and I don't see how it's that valuable. Okay, so there's a lot of points that I want to talk about there. And I apologize also. I'm not this scattering, but it's genuinely, there's so many avenues you can go talking about Thunderbird and you can get lost in the week. So thank you for redirecting me.

Regarding your point about Disney and outsourcing. So as you know, the Streaming Wars in the beginning, in 2020, 2021, it was all about growth at any cost, right? Wall Street was rewarding a set of metrics that weren't really profitability or cash flow driven. It was really about subscriber growth and top line growth. And that obviously changed in 2022, 2023 when the cash burn and the low. losses were starting to be very evident. And the studios needed to rain in content costs. And there was a pullback and spend.

One thing I'll note, which is suddenly off topic, but worth knowing years, that actually in 2023, Thunderbird, unlike most other plays in this industry, grew revenue, which speaks to, I think, their ability to weather downturns in the ecosystem that they're in. But we're now in era where profitability is, the most important, right? Like, there needs to be, you know, I'd say high single digit to low double-digit revenue growth, but you want to have profitable growth. You don't want to just have like this explosive growth and worry about profits later.

It is, I think, intelligent cost cutting measure for Disney, and it simplifies Disney's model if they actually acts the in-house animation team and outsource it to a player like Thunderbird. And Thunderbird is the leader among the types of companies that do what they do. And that's exactly what Disney did. When they acquired Marvel comics, they shut down their in-house animation team in Burbank and outsourced the work to Thunderbird. And the reason they did that is because Thunderbird is the lowest cost producer for elite animated content in the world. I'd say that's actually one of the main risks I've identified is that, for instance,

if Malaysia or even India or China, I doubt that Disney is going to outsource their animation production to China. But if there's some other market or country that opens as a low-cost producer due to the low labor costs of content production, then Thunderbird's position could be jeopardized. But let me just finish the last thing. is like Thunderbird benefits from a series of tax credits, refundable tax credits and incentive programs in Canada

that are both, you can stack on top of each other. So they get 25% rebate on labor costs through the Canada Media Fund. They get a rebate on refundable tax credits from the federal government. And they also get refundable tax credits from the province of British Columbia, where Vancouver is based.

And so that's actually why Vancouver, has become this hotbed and kind of for animators is because of the environment, when you stack those credits up, you can rebate up to 75% of your labor costs on your production. So that gives Thunderbird the ability to be a low-cost producer and also bid aggressively on projects where other players economically can't match them on the bid. So I'll be quiet now, but that's kind of What I'm hinting at is really, they're a low-cost producer. They're also in the same time zone as California. They can, they culturally, that Canada is very similar to the U.S.

And it's easier. I think it's, you look at companies in the 1990s in the U.S., like technology, large technology companies, they started outsourcing everything to India, like IT companies. And I worked at Goldman Sachs, right? And we had analysts in, I was in the TMT group in San Francisco, and we had an analyst who worked out of Bangalore, who did all the modeling for stuff. And the reason why Goldman Sachs had that analyst,

instead of having it in-house, was because of the clear fact that the cost advantage of Indian labor. So that's something that I really think is worth harping upon, is that this is, and it's a big competitive advantage of Federer. I probably should have mentioned all of this at the beginning. this is one of their biggest competitive advantages and it's literally one of the ones that competitors cannot

really replicate, right? Because they're not based geographically where Thunderbird is. So let's go back to the Disney example. Disney uses Thunderbirds for Spidey and Friends, right? And Disney does what if the Marvel television studios? And I believe that's made in-house by Marvel, what is it, Marvel animated studios or whatever it is, right?

So why why does Marvel go with Thunderbird for Spidey and not for what if? And why does Disney go with in-house for what-if and not outsources of Thunderbird? And I guess I would ask that in one other form. Like the Canadian tax credits, I hear the Canadian tax credits mentioned all the time and they're nice. But you know, the Georgia has tax credits and everybody starts shooting in Georgia. And ultimately, like, tax credits to me, it's nice, but it's a way. of lowering the cost of capital, but everyone can get them. So I guess my two questions is like,

we could wrap it into one, right? Why doesn't Disney choose for Spidey and Friends? Why don't they choose, hey, let's just hire five Vancouver-based Disney employees and have them produce Spiding Your Friends. And on the other side, for what if, why don't they say, hey, why are we producing this in-house? Why don't we outsource it to Thunderbird, let them do it like we did for Spideyton? So what's driving that?

