Tag: MDA

Reasons to shut the radar off IPOs and SPACs entirely

Here is a prototypical example. MDA (TSX: MDA) has gone public yet again. Most people here probably know the financial history of the firm – purchased by Maxar (TSX: MAXR), and then taken private so that Maxar could de-leverage, and then now it is taken public again with a price of CAD$14/share.

The company had its founding in the Greater Vancouver area, and continues today to perform engineering services in the space satellite domain, among other things.

The offensive thing about the public offering is page 65 of the 275 page prospectus:

The overlords of MDA knew perfectly well that they were probably going to go public again, and in the process granted themselves a ton of cheaply issued stock (noting that the right-hand table contains the applicable prices because of the 6:1 reverse split they performed before the IPO). They were looking to raising more money (at a higher share price) but had to taper it back to CAD$14 due to the tepid reception – probably partly due to this table. The other is the financial status of the company (it isn’t making that much money).

At the very minimum, I’d wait until the 180 day lockup period is over before even considering it, but knowing that space is a hype sector, I’m sure it’ll take off soon before then. Comparisons to SpaceX, however, is incredibly misguided – SpaceX has the reusable rocket technology which contains a massive competitive advantage on launch costs, while satellite construction and manufacturing is a much more competitive (and hence lower margin) industry, albeit played by a much fewer number of participants.

Potash Corporation takeover should be approved

The Canadian government has until November 3 to make a decision on whether they will allow the takeover of Potash Corporation (TSX: POT) to proceed.

I do not know what the decision will be politically – the only time that the Canadian government has exercised its right to refuse a foreign takeover of a Canadian company was in 2008 when Macdonald Deitweiller (TSX: MDA) was prevented from selling itself as Canada did not want its sole satellite manufacturer going into foreign hands.

As a matter of public policy the sale should proceed. First, the buying company is overpaying. Secondly, the media (and Saskatchewan government) is making it sound like that Potash Corp is the only potash producer in Canada – while they are large, it is not the only source of Potash production in the country.

If the Canadian government refuses this sale, you will likely see any built-in takeover premiums of large Canadian companies be reduced. This is also an increasing trend as of late – governments trying to protect their strategic interests in natural resources, including oil and gas, uranium, water, metals and other resources. One wouldn’t be shocked to see the ultimate resource – intelligent people – be a future (but hidden) consideration in the future.

Politically, however, the decision might be different.