Second stock in the clip. GLTA
https://www.bnnbloomberg.ca/video/jason-mann-s-top-picks~2273934
GreenFirst Forest Products (GFP TSXV)
This one is another special situation that we’ve played in our merger arbitrage fund. [It’s] small cap, trades on the venture, but quite interesting. Management is ex-Fairfax, well regarded.
GFP is now one of the top 10 lumber producers in Canada following the just completed purchase of eastern Canadian mills from Rayonier. These were actually Tembec mills and have been around for decades.
What made it a special situation is they funded this purchase with a massive rights offering (relative to their market cap) to buy shares at $1.50. These rights couldn’t be exercised by U.S. holders, which caused a lot of forced selling in the market. Stock went from $5 to $1.80 as a result. Senvest back-stopped the offering – you might remember them from their massive win on GME this year.
These mills were bought cheaply around 2.2x EBITDA at $500 lumber (lumber is moving back up, last above $600). Stock is 3-4x EBITDA currently, in-line with comps. The key is they believe they can improve utilization and make these numbers look meaningfully cheaper, which should provide a re-rate higher.
So, an emerging way to play lumber with a team that we expect we’ll hear from again as they grow this business.