That's a really good question. And to be honest, like, I did a lot of channel checks, but the channels I didn't provide me too much insight on that question. And it's really what you're asking is why does Disney, like, why would Disney just build its own studio in Vancouver, for instance? Like, why do they have to even rely on Thunderbird? There's higher Vancouver animators. And the truth of the matter is, I mean, it comes to a question of like, why do firms in general outsource?

To your point, with the Georgia tax credits, there's also tax credits in Florida. I don't think they come nearly close to the tax credits you get in British Columbia. I also think, look, this is a company. I lived part of the year in Los Angeles, and I did, I have a good network of people in the media entertainment space. And I did probably just shy of 30 interviews. with everyone from talent agents to people at the streaming platforms, ex-employees of the streaming platforms, to creators, writers and animators, producers.

And the feedback we got is that Thunderbird, and I think this is, it might not be a perfect way to answer your question, but I think it's the best way I can answer it, is that Thunderbird's reputation in this industry regarding their execution and really their corporate brand is really, it's almost like the type of brand that Goldman Sachs would have. I would call them like the Goldman Sachs of animation. Since their main, it's 90% of their business,

the service side, I'd say that they're almost like a professional services firm for creative work. Because they bid on projects, it's kind of how they function, right? It's similar to like a McKinsey for animation. I think they have executed. so well. The feedback is that it was completely consistent and resounding that they have this incredible track record of being highly reliable, of being able to have extensive capabilities that enable them to work with the most demanding partners like a Disney. Disney, by the way,

their specifications on their content and the characters and how animation the animation looks is like the most demanding in the industry. And that pretty much no one or very few people come anywhere close to that. And I think these companies have had such a hugely successful experience working with Thunderbird. And

Thunderbird has proven time and time again that they are a good partner to work with. And that's not just evidence by the actual fact that it's not just Spidey and Friends, but it's also Iron Man. And so they've done work on 101 Dalmatians, all the Disney franchise that they've done work on,

they continue providing them with work. And it's also evidenced by the hit rate that they have on the IP development side in terms of the number of productions that they successfully pitch to their network, to their clients on the service side. That hit rate is about 80%. So I would say I'm trying to put myself by no means industry participant in entertainment. And I can't really answer your question as thoroughly and completely as I would like. But I think, It's probably a case of like why reinvent the wheel mixed with the cost advantage. Yeah.

Can you quickly ask on the hit rate? I think I heard in the Trotter call as well, both sides mentioned the hit rate. I was just wondering, so over 80% success rate for pitches. And anybody who's done, you mentioned Goldman Sachs is similar, or consulting, knows that that is very high rate. But what is the standard hit rate in a, when you're pitching production and design for cartoons? What does a hit rate look like? That's a good question. I imagine it's like incredibly low, like I would say like single digit percentage because it's really people who are pitching, and this is not production and service work.

I think you're thinking of like when you mentioned Goldman Sachs of the bidding side, like when they bid on a project, we're talking right now about the owned IP development. So not like kind of this RFP rate, which is for the service side. the owned IP development, the projects that Thunderbird comes to the streaming partners with and says, hey, we just option this piece of IP. We want to develop this piece of content and we want to pre-sell you the show. Their hit rate on that, the CEO has indicated, is higher than 80%. Okay. Let me go to AI. So, you know, and this is, well, it's concerning on the IP side too, but I could imagine a lot of ways AI helps them, right? You could imagine, hey, we used to need to have 10 designers on this project. Now we only need three because AI does so much work. So our margins

go up. We can handle much more work, all this sort of stuff. I could imagine, hey, we're IP's where the money really is. AI helps us speed up IP, all this sort of stuff. I can imagine it. On the other hand, I can imagine you say, hey, to go back to Disney. I remember they did, what was it, like Disney Secret Wars or something? There was a big controversy where the title cards were all generated by AI. And people, this was like right when AI was really starting to roll. and people were up in arms. But, you know, I could imagine, you said, hey, AI is getting so good.

