SafetyinNumbers Posted February 9, 2021 Share Posted February 9, 2021 Farmers Edge files for IPO. Pricing Feb 22, close Mar 1. Lots of info filed on SEDAR for anyone that wants to learn more. https://www.newswire.ca/news-releases/farmers-edge-inc-files-preliminary-prospectus-for-initial-public-offering-of-common-shares-868468104.html Link to comment Share on other sites More sharing options...
petec Posted February 9, 2021 Share Posted February 9, 2021 Wow that thing’s losing money! Utterly astonishing looking at those losses to think Prem claimed he invested at 4x projected EBITDA. Some projections! Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 9, 2021 Share Posted February 9, 2021 Wow that thing’s losing money! Utterly astonishing looking at those losses to think Prem claimed he invested at 4x projected EBITDA. Some projections! It's bat-shit crazy. We knew that they were losing money because some of that showed up in the FFH AR. But, we never had the opportunity to see the more detailed financials before, and I must say that I am gobsmacked. Not only are they losing money, but the prospectus doesn't make much of a case that they've got such great operating leverage that they can grow out of their losses by signing up more acres. It looks like they might have negative contribution margin, which would be a complete and utter shit-show. The good news is that sometimes it's more desirable to be lucky than good. The market seems to like these sorts of "disruptive" offerings, and Farmer's Edge is selling itself as a disruptor. This might be the best timing imaginable to IPO this pig. All of the data about FFH's holdings post-IPO are starred out pending final numbers, but there was enough disclosure there to be fascinating. They plan to IPO it for somewhere in the range of $10-17/sh. If I've understood correctly, FFH has convertible debs worth $225m, with an impending mandatory conversion at $2.40/sh. So, if we truly believe this is worth $10, FFH is holding about CAD$1 billion worth of debs at the moment. There is that minor detail of an 18-month lock-up following the IPO, as well as the prospect of trying to dump nearly 100m shares, but in principle, if we at all believe that the IPO price is reasonable, this would be profitable as hell for FFH. My view on this is that it's beyond bat-shit crazy. The IPO price is ridiculous and I am flabbergasted that FFH would have taken a position size of that significance in this company. If it ends up working out, that's great. But, reading that prospectus has actually reduced my esteem for FFH management. SJ Link to comment Share on other sites More sharing options...
bluedevil Posted February 10, 2021 Share Posted February 10, 2021 With accrued interest, it is 272m in debs. And some deal with Osmington that suggests FFH gets 10m more shares for 2.40. Plus they get 18m additional shares as warrants for the debs. At no cost. If the IPO pricing is right even at the very low end of the range, this seems like a huge payoff. All in all, if I followed everything, they will have 140m shares at a cost of ballpark 300m. 10 dollars per share means ballpark profit of 1.1 billion! 17 dollars per share means ballpark profit of 2.1 billion! I hope I’m reading this right and they IPO range is real. Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 10, 2021 Share Posted February 10, 2021 With accrued interest, it is 272m in debs. And some deal with Osmington that suggests FFH gets 10m more shares for 2.40. Plus they get 18m additional shares as warrants for the debs. At no cost. If the IPO pricing is right even at the very low end of the range, this seems like a huge payoff. All in all, if I followed everything, they will have 140m shares at a cost of ballpark 300m. 10 dollars per share means ballpark profit of 1.1 billion! 17 dollars per share means ballpark profit of 2.1 billion! I hope I’m reading this right and they IPO range is real. I like your numbers better than mine, so I hope that yours are the correct ones! Now all they need is for this IPO to actually fly at the suggested prices *AND* for FFH to find some sort of exit-strategy for what could theoretically be a position with a very high market value. I have more than just a bit of doubt in my mind about each of those requirements! SJ Link to comment Share on other sites More sharing options...
nwoodman Posted February 10, 2021 Share Posted February 10, 2021 Attached the prospectus. SEDAR is a bit clunky at times. Agree with the comments above. I see this as a once in 20 year opportunity for Fairfax to really clean up the balance sheet. I hope they embrace the opportunity with gusto cheers nwoodmanCheckCode.do.pdf Link to comment Share on other sites More sharing options...
Dazel Posted February 10, 2021 Share Posted February 10, 2021 Do you guys think that Berkshire will return their profits from Snowflake? Let’s go!! Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 10, 2021 Share Posted February 10, 2021 Do you guys think that Berkshire will return their profits from Snowflake? Let’s go!! I am a shareholder in BRK. I would like them to REALIZE their Snowflake profits, which would require some sort of exit-strategy. Snowflake, Blackberry and Farmer's Edge do not look like businesses that will provide enormous cashflows to their shareholders over the life of the company. They are companies to sell opportunistically rather than hold forever. SJ Link to comment Share on other sites More sharing options...
