November 25, 2015

The S&P 500 and Toronto were both essentially unchanged on Wednesday.

U.S. markets are closed on Thursday.

Bombardier had a 12% rebound. The Bombardier pref share that we follow rose 3%. I suspect these shares will rise somewhat as it becomes apparent that Bombardier is not going to actually go broke.

AutoCanada fell 6.8% to $25.54 as the company announced a share sale at $25.50. At $75 million ($86.25 million with over-allotment option) this is a fairly large share sale in relation to the existing $626 million market cap. The number of shares will increase by about 14%.

It was only a week ago that AutoCanada negotiated an increase to its credit line for $200 million to $250 million. As of September 30, it had $133 million drawn on the then $200 million credit line. It subsequently purchased or announced the purchase of about four dealerships.

Overall, it appears that the equity issue is not any sign of financial duress but rather is to provide continued funds to make acquisitions. RBC was involved in the increase to the credit line and it will benefit from the fees to raise this equity.

At this point considering this equity raise and considering that Q4 is likely to be a poor quarter, it does not seem likely that there would be much reason for these shares to rise until and unless the company can resume earnings per share growth perhaps in Q2 of 2016.

I think this company should do well longer term based on its acquisition strategy but the near-term does not look encouraging.