You know, you look at the stuff. Elon Musk is tweeting in these videos and stuff. I can imagine you say, hey, there's just not even a need for a design and production studio anymore. Like the IP owners can all work with AI to create exactly what they want. So I would pause there. I propose huge, ginormous chasms, right?

AI is a huge benefit for them and AI is depth for them. And how does AI fit into kind of the Thunderbolt? story. Okay, so I want to start off by, and this is where I think I can provide the most incremental value to the listeners who have been following this saga for, you know, five years now since it started getting pitched. And so basically, you know, I've heard through the grapevines by talking through, talking to different major shareholders of the company, that private equity has been looking at this. They've been doing outreach to private equity firms, and they've gotten close to a cash offer for the company, but private equity has stepped away again and again

due to the AI risk. And that's really something that you won't find in, that's a recent development, so it's not in those write-ups that you find on the internet from a few years ago. And I think it explains why this stock is so cheap. And I will get to the AI point, but you basically have 50% of the float held among five to six. investment firms that have gone burnt on the stock and they want, they probably want out. Some of them, I think, are sellers. I won't name the ones that are and the ones that are, in my opinion, but I suspect that there's quite a few of those six, five or six that are sellers of the stock and they're tired

of kind of the messaging and communication of the company over the years and are a little spooked by the fact that they weren't able to get private equity interest in the company up to now because obviously that is that will spook you like you know when an asset cannot say sell and there's a field auction process it's understandable that um the valuation will compress and funds will want to get out of the stock that is the first part so funds are are bearish not bearish but thinking about the AI risk and not executing the transaction because of it Regarding AI, what you've discussed, and I studied basically, my major in college was basically philosophy, so I find, and my sisters was as well, and we are obsessed with AI, and I find this is probably a discussion that we could have over like a four-hour podcast if you want to like go into the philosophical implications of what you're talking about. I will just say that I personally, and I'll provide a little bit of my knowledge on this space and another stock.

which is Adobe, which has been rattled by those same fears. I personally think that the arts is really the last frontier that will be, that Jan AI will be used, will be leveraged to help produce. I think that there will be, I personally think that there will be a major backlash that AI is going to eliminate a ton of jobs. Like, for instance, my job as a consultant at Bain & Company, I will say on the record, I think Chad GPT could do a much better job than me. And I think that there's going to be a lot of jobs that are eliminated.

I don't think the job of an animator is going to be one of them. And I think it's partly because a client like Disney, which has an incredible brand, and it's associated with the best of the United States and creativity and the arts, they don't want it to be kind of automated through Gen. But there's also a legal component. And this is where it gets, and I'm not an expert on this, but this is where I get more conviction in my thesis. When you use chat GPT or you use, and there's the recent New York Times lawsuit that connects to this topic. But when you use these AI to produce content to generate content, you're using a model, a large language model that trained on a ton of third-party content that is usually copyrighted.

and you don't have the copyright. So your ability to ensure that content is truly original is lacking. And I think this is an area. And I think you're going to see that alone, which is kind of like the depth of my, what is a very surface level understanding of the legal implications of AI, that alone is cause enough for me to like not have this bearish, outlook on the stock due to AI risk.

That said, you know, I talked, I talked about Adobe and everyone was saying, like, no one's going to use Photoshop anymore because, you know, GROC, you can go on GROC and you can, I put a photo of my dad on GROC as a joke and I was like, make my dad appear like a Roman emperor and it completely made my dad, putting a photo of my dad dressed in like a robe with like in a cauccium, which was hilarious. But you can't, that's not the risk. First off, if you know anything about Adobe, which I think most of Wall Street doesn't know the work flows of like a graphic designer or a product designer. Adobe is definitely going to stay in the future.

