December 2008: $191.563 billion
January 2009: $185.679 billion
February: $183.759 billion
March: $184.089 billion
April: $181.811 billion
May: $178.691 billion
June: $176.365 billion
July: $174.664 billion
August: $173.818 billion
September: $171.152 billion
October: $171.091 billion
November: $168.425 billion
December: $169.430 billion

January 2010: $167.892 billion
February: $168.104 billion
March: $169.495 billion
April: $169.163 billion
May: $166.378 billion
June: $165.369 billion
July: $166.988 billion
August: $164.774 billion
September: $163.976 billion
October: $168.401 billion
November: $168.892 billion
December: $169.170 billion

January 2011: $170.42 billion
February: $171.800 billion
March: $174.028 billion
April: $175.198 billion
May: $173.974 billion
June: $176.527 billion
July: $177.574 billion
August: $177.654 billion
September: $176.856 billion
October: $178.214 billion
November: $176.705 billion
December: $180.526 billion

Last November, RBC CEO Gord Nixon voiced concern about a lack of demand for new loans within the corporate and commercial borrower universe. For the prior five months, he was right. There was a long flat patch that started in June. But $3.3 billion of new net lending in December takes the overall outstanding chartered bank loan book back to levels not seen since April 2009. Unless, of course, IFRS is at work again (see prior post “Did the banks just find $10.4B of new earnings? part 2” Jan 9-12).

If Mr. Nixon were a farmer, he’d be delighted if it were as simple as talking about the lack of rain that brought about a quick end to a drought.

MRM

The ownership transition has finally begun at Constellation Software (CSU:TSX), with a $100 million block trade deftly completed by TD Securities last Friday. My market buddies believe the 1.1729 million CSU shares came solely from Birch Hill Private Equity Partners, which manages a 20% CSU ownership stake position on behalf of TD Bank’s former Private Equity division. It wasn’t the fee party that would have resulted from the potential $600 million bought deal that I yakked about last month (see prior post “Make your 2012 fee budget — bid CSU” Jan 17-12). A simple block trade won’t “feed the ducks” (as Ross used to say) who have been loyally publishing on the name for years, but it sure reduces the friction cost. Despite the fact that TD’s 19.7% ownership stake had all the appearances of a control block, it seems that you can sell “just” 1.17 million shares of a 3.44 million position and avoid the need for a full prospectus. My memory is faint on this, but perhaps being below 20% gives you lots of wiggle room, even if you’ve got two board seats. That’s why the top securities lawyers earn what they do.

As an investment, CSU has been such a winner for everyone concerned. Private equity investors, management, the buyers of its $17/share $80 million IPO in 2006; the entire lot of them. Proof that you can invest in a Canadian technology company, take it public, grow the beast, leak shares at $84 and make a mint.

Why don’t more folks, from investors to i-bankers to entrepreneurs, try to emulate this type of success? If only Mark Leonard could be cloned!

MRM

LFC

For the life of me I can’t understand what the apparent resistance to toll roads is, when Canadian taxpayers are prepared to pay user fees for so many other elements of their daily life. This isn’t the first time I’ve brought this up (see prior post “Bring on the toll roads” Sept 10-07), but there’s never been a better time to tackle the topic.

An extra garbage bag this week? There’s a user fee once you’ve blown through your annual allotment of two freebie tags. Park on the street in front of your house overnight if your 1890s era Annex home doesn’t have a parking spot? You need to buy a permit every 6 months. Ride the subway two stops? $3.00 please. Renovate your home? Permits will cost you. These are things we take as being part of the cost of city life.

I commend Mayor Ford’s advisor Gordon Chong for recognizing that toll roads are an obvious answer to partially finance the huge capital expenditure needs of the City of Toronto over the next five years. Here’s the thing. The opportunity is bigger than it has ever been, in that the current ultra-low interest rate environment makes the DVP and Gardiner more valuable than ever before.

If the City of Toronto would only grab the opportunity, selling Canadian pension funds a 75 year concession on the DVP/Gardiner would generate an immediate $5 billion payment for the local treasury. During the next 75 years, these pension funds would be responsible for all operational and maintenance costs of the DVP / Gardiner, which would save the City an estimated $1.2 billion to $2.2 billion (present value) over the life of the concession. And the profit on those tolls? They would help fund Canadian pensions; a virtuous circle.