Dazel Posted February 10, 2021 Share Posted February 10, 2021 I don’t pretend to be an expert in growth companies quite the opposite. Farmers edge subscriber growth Is very impressive....and the market is paying for growth...NOT VALUE. May be we are the ones that have growth wrong?!!! Because growth has been getting investors to pay up for well over a decade. Fairfax and Farmers edge are giving the market what they want. Disruptive technology.... Link to comment Share on other sites More sharing options...
Xerxes Posted February 10, 2021 Share Posted February 10, 2021 They got to get this on Prime Time either on WSB or ARKK. Why is it that they cannot disclose how much FFH will have post offering. "Immediately following the Closing, the Fairfax Shareholders will, directly or indirectly, have an approximate % interest in our Company through ownership of, or control or direction over Common Shares. If the Over-Allotment Option is exercised by the Underwriters in full, the Fairfax Shareholders will, directly or indirectly, have an approximate % interest in our Company through ownership of, or control or direction over, Common Shares. The Fairfax Shareholders will have a significant influence over us " Link to comment Share on other sites More sharing options...
valuesource Posted February 10, 2021 Share Posted February 10, 2021 I had a look at Intact Financial Q4 results after the bell. Possible FFH sympathy trade tomorrow? IFC has been talking about a hard market for several quarters and things seem to be falling in line. P&C premiums in US grew 19% with CR of 92. Canada (which is a bigger business for them) Personal Property was 73%. Conf call tomorrow at 11:00am. Kind of an odd time to schedule a call. Link to comment Share on other sites More sharing options...
no_free_lunch Posted February 10, 2021 Share Posted February 10, 2021 I don't know what it's worth but I don't see farmers edge as the debacle many here do. They are growing 60% a year and in the last year they managed to keep most of their expenses static. They could hit FCF neutral in 2 to 3 years. At that point profits kick in. If they are growing 40%, breakeven FCF then it actually could be a very valuable asset. This is tech , these companies have horrible income statements at the beginning, it's about scale. Once you are hooked in you have cross sell opportunities. Th carbon market in particular is growing FAST. This will be a big part of the hype and could be a mammoth market. I'm not a bull, wouldn't buy it but I could see it doing well. Link to comment Share on other sites More sharing options...
drzola Posted February 10, 2021 Share Posted February 10, 2021 Farmers Edge will never become profitable according to a reliable and gifted source out here in the Western Canada Fertile belt. This one can scale tho Solinftec if any one is interested in Digital Precision Agtech. Link to comment Share on other sites More sharing options...
Viking Posted February 10, 2021 Share Posted February 10, 2021 Thanks to all those who have posted on Farmers Edge. If they are only raising $100 million is it possible Fairfax’s stake could be so large? (Not that i am complaining if it is :-) ————————- Lock-up Arrangements: The Fairfax Shareholders, Osmington and Mitsui are subject to a release schedule of one-third of their Common Shares every 6 months (Could this be the exit strategy for Fairfax?) ————————- Use of Proceeds: Net Proceeds of the Offering are intended to be used as follows: (i) approximately 50% of the Net Proceeds of the Offering to strengthen the Company’s financial position, which will allow the Company to pursue its growth strategies; (ii) approximately $● to repay the Company’s outstanding indebtedness, including accrued and unpaid interest, owing to certain of the Fairfax Shareholders under the 2015 Note and the 2021 Debenture; and (iii) approximately $● for working capital. Link to comment Share on other sites More sharing options...
Dazel Posted February 10, 2021 Share Posted February 10, 2021 IFC results were impressive and it is trading at almost 3x book value.....Fairfax has work to do! Link to comment Share on other sites More sharing options...
drzola Posted February 10, 2021 Share Posted February 10, 2021 Agtech is mammoth alright but, the players in it are already well established and ingrained in it to allow newcomers any landscapeto compete it appears so, best to concede and just get to unicorn status fast and then taken out by BASF,Cargill's, Deere's, Microsofts or Nutrien's in this vast landspace at <=$1billion USD. https://upstreamaginsights.substack.com/p/2021-digitized-acres-by-company Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted February 10, 2021 Share Posted February 10, 2021 Anyone find the wide range odd? $10-17 is the widest I have ever seen, I think. The deck also says, if the $100m offering is successful at the midpoint of the range, public shareholders would own 16% and Fairfax would be at 65%. Ticker FDGE (keeps the jokes to yourselves) Link to comment Share on other sites More sharing options...
drzola Posted February 10, 2021 Share Posted February 10, 2021 Farmer's Edge is out of it's league when it comes to impacting the Carbon capture markets I'm afraid to say. https://query.prod.cms.rt.microsoft.com/cms/api/am/binary/RE4MDlc Link to comment Share on other sites More sharing options...