People are for very intricate work, which I think is true of animation to in Thunderbird's case, you simply can't get at this point in time the production value and the value. and the value of the content and the quality that you get from doing it the traditional way that has existed over the last few decades. But also, in Adobe's case, I saw someone actually pitched it to me as a long because Adobe has been embedding software in its product suite that enables you to look at AI-generated content and see if it violates copyright. So it's interesting the market was bearish on Adobe, but actually Adobe could very well be a play on AI.

That's just something I wanted to say. I think that I don't want to get too in the weeds or off topic, but for me, I think the main thing is the copyright issue, which I mentioned, but also just to, I definitely hear you on the copyright. I mean, I have been wondering recently, I think last week Warner Brothers sued midsummer or whatever for, hey, everybody goes in. and says, make me a five-second video of Batman doing the Macarena or something. That's IP infringement, right?

Like, I think there are real outstanding IP risks that are really interesting. And I do wonder if five years from now people are pitching Warner Brothers as a, you know, hey, they've got a $5 billion value claim against Open AI or whatever for all this IP infringement they've done. I think that's interesting. But I don't think that changes, you've started to hit on with the Adobe point, But I still don't think that changes like the AI risk here, right? Just because AI might have some legacy liabilities for,

legacy, recent liabilities for IP infringement doesn't change. Hey, what happens if, I think there would be two scenarios, right? A show that a cartoon that used to take 10 cartoonists, what happens if you can do it with three cartoonists? Is that good or bad for three cartoons because you're using AI to supplement them? Is that good or bad for Thunderbird? Or is there a world where six years from now, a show is, one cartoonist could make 20 shows because you just put the plot for 20 shows into AI, it produces them.

And then one cartoonist goes in workshops, the kind of hits or misses that they need to make sure they're brand-centered, which would be if you're the best cartoonist in the world, like you could imagine 500 years ago there was the best singer in every city, right? And they probably made a normal living. Today, there's the best singer in the world. You know, it's Taylor Swift, and she makes a billion dollars, but there's no room for the best singer in a city. Like, you could imagine right now there's 5,000 animators.

Maybe there's only three, 10 years from now, and the three that are in demand make a million dollars per year, but there's no room for anyone else. So I threw a lot out there, like, how do you think of the AI risk for Thunderbird when I laid out like that? So basically what you're describing as a situation, which I think is going to happen,

It's happening virtually every other industry in which AI causes workers, employees, to up-level, right? To do more with, have more output with less employees. And I would venture, I mean, maybe I'm missing something more profound here, but I would say that that is probably going to be a major plus for the company. I think that maybe the, you know, the biggest risk, I imagine, would be Disney realizes that they can just use AI, and it's like the cost differential

between relying on Thunderbird once you have AI being fully used for the animation process is not enough to warrant them outsourcing the production. But, I mean, it's, I think, like, it's, I won't even pretend to know with, with certainty how this is all going to play out. And I think no one could say, even someone who's an expert in AI,

and also an expert in this industry, could really predict what's going to happen. But my main takeaway is that I think less, like, that is probably going to be a good thing for all the players. And when we talk about that risk that, you know, Disney realizes that the cost differential isn't enough to warrant outsourcing the, I think it's not just a cost thing, to your prior question also.

I don't think it's only, it's just a cost thing. I think it's also just simplifying the operation. So if Disney can focus on less the creation side and more the distribution and the financing and the marketing and the operation side, that just simplifies their structure, which leads to better profit. Let me ask you, you addressed it a little bit. But, I mean, look, I'm not going to claim to know all the shit. shareholders here.

People can go look at the major shareholders, but you can Google this. Shareholders have wanted this thing sold for years, right? There were multiple proxy fights. I know several smaller, but vocal shareholders who were publishing letters to the board, privately, publicly, all this sort of stuff. For years, the thesis has been, hey, picks and shovel play, in demand, sold. And I think the management team resisted it, and then they were in a process. And in late 2024, they called the process off, right?