What would the City do with a $5 billion cheque? Whatever it wants:
- Pay off the City’s debt.
- Build new subways.
- Reduce property taxes.
- Upgrade City roads that are currently part of the $400 million “State of Good Repair Backlog” outlined in the 2011 City of Toronto Transportation Services Recommended Operating Budget.
- Reduce TTC fares and/or upgrade rolling stock.
- Rebate some or all of the toll road fees paid by users of the DVP/Gardiner who also happen to be City of Toronto taxpayers.
- Rebuild a portion of Toronto’s decaying underground infrastructure.
- Build new affordable housing.
- etc., etc.

The annual savings that would flow to the City budget by not having to maintain these highways each year amounts to tens of millions of dollars. That frees up real dollars for new programs, lower taxes, or both. I’m all for fixing the structural deficit and general waste at City Hall, and I voted for it, but let’s not do so with a blind eye to the obvious fix to our capital expenditure budgetary challenges. At a time when low interest rates have boosted the value of our asset by more than a billion dollars.

When I bounce the idea off elected people around town, the nay-sayers usually throw up the standard line that John Tory used with me during his Mayoral run: “I’m against asking taxpayers to pay for things twice.” Some sitting council members agree with that sentiment. But, if we extend that concept to the TCC, why do I pay a fare every time I ride the Yonge Street line? The taxpayers of the 1950s and 1960s paid to install that subway, after all. Just as previous generations of Toronto taxpayers paid to build the Gardiner.

Sure, there’s a cost to operate the TCC buses and subways. But there’s also a $50-100 million annual cost to operate, clean and maintain the DVP/Gardiner (depending on how much capex is done each year).

The difference is that half of the Gardiner’s daily car traffic involves folks who live outside the City…and don’t contribute a dime to the upkeep of Toronto’s key road artery system. An Oakville resident who relies on the Go Train pays to ride the Rocket from Union Station to his/her workplace, but the car commuter get a free pass. Because our City won’t charge them. Go figure.

The first two massive Canadian institutional investors I bounced this idea off of said they would pay the number. That means there’s a $5 billion cheque sitting on my desk (figuratively speaking). All we taxpayers need is the will to cash it.

MRM

(disclosure: this blog, as always, reflects a personal view and is not meant to represent the views of the TPA, its Board/Staff or the federal government)

Think communication and interactive tools for the enterprise. According to Wikipedia: “Communication tools typically handle the capturing, storing and presentation of communication, usually written but increasingly including audio and video as well. Interactive tools handle mediated interactions between a pair or group of users. They focus on establishing and maintaining a connection among users, facilitating the mechanics of conversation and talk.”

The U.S. market continues to embrace our non-amortizing venture debt (aka “True Growth Capital”). And, despite what you might have heard (see prior post “One man’s “competition” is another’s opportunity” July 18-11), terms and conditions remain consistent with market norms. The commercial banks are still keen on asset-backed revolvers, leaving the “growthy” lending to us.

If you’ve got a great deal, our dance card always has room. We’ll eventually need to get around to raising our Fund IV, but for now, there’s still room left in our 2006 vintage $450 million lending program.

MRM

LFC

I’m trying to imagine what the share price would have done had the following been announced by Research In Motion (RIM:TSX, RIMM:Q) yesterday:

- stay the course on the BBX and Playbook, with Mike and Jim still at the helm as Co-CEOs
- hire a new Chief Marketing Officer
- appoint Barb Stymiest as Board Chair
- recruit Prem Watsa to join the Board of Directors

The idea of appointing an independent Chair was a fait d’accompli following last June’s AGM, so no surprise there. Mr. Watsa is well known to the Canadian investment community, and with a 2.5% RIM stake acquired by Fairfax last Fall in the $22-40 share range, he has every reason to be a prime candidate to join the Board; Mr. Watsa’s familiarity with RIM Co-founder Mike Lazaridis likely dates to their membership in the University of Waterloo Chancellors’ club (hat tip RMQ).

The need for a new Chief Marketing Officer was so obvious that Kim Parlee and I even discussed it weeks ago on BNN as an immediate need; throwing sponsorship dollars at TNT so that Marv Albert will mumble “sponsored by Blackberry” during a NBA halftime show isn’t going to get us up off the U.S. marketshare mat.

Americans know about the BlackBerry; what they need to understand is why they should buy one. Watch how Apple markets the iPad; it might be as simple as showing people what the 9900 can do and they’ll have reason to get one (just as I did last August).

