February 17, 2016 11 am eastern
The big news this morning is Bombardier’s potential plane sale to Air Canada as well as their layoffs and losses.
At least Bombardier finally may be admitting that it is in dire straights.
The sale to Air Canada is a potential 75 aircraft. Based on list price that is worth $3.8 billion. However, I have come to understand that referring to sales at “list price” is highly misleading although standard practice in the industry. I understand that sales may actually be at deep discounts to list price. I recently read that the discounts can be in the order of 50%. One can imagine that Air Canada got a big discount here given the desperation of Bombardier. So really, even mentioning list price here is just another example of Bombardier’s failure to be candid in its reports over the years. (For example, you will find very little reference to government assistance in most of their reports over the years).
I am at a loss to understand how it would work if the Federal government were to invest $1 billion in the C-Series on the same terms as the Quebec government. Quebec now owns 49.5% of the C-Series program. If the Federal government matched that, then Bombardier would own 1% of the C Series?
In other news, markets are strong this morning. I therefore decided to sell the rest of My Canadian Tire shares. I am not sure that was a wise move but I had a large gain on these shares and even if Canadian Tire is a still a good investment, there are better investments available at this time. And there is a chance that Canadian Tire will have some bad news to report in its Q4 in regards to the low Canadian dollar. In the past few years or longer, they have managed to surprise very much to the upside but we shall see what tomorrow’s report brings.