And as you said, part of the reason they called the process off was AI risk. People didn't know how its handicap. But, you know, I kind of go back and say, hey, you keep hearing the story where this is in demand, growing, great brand. Why with this many shareholders when it's sold? Why hasn't this been sold? Like, you know, like I think all my many, many losses have been, I buy an asset and I think it should be sold. And there is a reason people say, hey, great assets get sold quickly. bad assets don't get sold.

This has been a slow-moving sale for three years, and there's no sale. Like, why are you, why are bulls, why are me looking at this saying, hey, this is your why is the market like, it's hammering us, hey, it's not as good as you think. Why are we right and the market's wrong there? So I think it's a good question. I think this is to start off prefacing this, this is a very asset-like business, right? So there isn't, the way it works is that they are basically project managers for productions. So they will hire contract workers. Most of the workers on these productions are

contractors who they hire just on a project basis, which is a huge plus of the company because they don't have to have FTEs who are, you know, idle and are getting paid when they're not productive. I think that that, like when you're buying something like Disney, like let's say Disney will obviously never be the target of a leverage buyout. But when you're buying something like Disney, you're getting tremendous asset value, right? Disney is not just a light asset-like project manager of projects. They have VIP, right? They have this, they have like a hundred years of incredibly high-quality IP

that I think you judge the quality of IP based on how many high-margin consumer product sales it makes, and Disney generates a ton of billions of dollars from consumer product sales for kids. Thunderbird is lacking that. And so I can understand that maybe this is like something like a wild brain. which has the actual asset value from the IP is more attractive to a buyer than Thunderberg, which doesn't seem to own like an asset. Do you understand what I'm kind of trying to say here, basically,

that there isn't like concrete asset value in the balance sheet that wouldn't interest like a P buyer? It's a very asset-like kind of business without. I mean, I think you're hitting on the skepticism I expressed initially, right? Like, you don't have real assets. You're putting together contracted workers to put these shows together. That seems like a very low, multiple, difficult business to me. Yeah. I mean, I think that you don't want to cast it under generalization, right?

Because I will speak back again to the channel checks that I did. They, they've done, I think one of the things I love, sorry to take a step back is this framework produced by that called Hamilton-Helmer called The Seven Powers. I don't know if you've heard of it, but it's like the seven things that provide competitive advantage, and one of them is process power. And process power is how efficiently and skill the company is in executing its production process or its manufacturing process. And I think Thunderbird has nailed it from my discussions, has nailed this to a T.

They know how to execute. And again, to our point, why doesn't this? Disney do it in-house. I'd say another reason Disney doesn't do it in-house is because they don't think they can be as efficient as Thunderbird. I think Thunderbird is, you know, you look at also a professional services firm. They don't really have much asset value. They're essentially project managers.

Maybe their employees are not contractors, but they don't have a lot of asset value in the business on the balance sheet. So I think the thing you're getting here is, again, an incredible brand. You're getting relationships with the streamers. I think people are like, well, I don't know, Disney signs on for one project. I don't know if they're going to renew it or they're going to give me more projects. I think you can expect that that production service revenue, although it's not contractually recurring, is in all shape, and form recurring. And you get a great reputation and their expertise in process power in making these animated productions.

And that's, like, really what you're getting. And I think that this company, there's going to come a point. And you're asking me why now? There's a couple reasons why now. This can't go that much lower, right? I would say that a good valuation is like... I've told myself that before. Yeah, but I don't think, like,

there's obviously three ways to make money on a stock, right? The fundamentals improve. There's a re-rating or the capital sector de-leverages. They have a net cash balance on the balance sheet. They have been growing their fundamentals, their cash flow and their revenue pretty consistently. They, and they're mindful about their growth. And they've had a tremendous derating from 2021 when they were...

Let's talk to the net cash. I want to wrap up with one question. You mentioned, you kind of alluded earlier, and I'm really interested in this. Look, I was joking because they said on their call, they said, content is king is cash is king. And there can only be one king unless we're going to war and we have multiple empires and everything. They can generally only be one king.