Had the aforementioned “plan” been announced on Monday morning, the stock might have sold off 10% as a result. But, despite the addition of a new CEO to the above list (who one has to assume had been part of most major operational decisions over the past 2 or 3 years), the stock is down about the same amount it would’ve been had Jim and Mike not succumbed to what I assume was the Board’s push for a break from the past. What a message Mr. Market is sending the Board: nothing was accomplished.

There was a school of thought that the time had come for a sea change, and the RIM authour himself (pere Rod McQueen) suggested some candidates in a blog last December: proposing John Wetmore, (a RIM director since 2007 and former CEO of IBM Canada) to be CEO and Patrick Spence, (who joined as a co-op student and is now managing director in London) as COO.

I, for one, have long since gotten comfortable with the idea that the guys that brought us to these P/E valuation depths might be able to get us out; or, at least, we might have to rely on that possibility. Rare as it is for the tailspin to be arrested in tech land, I’d back Mike and Jim to try to complete the task…at least if the alternative is merely the second in command taking on a bigger title while Mike and Jim continue to come to work each day.

To Jim’s credit, he made it clear in media interviews yesterday that the management move had nothing to do with the fact that the stock is down 90% from the highs, and that shareholders were demanding change. Mike and Douig Fregin may be the co-founders of RIM, but Jim (who arrived 8 years after inception and isn’t a co-founder, as the DTM often forgets) gives the company its backbone. Yesterday’s pugilistic approach to the topic was proof; or else evidence of something wild-eyed crazy-like.

Backbone’s what we need right now.

The Board may be lacking it, as demonstrated by a seven month process that crushed the stock just the same. And Mike’s role and heart will always be in the lab, regardless of his title. If the 12 month plan is really just “wait and see — we’ll prove everyone wrong”, all we have is our delightfully hard ass, tin ear, multi-focused, micro-managing Jimmy to ensure that the future we’re about to intercept doesn’t look like Palm’s recent past.

MRM
(disclosure – I own RIM)

LFC

At the time of the “for sale” press release, with the stock at $65/share, the market cap was around $1.385 billion; before any takeover premium. That’s a hefty M&A bite for most software or service firms, leaving only big players such as INFOR as viable bidders. I’m sure that Merrill and BMO did a good job on the sell-side, but with a tough debt market limiting PE options and an apparently unwilling management team, the outcome might not have been much of a surprise. At least with the benefit of hindsight. Just because it has been a great investment post-IPO doesn’t guarantee a successful sale transaction, unusual as that is to say.

Now that the stock is over $84, thanks in part to a new 5% dividend that pushed the quote up despite being pulled off the market, perhaps there’s still a deal to be done at CSU. The two original backers still own 40.3%, or just over 7 million shares. What better time for a bought deal? It worked for Macdonald Dettwiler and CAI years ago, with improved liquidity rewarding existing and future shareholders. The stock is up almost exactly 30% from the time of the April “alternatives” announcement, which is kinda what a traditional M&A premium looks like to most of us.

So, if you run the tech practice at a local i-bank, dust of your bought deal letter and fire it off. Get the control block folks a bid north of $80 and they might just hit it. At 4% commish on almost $600 million of jointly-held stock, you’re staring at a $24 million fee pie. Keep 35% for yourself, and the 2012 revenue budget is made…and it’s not even the end of January.

Now that MKS is gone, Joe and Jill Retail need a new tech dividend name. And the dividend-oriented mutual fund managers will like the fact that it’s got a decent market cap to it, with stable cash flow. But with just 7,300 shares/day trading hands on average, how can any PM ever build a useful position?

Go get ‘em.

MRM

Since he recently estimated his own 1990 version of the Latour to be “trading for $5,000″ per bottle (see prior post “O’Leary fact watch: a 1990 Latour trades for $5,000?” Oct 17-11), KO will definitely want to get his hands on a case or two of the stuff — particularly if he can get it for a delightful $4,250 off each bottle!

Would be a licence to print money, wouldn’t it?

Or, since he paid a reported $300 for his bottle, perhaps Mr. O’Leary might want to enter his precious bottle of Latour for sale in the Sotheby’s auction…before the price drops even further. The 1990 Latour went for ~US$833 each at a New York auction last Fall. Now it might settle for C$750 (before buyers’ premium). Such a bargain, but not if the price is soft. Does that make one a buyer or a seller?

Decisions, decisions.

MRM
(disclosure – this post, like all blogs, is an Opinion Piece)