Why did Bombardier do a R/S?????????We here, are all trying to guess why the Bomber did a reverse split???
We were all guessing this, or that. Delisting, attracting Institutions with a higher SP.
We were all wrong.
There was only one underlying REASON that was always a necessity. That was to reduce the 2.4B float. There were too many outstanding shares. Especially given that the company went from a $22B in Revenues down to a smaller $6.8B Business Jet division and $6.1B in Revs.
Here is what really happened.
This is just MY HUMBLE OPINION of course. But it's the only thing that makes sense. The way I tied the pieces together was the Hiring BART DEMOSKY
Club and I, and many others here, were racking our brains to figure out why they did the reverse, and why so large a split and timing etc.. Club wasn't getting the right answers from Francis Richer. Nor could anyone else get the proper answers from Management.
Here is the reason why they did the R/S
Bart Demosky was the catalyst.
Remember BD came from CP Rail. I was always saying that he was the KEY and the FINANCIAL BRAINS behind the Financial transition from BT to BBA for Bombardier.
Don't get me wrong here. BD couldn't, and didn't do this alone. Eric Martel hired Bart, and Eric was the BRAINS behind fine tuning BBA (Bombardier Business Aviation). EM (CEO) was operation guy, and BD was the Money guy (CFO)
Well here is what could have happened and this to me is the most logical reason that, we got what we got with the R/S.
PB was starting to believing in EM, and EM believed in BD, because those two worked well together, and transformed the company. EM started to fine tune the Revs on the business side, and BD went after the LTD, and stablized the whole company's Finances with the BT money.
BD used his experience from CP to model Bombardier after CP.
I know that a lot of you aren't going believe this. But this is as close to the truth as we are going to get. Because when PB started to see the Bomber transformation, and Financial changes, to such a strong position. PB started to believe in EM & BD. EM believed more, and more in BD, and BD used CP as a MODEL to transform Bombardier as close as he could to CP. You can chose to believe all this, or not??? It doesn't matter to me. But I did my DD and this is the only thing that makes sense.
Here are some of the REASONS why I believe that after the digging I did on CP, and compared them to Bombardier made/make sense.
CP is not that far off in comparisons to Bombardier. Other than the huge glaring facts of CP's 50% annual Margins as opposed to Bombardiers 20% Margins on Revenues. The companies are fairly similar after that. They're both had to do with Rail. They Both have similar Revenues. In 2021, CP $8B, Bombardier $6.1B. Bombardier's Revenues will go up to $7B soon.
The Biggest glaring difference to me now, between Bombardier & CP was the shares outstanding. CP had 185M shares up till June 2021 and they Split forward 5 to 1 to have 925M now. Bombardier did the reverse in june 2022 of 25 to 1, and now have only 85M.
I can give you other comparisons, & many other differences of course, and people here that like to argue, will argue all day about the other differences between BBA & CP, and so on. But the bottom line is that BART DEMOSKY was able to convince first EM & then EM was able to convince PB, that this is the only way to go. Because Bart came from CP, he knew that this would work here. BD realized that BBA is not that different that CP, and that at the very least, if he lowered the LTD of Bombardier to $3.5B, then this could work. So they presented it to PB, and here we are right now. The good thing here is that, we could see (Big Could), a positive split down the road assuming that the SP will recover by 2025. CP went from, $70/s to $350/s before they split in 2021.
Also remember that CP has 80% of Institutions that hold their Public shares right now. Bombardier biggest complaint other than reducing their 2.4B float, was that, NOT enough Institutions are buying their shares. I think that Institutions will start to come in slowly this year & next year, and that the Bomber's Revenues will increase to close to $7B at the end of 2021. I also saw that CP had only 0.02% of insider buying for their shares, and I'm sure Bombardier is slightly worse. But those kind of things don't matter on the SP, even though people think that Insider buying matters, in either CP or Bombardier. IMO, insider buying matters most on companies with small Revenues, and newer, or start companies.
So in a nut shell. CP is on their way to better pastures with the acquisition of Kansas City, and Bombardier is on it's way to better profits from stronger Revenues, with an emphasis on a very low float, and Institutions buying into the company's SP.
So again Club. I think this R/S baby, was a Bart Demosky invention. Our 25 to 1 is only explained with the low CP float in comparison of 185M before June 2021. The high Bombardier float of 2.4B is also easily explained by the Bomber's need for Public money over the years. Now we're cooking with gas with BBA. As for the timing of the split. They didn't care about the shareholders, as long as they the timing suited them. This combo of EM & BD are way better than those lying idiots of Bellemare & John DiBert. In fact I think that EM & BD are telling PB what to do, to get Bombardier strong again. Instead of the lying puppets of Bellemare & John DiBert putting PB's fires out.
I now have my direction here for my holdings. Everybody has to do their own DD.
If CP did so well to be able acquire a $35B company with such low Revs., but high Margins of 50% to Revs. Then there is no telling what Bombardier can do with a little better guidence from EM & BD. I may regret this again, but I may add to my position after Q3 or Q4 2021. But the only reservations I have, are that the Business Aviation & Defense Margins are at 25% at best, and Bombardiers, FIXED Minimal Expenses, not including yearly CAPEX, are fairly high. As Pablo said a while back, that these fixed expenses can only remedied by higher Revs & Margins. Going forward the concern of the LTD is getting less & less a worry for me. As management has to deliver on the capacity increase, and be be very disciplined on CAPEX, especially in the 2023/4. This is not that hard, but we are in difficult times, with Supply issues & Labour disruption issues. The good part for the company is that we have more than enough, skilled Labour to go around, with 14,000 employees. But even there, some trimming of the fat has to occur, only after the coming on stream of Pearson. I don't think that supply issues are going to be as much of a problem in this recession, because the Bomber has control of it's manufacturing and the parts supply pipeline. Remember that this Inflation will cause the recession. But the skilled Labour to supply those parts for all those Planes, for Bombardier, is available right here in North America. So we're lucky in that sense, because people here in NA will want to supply & we'll even get some competition if the supply side gets too inflated. Keep our fingers crossed that Interest rate hikes reduce inflation quickly & Labour & Supply issues stablelize. This covid stupidity, & low interest rate enviroment, has casued such Chaos. Let's hope the Global economies can recover slowly. This Inflation problem, will not be easily & quickly resolved. But curbing such high, and INCAUTIOUS human demand problem, for cheap money & the best of everything isn't going to stop overnight. But it must be curbed.