Brattle Street Investment Corp. 2

October 1 2020 – CA: BRTL – $0.12 CAD

Prologue
Look, people don’t like when things come fast. It makes them feel uncomfortable, weird questions are asked, and so on and so forth (you know what I’m talking about). On the other hand, when good news about your pet net-net (Brattle Street Investment Corp.) comes faster than expected… people rejoice.

Jokes aside, when I wrote about BRTL a month ago I (naturally) hoped that something interesting would happen immediately. I reckoned it could take a year or two though. I was happy to just sit and wait. The good news is a welcome surprise.

What good news? Mr. Dalsin and Greene appear to be in the early stages of an interesting deal.

Valuation and Price
The pre-trading halt valuation was $0.18 per share (NCAV) and the last price was $0.12 per share.

What’s the deal? First, The TSX Venture Exchange has to approve the transactions that make up the deal. They are all pending. Big picture as of now: BRTL transforms into Salona Global, a healthcare roll-up. The first stage of this roll-up is acquiring SDP, hiring new management and doing a private placement. Here’s all the math from their recent filings: 1) a 7.37 shares for 10 rollback. 2) Issue 19mm shares to acquire SDP and get a pre-money valuation of $45.9mm. Now at 54mm shares out, that’s $0.85 per share. 3) Private placement for $8.5mm at $0.85 per unit (unit = 1 share and 1/4 warrants).

It will be interesting to see where the stock trades after The TSXV makes their decision. If they OK the transactions and the stock trades at $0.85, we’ve made about 5 times our money (math: $0.85 per share / ($0.12 * rollback (10/7.37))). Not bad for a net-net.

10-year chart.

Margin of Safety
Evaluate risk first. The deal could fall through and BRTL goes back to the land of net-nets. If the deal goes through, it’s likely the stock will become more liquid and have a higher valuation – two things that make me a bit leery. My thinking will have to change and I’m sure my valuation approach will too as it will become a healthcare roll-up with lots of shares issuance and further private placements for acquisitions.

Et Cetera
It’s likely that Mr. Dalsin and Greene have sold the deal to institutional investors that made money on their last roll-up called Patient Home Monitoring. More on that later, Salona Global is a good resource for now

I’m still trying to wrap my head around how they kind of went whoosh that’ll be $0.85 per share please.

In the specific deal documents to acquire SDP, why are does it note they’re offering shares of stock for $8.5mm at $0.55 per share?

Why is Les Cross doing this for a “measly” 4.6 points. Does he own through a holding company, is he going to get lots of options, did he own part of SDP before the transaction?

I own shares of BRTL.

Acknowledgements
Thank you Chip, Dean, Paul, Saj, and, Trevor for your help.

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