Category: Equity

Goeasy – not going so easy

I’ve been looking at the carnage left behind in Goeasy (TSX: GSY) and holy moly:

(Q4-2025 warning)

… announced today that it expects to incur an incremental charge off in Q4 2025 of approximately $178M against gross consumer loans receivable of $5.5B as at December 31, 2025, and a related write down of approximately $55M for loan interest and fees.

… $178+$55 is roughly the net interest income the company makes in a quarter. Oops!

The Company also expects a net increase in allowance for credit losses on gross consumer loans receivable in the quarter of approximately $86M compared to the amount reported as at September 30, 2025.

… this is quite a material increase given the typical top line of about $328M for Q3-2025. A +$86 allowance raise is a 26% increase in expected defaults – ouch!

The historical reporting practice resulted in certain customer payments being recorded as received while they were in fact in the process of being settled at month end, some of which were ultimately not collected, and also impacted the Company’s reported delinquencies.

… talk about counting your chickens before the eggs hatch!

Not surprisingly, the company’s stock took a huge bath today – down 56%.

Looking at the corporation in general, their reported Q3-2025 has (rounding to the nearest $100M) about $500M cash, $5.2B in loans receivable and on the liabilities side, capitalized with $4.7B in debt.

It’s pretty evident they are clearing out the books with this purge – the question remains whether this company actually ended up making any money or not on their core business. Doing a very rough projection with the above numbers suggests after fixed expenses, they did not. The company managed to get to $210/share in the middle of 2025 clearly with false profitability.

Are they a value at $50? I’ve always shied away from these types of financing companies since you never know when this sort of event will occur as it is difficult to ascertain the credit quality within the loan portfolio. On one hand, you have the Element Fleet Managements of the planet, and then on the other hand you have the Crown Capital and Accord Financials of the planet that are in much more questionable shape. I am not good at picking winners in this space.

This also might be a reflection of what’s going on in the downward-sloping part of the so-called “K-shape economy”.

Cenovus Energy preferred share redemption

Cenovus Energy called their remaining preferred share issue (TSE: CVE.PR.A/B, inherited from the Husky Energy transaction) and it will be redeemed out at the end of March.

Notably, the preferred share was incredibly low-yielding: 2.577% and a rate reset of 1.73% above the Government of Canada 5 year.

At today’s GoC 5yr at 2.68%, the preferred share would have reset at 4.45% yield at par.

Yesterday, the preferred shares closed at $24.75 (a mild discount to par). The redemption at $25 is obviously the company deciding to clear out the books entirely on one class of its securities.

A 4.45% after-tax drain, at a notional tax rate of 25% is the equivalent of issuing a perpetual debt at 5.93%, notwithstanding the 5 year changes in the reset rate – a 1.73% spread is quite narrow.

This is extraordinarily cheap capital, yet it is being redeemed. Despite blowing a bunch of cash on the MEG Energy transaction (don’t get me wrong – it was strategically the correct thing for the company to do), Cenovus has ample cash and free cash flow to spend $300 million to save $13.35 million after-tax annually.

This kind of exemplifies the yield wasteland in the preferred share market in general.

Slate Office REIT’s nearly cooked

It’s not looking good for Slate Office REIT, now rebranded as Ravelin Properties (TSX: RPR.UN):

Toronto, Ontario–(Newsfile Corp. – February 20, 2026) – Ravelin Properties REIT (TSX: RPR.UN) (“Ravelin” or the “REIT”), an internally managed global owner and operator of well-located commercial real estate, announced today that it does not expect to make principal or interest payments on the upcoming maturity date of its 9.00% convertible unsecured subordinated debentures (the “9% Debentures”).

The maturity date of the 9% Debentures is February 28, 2026. In connection with the upcoming maturity date, the 9% Debentures, which currently trade on the Toronto Stock Exchange under “RPR.DB”, will be halted at the market open and delisted at the close of trading on the business day following the maturity date, being March 2, 2026.

