Impact of BNN (Mediagrif)

Mediagrif (TSX: MDF) is a small Quebec-based software company. It had a lot of turnover on its executive suite, and when it comes to software organizations, if they lose a lot of core intellectual knowledge, it can be very difficult for new offerings to come out. These sorts of changes are impossible to detect looking at financial statements (other than the losses that occur as a result of a loss of product agility), but you could infer this was going on in MDF. Perhaps the most well-known Canadian offering of MDF is Merx, where you can sell the Canadian government defective face masks and any other procurements they are interested in.

Today, MDF stock spiked up 40%:

I tried looking up what could possibly have caused the spike up. No news releases. Nothing on Twitter. Nothing on the usual message forums. But then I found it – some analyst on BNN made it his top pick and equated it to Shopify:

MEDIAGRIF INTERACTIVE TECHNOLOGIES (MDF TSX)
New position.

Mediagrif providea Shopify-like e-commerce solutions, but for much larger companies. They manage the online platform for Sobeys/IGA and also for Carrefour in Italy, the only company enabling online food orders during the peak the crisis. It also owns platforms that enable suppliers to bid on government contracts, allowing corporations to exchange data with their suppliers and customers. This is one of the rare companies doing well in this environment and benefitting from businesses going digital. Whereas Shopify trades at 35 times revenue, Mediagrif trades at just under one time. We have been accumulating shares and now own 5 per cent of the company.

Talk about bidding up his own book! MDF traded 186,000 shares today and typical volume is 10,000 shares. It took about 10,000 shares of trading after 9:00am (pacific) to get the stock up from about $3.80 to $4.80 (presumably after it was mentioned on television).

Who are these people that sit on television and pound the buy button on the words of BNN analysts? How long will be it before they get bored and start hitting the bid and reaching for the exits? (Answer: After 10:12am, 1,200 shares were traded at $6.25, and after that it was just the day-traders that got involved).

I don’t watch BNN, but if you ever have one of your smallcap stocks get mentioned on it in a positive light such as above, I’d pick a good point to dump it (especially as there is liquidity from the active daytraders) and you’ll very likely be able to reload later.

I don’t have much opinion on MDF. There aren’t a lot of software companies on the TSX (other than Shopify, the largest one is Constellation) so as a group they are not difficult to keep an eye on all of them. In general, the sector is more resilient to COVID-19 than others (especially Cineplex!).