Five Signs Of A Good Financing:

Investors should generally dislike companies that issue stock because it's better if they are self-financing and don't need to dilute their shareholder base.

However, companies do need to grow, and financing is one of the prime reasons the stock market exists in the first place. Rather than dismiss all financings, here are five points to consider in determining whether one is good or bad.

A new share issue should be priced higher than the prior one

This seems so basic, but stocks are supposed to go up. When a company issues stock at a lower price than its previous issues, it just makes us mad.

No increase in the deal size

Companies should take what they need in a financing and nothing more. Enterprise thought it wanted to raise $12-million. What suddenly changed to dictate that it now needed $24-million?

Insider participation

We like to see insiders buy new shares alongside other investors. If we are going to recommend a stock, we want management committing their personal funds as well.

No sweeteners

We just cringe whenever we see warrants or other sweeteners attached to a financing. Issuing such attachments is, to us, akin to a bribe to potential shareholders. “You don’t want just common shares of our company? How about we throw in half a warrant as well?”

Warrants bring out a different type of buyer, typically hedge funds that short the stock against the warrant, or shorter-term players looking for a leveraged pop from the warrant.

We also don’t like most convertible debentures, because they include the obligation to pay interest. We prefer that a company issue regular, plain old vanilla common shares. Nothing fancy: straight equity with no commitments.

A clearly defined use of cash

It always makes us wonder when a company raises money for ‘general corporate purposes,’ and not in a good way. We know that the line is often just thrown out as a tag in a press release, but a company should know exactly what it wants to do with its new cash.

Many companies raise cash as a cushion, which is fine, but too much cash can be a drag on the returns a company makes.

It's preferable if a company issues stock for something specific, say, bridging an acquisition with debt. Shareholders then know where the proceeds of the issue are going, and do not have to hope that the company does something smart with their money.
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If copper stays at $5, they should produce $9 billion in free cash flow or 15% free cash flow yield.

It's run up 166% in 3 months, but he won't bet against it, because they control the ecosystem of the young. HOOD, Roblox and American Express, we love.

Hallelujah! It's taken way too long. It's our best asset in addition to water. Best part about getting gas to market is that these pipelines will open up Asia, and maybe even Europe. The last prime minister rejected us selling our gas, but this is what we do well. We have to support this. The revenues that come from it support it. Great time to be in the gas patch, and it's good for Canada.

He'd disagree. We've only just gone through a generational shift in interest rates. 2020 saw generational lows in rates, the last one being 1951. Long-term higher rate cycle is great for financials. The XLF (the financials ETF in the US) didn't make a new high from 2008-2022, and that started a new bull market.

Our Canadian banks dodged the 2008 bullet, and they're in good shape. Performing well, and he'd be in no hurry to sell.

Rumours of Trump about to fire Powell sent markets tumbling and interest rates rising. Then, Trump denied the firing, and market rallied. The market said that Trump is wrong about firing Powell. While Powell made mistakes in the pass, raising them in late 2018 and calling inflation transitory post-Covid, there's no reason for him to cut rates. Trump would be smart to leave Powell alone. Firing him would rock the stock market and raise long-term interest rates.

Top Performers in June: 

Propel Holdings Inc. (PRL)

The best performer of June was Propel Holdings Inc (PRL) whose stock price was up 19.4% on the month, up 2.9% year-to-date, and up 48.5% over the past year.

PRL is an innovative fintech company operating through three main brands, MoneyKey and CreditFresh in the US, and Fora in Canada. It reported strong earnings in early May, which helped to improve its momentum, and since then, it has carried this positive momentum into June. The name was heavily sold off during the April Tariff turmoil decline, and since the market recovered, PRL has continued its climb higher. It trades at an 11X forward earnings, it has a 1.9% dividend yield, and with a strong growth profile, we feel this name can move higher in the coming year(s).

Galaxy Digital (GLXY)

The second-best performer of June was Galaxy Digital Inc (GLXY), whose stock price was up 17.4% on the month, up 19.3% year-to-date, and up 74.7% over the past year.

It operates across a few main segments: global markets (trading, lending, derivatives), asset management (venture investing, passive ETFs, etc.), digital infrastructure (data centres for blockchain and AI). It has now completed its uplisting on the NASDAQ exchange, and in June, it closed its first external venture fund at more than $175 million. This fund aims to back early-stage blockchain and digital asset startups. The crypto market has been moving higher in general, and this has helped to improve its price action. Lastly, it has established a strong partnership with CRWV and this has helped to drive growth and diversify its operations.

Magellan Aerospace Corp (MAL)

The third best performer of June was Magellan Aerospace Corp (MAL) whose stock price was up 14.4% on the month, up 91.7% year-to-date, and up 140.9% over the past year.

MAL is a small ($1.0 billion market cap) aerospace name that pays a decent yield of 0.5%. It has a diversified customer base and long-term contracts, serving customers like Boeing, Airbus, and Lockheed Martin. In late May, TD Securities upgraded MAL and raised its price target, which helped its price action into June. It also announced a dividend increase and it gained momentum from the rising global military and defense-related spending. Given its forward expected earnings growth rates, its valuation of 17X forward earnings seems fairly attractive to us.
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They're not Blackwell state-of-the-art, but the next best thing. A year ago, they were the cat's meow. It's why NVDA popped up another 4% yesterday. Gives more legs to the whole AI revolution going on out there, with China being such a large market.

He was surprised, but pleasantly, as he's pretty overweight in the AI ecosystem.