The REIT has been in default of its obligations to pay interest on the 9% Debentures since March 1, 2024. The repayment price due on maturity is $1,180 per $1,000 principal amount of 9% Debentures, representing aggregate principal amount of $28,750,000, and $5,175,000 for accrued and unpaid interest thereon to, but excluding, the maturity date.

The big question I have in my mind is – how will George Armoyan, who went through a huge effort to take over the REIT, be able to salvage this situation? It is incredibly unlikely anybody from the public will be able to make lemonade from the lemons (the units and debentures are well subordinated), but Armoyan’s corp, G2S2, has lent Slate/Ravelin a ton of money and maybe this was the plan all along when they will get to eat away at the entrails of this soon to be extinct REIT.

General Fusion – How to make money appear from nowhere

I really have to give credit to these guys. Through a SPAC (Spring Valley Acquisition Corp. III, ticker SVAC), General Fusion is effectively going public. The SPAC traded up from US$10 to about US$11.50, give or take, on the announcement. The SPAC shareholders will own about 22% of the remaining entity after all is said and done – 23 million SPAC units are outstanding so the entity is already worth about US$1.2 billion off the get-go.

However, this is not the point of the post. I am writing about them internally cashing in before doing this. It isn’t like one day where you pick up the phone and order that your company get SPAC’ed – there is some lead time involved.

On August 20, 2025 they filed with SEDAR a report of exempt distribution, where from August 6 to 12, 2025 they sold $25.3 million in preferred shares, which will undoubtedly be converted into common shares. I am not sure what the conversion ratio of this transaction is, so let’s just leave it.

On November 28, 2025, less than two months before the announcement, $51.5 million in “Simple Agreements for Future Equity” and warrants with a strike price of $2.8035/share were issued. Unfortunately I do not know what the common share price subscription was effectively at, but one can infer from the warrant strike price that it was likely around CAD$2.50-ish.

So in two months, this is now worth about CAD$16/share, a cool transformation (or should I say creation?) of about $250 million from nothing in two months!

Well done! As much as this thing is going to get hyped up, I will be a spectator. And if their technology actually manages to produce sustainable and cheap fusion, they will be worth trillions in addition to decimating the natural gas market but as a physics major, I remember the in-house joke about fusion power, “Fusion is the energy of the future, and always will be”.

Velan – When getting bought out doesn’t mean going private

Velan (TSX: VLN) had an interesting transaction reported last Wednesday:

Velan Inc. (TSX: VLN) (“Velan” or the “Company”) today announced that its controlling shareholder, Velan Holding Co. Ltd. (“Velan Holding”), the sole holder of the Company’s multiple voting shares, has agreed to sell its 15,566,567 multiple voting shares and one subordinate voting share (representing approximately 72.1% of the Company’s outstanding shares and 92.8% of its aggregate voting rights) to funds managed by Birch Hill Equity Partners Management Inc. (“Birch Hill”), at a price of C$13.10 per share, for aggregate gross proceeds of C$203,922,040.80 to Velan Holding and two other entities associated with shareholders of Velan Holding (the “VH Transaction”). Birch Hill is a leading Canadian investment partner with a 30-year track record of deploying patient capital and operational expertise to scale market leaders for long-term global growth.

Velan, for those that are unfamiliar with the company, are a producer of industrial parts. It has been selling valves for roughly 20-25% gross margins (aside from the Covid times) for time immemorial and is relatively unremarkable other than when the founding family wanted to get out.

The voting shares were privately held by the family and the public (lesser-voting ‘subordinate’ shares) are traded on the TSX.

Subordinate shareholders were clearly anticipating that such a sellout would include the entire company.

Upon the announcement, the stock traded from around $19/share to under $15, likely because any speculation that they would be taken out at a premium faded away, and the final negotiated price was well under what the market was trading at.

Financially the company has had better days – like a decade ago. It is understandable how a $19-20/share valuation would be lofty.

But the overall lesson here is that when it is well known a controlled company is going to go private, the minority shareholders might not necessarily get a good deal, or in this case, any deal at all.