RE:RE:should i be concerned? Hey all,
If you're confused by the posting on here I don't blame you. It's hard to separate the insights from the noise so let me attempt to simplify the bull/bear cases for you:
Bull Case
If you like OG you were probably attracted to their ethical concept of business that aims to provide Canadians will lower cost groceries while providing a positive presence in their communities through various environmentally friendly initiatives. On a fundamental level you think revenues will continue to increase overall, but in particular the newer locations like Liberty Village will see improving performance over time. You hold the view that a company which offers superior pricing for the same products as their competitors will eventually convert customers and steal market share. Importantly you belief the company can improve bottom-line profitability through growth and cost-savings (identified most recent press release). Here you see them as having options at their disposal to accomplish operational efficiencies like price increases which would still maintain their lowest price status, and the distribution centre capacity (20 stores). You see the company as being true to it's rollout strategy of 1-2 new stores per year. The 5th location (Bayside) lease has been signed with construction expected to be completed in Q4 2019. The 6th location (Leaside) lease has also been signed with construction expected to be completed by Q2 2020. OG bulls recognize that the company isn't profitable today but believe growth will bring them closer to this goal. In the meantime you see them accessing capital however they see fit, either through debt or equity. Proponents of the company also compare and contrast OG in a wider context of public companies, and invest with a 3-5 year horizon in mind which is a standard runway for a company to prove out its business model. They see OG not as a short-term trade but as a long-term progressive buildout.
Bear Case
Now if you don't like OG you probably don’t care about the company’s ideals, and instead choose to focus on fundamentals. You think revenue growth is weak based on Liberty Village only growing overall revenue by 19% whereas going to 3 to 4 stores should have grown by 33%. But in all honesty bears probably don’t care about revenues all that much; they see the fact that the company isn’t bottom-line profitable as the major concern. This then maps onto the company’s generally high debt levels. Bears will recognize that the company does have a relatively low share count so they shouldn’t have a problem issuing shares to raise capital. However, further debt raises would take an already painful situation and make it insurmountable. They question how long the company can survive for purely based on dilution but arrive at a projection of about 18 months and 10-15M shares issued per new store. With 37M shares currently outstanding, for OG to total 10 stores would bring them to 97-127M shares outstanding.
As usual I own shares of OG so I’m not to be trusted. Please feel free to comment…
Cheers