TSX:AX.PR.E - Post by User
Comment by
richerthanthouon Jun 04, 2015 3:43pm
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Post# 23798095
RE:Slow melt down
RE:Slow melt downI believe the problem is two-fold
1. They have not been earning their cost of capital for a few years, which basically means every $1 of extra earnings costs them more than $1 to obtain. Ultimately, this destroys value
2. Until last year, investors were holding on because they had the wind in their back from the oil economy. Suddenly, that doesn't exist anymore or is at least in jeopardy.
With the reduced outlook, it seems like they will earn an even lower return on capital (which was already below the cost). The only way out of this situation is to sell off the pieces that return the least amount compared to their cost and return that capital to investors.