Tuesday was another negative day for Canadian markets. The S&P 500 was down 0.4% and Toronto was down 0.3%
Bombardier was down another 4.8% to just $1.79.
This company has been a disaster for both investors and for the extended Bombardier family for the last 15 years.
At $1.79, its common equity market value is $2,404 million. It’s assets are $29,085 million. On its books, the value of its common equity is shown at a palty $200 million (this is after deducting preferred shares of $347 million)
It has debt of $9,046 million.
Its corporate governance is abysmal. Its Board of directors is stacked with five family members, three of who have been on the Board since 1975 (and probably prior to that at predecessor companies). Some other Board members I would describe as political hacks or celebrity appointees (former Premier Daniel Johnson, Jean Monty of Nortel infamy, Vikram Pandit of CEO of CitiGroup at the time of the financial crisis, and the CFO of Google). Some years ago it appointed a then relatively young family member as CEO. But investors are not blameless, they continue to elect this Board with only a small percentage of votes withheld. I would imagine that the large extended family is not too happy with this Board as they see their family fortune melting away.
I don’t know what is going to happen with this company. If it were to become insolvent it is likely that the Quebec government would work to save the jobs. But that does not mean that shareholders would be rescued.
Canada’s low dollar should be a major positive for this company but it may be that the company was “clever” enough to have hedged away the gains.
I still cling to some hope that the company can pull out of this dive and begin to report significant earnings. However earnings on the C-Series appear to remain at least a year away and meantime there are reports that it may take yet another restructuring charge in Q2 in relation to its plans for the next generation of its largest global business jets. The new CEO has been in place for only a few months and it is possible that he will be able to give some confidence to the market when it reports its Q2 results. This would include plans to sell off a portion the rail car business.