Salona Global Medical Device Corp. No. 3 $SGMD.v

The snowball is taking shape.

Salona released their Management Information Circular a couple weeks ago. The Shareholder meeting is March 11. Just my opinion… you should vote Yes on the proposed transaction and hold on to your shares for a bit.

Salona is buying South Dakota Partners (a white label medical device manufacturer) in an all stock deal for about $3.0mm CAD ($2.5mm USD) worth of stock (19mm shares @ $0.16 per share).

South Dakota Partners revenue grew about 25% annually between 2017 and 2019. Covid caused revenues to decline, and my guess is they managed to do about $10mm USD in 2020. I don’t know what SDP normalized earnings are. Seeing a 1/4x (depressed) Revenue multiple on the acquisition does make me happy, though…

The resulting issuer will have about $11mm CAD (8.3mm USD) in working capital and I reckon they do a few more acquisitions this year. Also, I believe Les Cross will eventually be replaced by the COO, Luke Faulstick. Management and Insiders will have about 7mm shares worth of options – a nice incentive to grow the Salona snowball.

There will be some dilution to acquire other small privately-held medical device companies. I’m pretty confident that most acquisitions will be reasonably priced, and the stock will be much higher in a few years than the rollback’ed $0.16 it closed at.

I own shares of $SGMD.v.

Salona Global Medical Device Corp 2 $SGMD.V $0.40 CAD

A brief update on Salona Global.

Salona Global published an update on their pending transaction and Q3 financials on Thursday, January 21.

Before we begin, I need to correct a few mistakes from my first Salona Global post. Thank you Chip and Jacob for pointing them out. The whole Valuation and Price section is wrong… shit. Cash After the Transaction should be $16mm, not $24.5mm. Net Assets are now roughly $22mm, not $30mm. There is also an $11mm tax credit from their previous Annual Report, but we’ll leave that aside for now. Luckily, pro forma financials are coming soon and we won’t have to guess as much.

Salona received approval from the TSX Venture exchange Wednesday, January 20th. They will hold a shareholder vote on Tuesday, March 2nd. With Mr.’s Dalsin and Greene owning roughly 1/4 of the company, and poor stock performance of BRTL, I believe shareholders will vote the deal through. But, what are the rules for these types of meetings? How many votes are required for approval? I don’t actually know, and should probably find out.

Meeting materials (management information circular and pro forma financials, among other exciting things) will be released around Tuesday, February 9th.

I’m (perhaps naively) excited about this whole situation. I bought stock as a net-net, figuring Mr. Dalsin and Greene would just do something interesting. A healthcare roll-up with a potential Nasdaq uplisting is interesting, to say the least. Time to stop patting myself on the back, though. I should get back to work.

Disclosure: Long SGMD.V (I can’t sell it! It’s halted).


Colony Capital Inc

Theft, but it’s OK (…right?).

I stole this idea. A lot of what I’m doing here is paraphrasing the work of my friend. OK? OK. With that out of the way… let’s dive in.

Big Picture

People, businesses and communities continue to increase their use and dependence of technology. More and more people shop online, stream content and make Zoom calls, every day. We know this. The story isn’t new. covid accelerated these phenomena, etc.

Interestingly, this growing use and dependence on digital stuff… results in massive changes in the physical world. More specifically, it’s having a profound effect on digital assets.

Little Picture

Colony Capital is undergoing significant change. It’s transforming from a diversified REIT to a digital asset-focused asset manager. During 2020, Colony hired Marc Ganzi as CEO (after acquiring his company) and shed some non-digital assets, like their hospitality and bulk industrial assets, while acquiring digital assets like data centers, fiber businesses and cellular towers.

In short, they use OPM (other people’s money) and a bit of their own, to acquire and operate digital assets.

Valuation and Price

I need to improve on this section, as I’m totally relying on my friend, but here we go…

CLNY has about a $2.5 billion market cap and is trading close to its 2021 NAV of $5.00 per share. The belief is that Colony will be worth $8.00 per share in 2023.

Margin of Safety

The stock price has come up to 2021 estimated NAV, but there’s still a pretty big redundancy with an $8.00 2023 price target.

Marc Ganzi is an absolute stud with a great track record.

I need to work hard and do more of my own work on this one, to see if I can develop conviction, otherwise the margin of safety doesn’t even matter.

Et cetera

Need to learn more about Marc Ganzi, digital assets, and 5G.

Some interview of Marc. He kind of talks like Bruce Flatt, but perhaps all polished executives speak similarly. https://www.youtube.com/watch?v=UGrJEPFVATw, https://www.youtube.com/watch?v=bSV8_d15O74, https://www.youtube.com/watch?v=oY8CJ23bPs0.

I own shares of CLNY.

Acknowledgements

Thank you to my friend who wants to be anon.