The VerticalScope Fraud perpetrated on Torstar ShareholdersHi all,
Strong accusation but here at the facts for your consideration:
· Long-term debt at VerticalScope has grown from $56 million 3 years ago to $161 million or a CAGR of 42.2%;
· Revenues for VS Q2 2016 versus Q2 2018 have grown at a CAGR of 16.3%;
· Management is quoted on page 14 in the MD&A as stating “13% year to date growth largely benefiting from growth from acquisitions.” Pressed by the analyst on the conference call DiMarchi acknowledged that organic revenues declined in the low double digits. Why wasn’t that disclosed in the MD&A?
· Boynton referenced and commented on the “continued solid growth at VerticalScope”. When growth is propelled by buying revenues at multiples that are unknown to investors that is not solid growth by anyone’s definition of growth. That is all part and parcel of a scheme to mask the decay in the core business.
· Blaming the revenue decline on Google’s search algorithms is a pathetic excuse and a convenient way to buy time. Stating it is going to take several quarters to resolve this issue is unacceptable.
On the broader topic of Torstar, the transformation gobblygook is laughable and the Board should be embarrassed, although they seem impervious to the most ridiculous of claims and results.
Advertising was down 19% in Q2 and flyers were down 15%. No reference was made to the one-time uplift from the provincial election which generates still significant advertising revenues from the provincial government, political parties and candidates.
The Q2 net income of $4.8 million was not remotely possible without the $15.8 million digital media tax credit that will not be repeated in the future. Those that got giddy about the signs of a turnaround are sure to be disappointed next quarter and beyond.
You can also be sure the Doug Ford government will do everything in its powers to not help the Toronto Star or Torstar for reasons well known to all readers of the Toronto Star.
Time for the Voting Trust to realize they have been taken for a long and expensive ride. It is time to finally hit the ejector button before the wheels come completely off the rails and all is lost.