Yikes. This is a stirred up hornets nest. A few observations I had been expecting a bit of a lull around $2.00 but I guess it came early. Normal supply/demand interactions are distorted by the lack of vision, clarity, and tendency to make excuses. In short, really lousy execution.
That said, there's going to be a significant coiled-spring type vibe though as the peers continue to rise and this stays put. It's quite a scathing indictment on the vision (or lack thereof) set by leadership to not keep pace. The value gap presently is egregious; having it widen is unacceptable. Heaven forbid they'd do something about it -- make a presentation, articulate a vision. Nope. Like buddy said, crickets chirp.
At some juncture, if the gap gets wide enough, someone will just tender a hostile. Poison pill or not. This, I think, becomes more likely as the cash on hand grows. In hindsight it's either a shame or a benefit Ken sold the option to the refund already. I don't know. Who knows, maybe Ken peddles the current duty cash on deposit for a discount again to pad the balance sheet and make the above vison more likely. So his wheeling and dealing may simply hasten his demise as CEO. Unlike Norbord, where Peter kept a senior place, I am reconsidering that maybe there is zero role for Ken in a takeover. Jordon will be fine. I don't know about the other two exces. I'm not sure what they do. I guess the one guy runs the mill?
To previous comments, the Covid era does not change the underlying demand/supply balance for the worse. In amplifies it. Feel free to enlighten me as to where a wall of wood will come from, or how consumer buying power will suddenly be truncated. Everyone prioritizing an Apple iPhone and iWatch spending spree as priority #1? I doubt it, simply based on a Maslow's hierarchy type vibe. Believe what you want, however.
Also the old ~1963 mill has little bearing as I don't believe it's ascribed any value in the marketplace, whereas it's lumber margins in high pricing should be. All I mean is the mill is uncompetitive in a $350/mfbm pricing environment, but at $800 as current (and with a likely $600+ avg. in 2021) the incrementally higher conversion costs also have no bearing on reality. Or in other words, this is grossly undervalued on the power cash flow alone. It's not for everyone however, and if that strikes you as suspect ETFs are a better bet most likely. You will see the value reduction in a sum of parts valuation or takeover, where instead of $500/mfbm capacity you realize like $150/mfbm or something as it's old and likely under capitalized.
To other comments, we will have to see about the long run prospects. My take, coming from the industry, is that it's difficult but not rocket science to run these things. More a grit and execution thing than a spreadhead notion. You need a strong and loyal workforce. You can have some ineptitude at the top and get away with it, largely, but it can't be excessive. This likely is.
I was reading about poison pills the other day and thought the downside commentary was interesting. I think it's given air-cover to Ken's lack of accountability. This guys is always has an excuse, and never a dividend. And always dilutive pressure on the share base. I'm still livid about the "inventive shares". A grotesque travesty IMO. Maybe there's something to be said for the sell-off at $1.50 that we can't seem to shake. I doubt it, and suspect I have a much larger position than most retail guys, but still it's grating to see such dismal short run performance. Oh well.
Poison pills are not without their downsides. Most notably for investors, a company triggering a poison pill is typically requiring an existing holder to commit more capital to buy new shares just to retain their stake. As with any new share issuance, a poison pill is dilutive.
More broadly, in normal times a poison pill is thought to give wide leeway to management teams and could make companies less accountable to shareholders. The poison pill concept only works based on the assumption that a takeover, or activist intervention, is not in the best interest of long-term holders. But there are plenty of examples where shareholders have benefited from activists and would-be acquirers causing poorly run companies to shape up.
Anyway, I was looking for compensation info and can't find an information circular newer than 2017. But the website promises this:
Our leadership team has extensive experience and a proven ability to perform effectively in a company focused on optimizing profitability. Conifex’s leadership has an extraordinary commitment to the company, as well as financial and reputational incentives to ensure future success.
You guys think this is true? Seems like a farce to me. Shields is getting, back in 2016 alone (so much higher now):
- $450,000 base
- $442,000 share-based; likely much higher since he diluted our holdings in exchange for not burning down the store
- $400,000 for the annual incentive. 2016 wasn't even a good year.
- Another $45,000 for other stuff.
Here's a modest proposal. Put this out of its misery. Send Ken packing. Sell for $100M, or a 42% premium. Take an Interfor for example: they could do equity only and issue another 4% of their share count, while increasing their lumber capacity by 8%. And the power cash is a bonus. It's not a great deal, but insomuch as it rolls CFF into a more viable and better managed company we all win.
Synergies for IFP and a more stable annuity cashflow based on the power rev. They also need to sell to a BC based firm to ensure that in 15 years time BC Hydro gives them a nice renewal on the power deal. The above example becomes a loser if it means going private or joining Western or something. In the mean time, this is a losing hockey team. They've fired a lot of coaches. But the bell tolls for thee, GM. Time to go. I sure hope BWC and Polar start throwing some elbows. And Mr Rhino can organize his liver cirrhosis boat parade in Willision Lake or whatever he was on about to put some extra heat on these clowns.