bluedevil Posted February 10, 2021 Share Posted February 10, 2021 Bloomberg article on IPO: https://www.bloomberg.com/news/articles/2021-02-09/farmers-edge-files-papers-for-initial-public-offering-in-canada Link to comment Share on other sites More sharing options...
maplevalue Posted February 10, 2021 Share Posted February 10, 2021 Agtech is mammoth alright but, the players in it are already well established and ingrained in it to allow newcomers any landscapeto compete it appears so, best to concede and just get to unicorn status fast and then taken out by BASF,Cargill's, Deere's, Microsofts or Nutrien's in this vast landspace at <=$1billion USD. https://upstreamaginsights.substack.com/p/2021-digitized-acres-by-company Agree with this. I am not an agricultural expert or anything but to me it makes sense that the equipment makers or the seed producers are probably best suited to deliver this type of technology given they have huge scale and established relationships and could runover a small Winnipeg based firm. Link to comment Share on other sites More sharing options...
drzola Posted February 10, 2021 Share Posted February 10, 2021 There are edges one can play in the massive Agtech sector however Carbon Capture is politicized and difficult for the time being it appears. https://agfundernews.com/carbon-harvest-indigo-ag-nori-announce-first-corporate-carbon-credit-buyers.html Link to comment Share on other sites More sharing options...
petec Posted February 10, 2021 Share Posted February 10, 2021 They got to get this on Prime Time either on WSB or ARKK. Why is it that they cannot disclose how much FFH will have post offering. "Immediately following the Closing, the Fairfax Shareholders will, directly or indirectly, have an approximate % interest in our Company through ownership of, or control or direction over Common Shares. If the Over-Allotment Option is exercised by the Underwriters in full, the Fairfax Shareholders will, directly or indirectly, have an approximate % interest in our Company through ownership of, or control or direction over, Common Shares. The Fairfax Shareholders will have a significant influence over us " They can’t disclose because they don’t know. They’re raising $100m. Until they know the price they don’t know many shares they’re selling, so they don’t know the total shares outstanding, and can’t calculate Fairfax’s percentage. Link to comment Share on other sites More sharing options...
petec Posted February 10, 2021 Share Posted February 10, 2021 I’m very skeptical that Fairfax isn’t selling any stock. It’s perfectly normal for private equity to offload some stock in an IPO. This thing can’t be very disruptive if the underwriters think they can only get $100m away in this market. Link to comment Share on other sites More sharing options...
petec Posted February 10, 2021 Share Posted February 10, 2021 I don't know what it's worth but I don't see farmers edge as the debacle many here do. They are growing 60% a year and in the last year they managed to keep most of their expenses static. They could hit FCF neutral in 2 to 3 years. At that point profits kick in. If they are growing 40%, breakeven FCF then it actually could be a very valuable asset. This is tech , these companies have horrible income statements at the beginning, it's about scale. Once you are hooked in you have cross sell opportunities. Th carbon market in particular is growing FAST. This will be a big part of the hype and could be a mammoth market. I'm not a bull, wouldn't buy it but I could see it doing well. To add to this, crucially, the gross margin turned positive in 9M20 and the commentary around cost of revenue seems to be that it improves as the installed base grows (a lot of it is due to onboarding customers not servicing them) and as density increases (ie they need a lot of customers in the same place, ideally). Link to comment Share on other sites More sharing options...
petec Posted February 10, 2021 Share Posted February 10, 2021 With accrued interest, it is 272m in debs. And some deal with Osmington that suggests FFH gets 10m more shares for 2.40. Plus they get 18m additional shares as warrants for the debs. At no cost. If the IPO pricing is right even at the very low end of the range, this seems like a huge payoff. All in all, if I followed everything, they will have 140m shares at a cost of ballpark 300m. 10 dollars per share means ballpark profit of 1.1 billion! 17 dollars per share means ballpark profit of 2.1 billion! I hope I’m reading this right and they IPO range is real. I get the same numbers with one minor exception. All values below assume the $10-17 IPO range holds; the numbers of shares change if the IPO prices below $2.40: - $272.8m of debentures which convert at $2.40 into 113.7m shares worth $1.137 at $10 to 1.933bn at $17. - 18.2m warrants for nothing which are worth $182-309m. - Agreement to pay Osmington $24m for 10m shares worth $100-170m. Total value of Fairfax position: $1.42 at $10 to $2.41bn at $17. Total cost: $225.2m principal amount of debentures plus $24m to Osmington. Round it up to $250m for the nominal cost of converting the warrants. I think you're including the accrued interest on the debs as a cost, when I think I would include them as a profit. Pretax profit: $1.17-2.16bn. Fairfax is going to look quite well capitalised if they can pull this off! Link to comment Share on other sites More sharing options...
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