You know, you've got this stock. just shelled out, multi-year shout-out. Shareholders, again, I'd go back to the Trotter call. I'd go back to the shareholder letters, everything. Shareholders are frustrated. A lot of people turn in the towel. You've got tons of cash in the balance sheet, and as you said, a generally asset-like company.

And the company comes on the Q3 call and says, hey, well, I do remember one shareholder who suggested they start making animations for Donald Trump, which I thought was kind of funny, but you've got shareholders come on the call and say, hey, why don't you buy back stock, right? you've got all this cash asset light business and they say cash is king we can't buy back stock we want to have a strong balance sheet we want to maintain yeah i get that but asset light

shell off stock below valuation like it kind of seems to me they not one of the knocks on thunderbird for the past 15 years is hey these guys want to go like all media people these guys want to go on pyreville they want to go buy stuff and when you've got to stock this low and they refuse to use the share repurchase it just kind of looks like to me like hey these guys want to buy stuff they they don't really want to they yeah yeah so I just want to end up that discussion. This is, yeah, let's end with that discussion. I think that is, like, where the Shakespearean drama unfold.

You have on one side, Voss Capital, who's an investor I really respect. And then you have, on the other side, Marney Weisshofer, who was a former board member and the CFO of a former CFO of Linesgate. And Frank Joostrow was the founder. And then kind of in the middle, you have Jennifer McCarran, brokering a peace deal. And this was in the proxy battle, which took place two years ago, but I think outlines, to your point. Marnie Weisshopper and Frank Jusra wanted to build the next Lionsgate, and they were convinced that if you continue what they call batting singles,

investing your own IP, taking the cash flow from the production service work, and investing it in your own children and immediate productions that you own the IP too, that eventually you're going to strike gold. And they did it with Lionsgate. They transformed Glinesmaid from a small Vancouver studio into a global player with that strategy.

And then you have Voss Capital, which is like, I want to do financial engineering. It's a similar situation, actually, to Bill, not Bill Ackman, Dan Lowe, maybe five or six years ago, he was launching an activist fight against Sony, and he was talking about how there needs to be less investment into owned IP in Sony films and their creative side. And George Clooney actually wrote a letter saying, no, they have to continue creating. It's a debate. I think I pretty...

Is George Clooney owned a lot of it? of Sony stock? Say what? Does George Clooney own a lot of Sony stock? Maybe he does. He's definitely an actor in Sony, but I... No, but my point is like, yes, for an actor who gets paid

and does projects and stuff, it's very easy to say, oh, they really need to create. Like, you know, I'm very familiar with these studios and especially post-COVID, but even before, I think the debate was, hey, yes, they are creating, but it seems like all the returns from them creating are really going to the actors

and the directors. is I don't know how much of it is actually going. Of course, I'm sure. I'm sure George Fleuny has way less skin in the game than Dan Loeb. I'm not trying to imply that there are equals, but I just wanted to use that to illustrate the point that I'm trying to make, which is that you can play, and this is true of anything. You can reinvest in the business or you can do financial engineering. That's just a common theme when it comes to corporate governance. And it's an interesting debate. I ideally would like to see a mix of the two because I think that they can, they optioned the right.

to Last Kids on Earth for like less than $10,000. So I think they can meaningfully invest in IP while buying back more of their stock. This gets to the major point for regarding, which I feel like we've been walking, talking about all kinds of things under this episode, and we didn't even get to this point, which is the major catalyst. At the end, by the end of this year, they're uplisting to the TSX exchange, the Toronto Exchange, not the Toronto Venture Exchange, which is the major exchange in Canada. And there are rules.

And I think this thing is so cheap, not just because people are. spooked by a failed auction process, but because it's just so illiquid. Like I said at the start of the episode, $75,000 of stock were traded yesterday. So really no institutional player can't own this anymore. And there are rules in, I don't know the exact ones, but in the Toronto Exchange, there are rules regarding how much stock you, like a minimum amount of stock that you have to buy if you're doing buybacks as a percentage of the float. Whereas in the TSX Venture Exchange, there's a limit of 10% of the flow that you can buy back, do share buybacks on. And I think just being on that exchange, having more visibility, having a larger set of

mandatory buybugs is going to increase liquidity way more. And we would see this thing at least re-rate to a 3 to 4x, which would be a great outcome for anyone coming into the stock right now. But I think, yeah, I think that will be a major catalyst. It's something that I think there's a theme also. And I consider the CEO to be fantastic CEO. I think Jennifer McCarran is a great CEO.

I think she's very mindful. She doesn't want to just do the quick thing to like get a re-rating. They were looking at doing a NASDAQ uplisting in 2021. 2020, they shelved that idea because they didn't want to

they found it could flop. They thought that the IPO would be unsuccessful in the NASDAQ, which I thought was an unfounded fear. And also because they had you know, one to two million capital markets fees, which was very sizable for a company of their size. I think that they have been very cautious in kind of gearing towards just investing in the business versus doing very tangible corporate actions that would re-rate the stocks. But I think you're starting to see a change. I'm sure I haven't been able to talk to boss capital because for various

reasons, but I know that they're still pressuring them. I know that this move to doing uplisting was probably prompted by them. And I think you're going to see, I think the more time that the Manfred can't execute and strike gold, like strike the next pep of the pig, the more, the less credibility they have. And the more likely they're going to succumb to investor pressures to do the buybacks to do actions that will raise the stock. And that's the truth of the matter. I mean, I think when you, why am I in this? I'm in this because it's trading at 1.6 times EBITDA, which is outrageous for a business of this quality.

No, look, I mean, that's the thing. Like, as I'm asking these questions, discusses them like, I feel like I should have led every question off with like, but it's trading at 1.6 times EBITDA and like they get all the tax credit you talked about and it's asset light. So there is amortization in there, but, you know, I don't think it's just to say this is four times after tax-free cash flow is kind of multiple. It's like all the questions I have, it should, I feel like the answer should just be, but it's trading it four times for your cash flow, right? So that's the crux of the, that's the, it's the tough thing with these really small micrubs. I don't know. Look, I've got a hard stop. I think anything else you think we should have hit on or touched on? No, I was just harped on the point that I think the main issue, I don't think it's been as,

publicly talked about. I think people on the buy side in these circles who increasingly are not buyers of the stock due to liquidity constraints know that they had a failed process. I think the average retail investor is not aware of those dynamics because really the only outside communication

was that they did a strategic review in 2023, which determined that it was in their best interest to remain a standalone public company. But I think what you're going to see is that the liquidity, which has been a big, issue for the stock is going to meaningfully improve when they uplist in a few months by a few months to the Toronto Exchange. And that alone could drive a reroute. And the last thing, which is I think,

I didn't talk about this enough. And I want to end with this note. But I do think we're reaching a reacceleration of the content wars. I think if you look at the history of the streaming wars, at first it was full intensity, the time of peak TV from 2020 to 2022. Then you had this era in which profitability was paramount. Then you have what's called the frenemy era, which is when they were bundling, the bundling economy started happening, and you see like HBO Max partnering with Disney

to put Hulu and Disney Plus and Max under one bundle. People look at that new rising bundling, and they say, hey, I don't think, I think the streaming wars are over. There's going to be consistent rainbacking content spending. And I really don't think that is the case, to be honest. I think that right now, they've done consumer surveys that show that the average American household has four streaming subscriptions. And I don't know the percentage, but more than 50% of those households want to rationalize their spending and cut back on their subscriptions.

And then you also have data that shows that only one in five streaming subscription services among the average household was purchased through an indirect channel, which is, in other words, a bundle. like Verizon Plus or the previous bundle I mentioned that is an HBO one. So I think I have this view, which I didn't talk a lot about, and it's controversial, I'm sure people will disagree with it, that there's going to be a Riod Salvation content spent because content is really what differentiates these platforms for the end consumer.

Okay, cool. Yeah, it's a view. Anyway, look, this has been great, Thunderburn Entertainment. Franco from Sopon Capital Research, thanks so much for coming on, and we'll talk soon. Thank you. A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor.

Thanks.