Here are the top reads on deals and financial services over the last week. Have a great weekend,
Taking Tesla private saga: Elon Musk has a lot of big, ambitious plans, from colonizing Mars to sticking battery packs tethered to solar panels in every home. Trouble is, each of these dreamy projects costs a fortune, and fortunes are not easy to come by – especially when you are losing a fortune every minute of the day. Take Tesla, his electric car company. Its cash burn is horrendous. Opinion (Eric Reguly)
Earnings debate: fPresident Donald Trump has asked the top securities regulator in the United States to consider doing away with quarterly financial reports, re-igniting a debate about the merits of “quarterly capitalism” and forcing Canadian regulators to consider revisiting their own reporting requirements. Story (Tim Kiladze and Victoria Gibson, for subscribers)
Discount brokers: Wealthsimple Inc., Canada’s largest robo-adviser, is infiltrating the discount brokerage business with the launch of a new trading platform that will allow investors to buy, sell and track stocks and exchange-traded funds with zero trading commissions. The online portfolio manager – which manages more than $2.5-billion in assets and is predominately owned by investment giant Power Financial Corp. – is naming the platform Wealthsimple Trade. It’s a mobile app that will provide users access to unlimited zero-commission trades of more than 8,000 publicly traded stocks and ETFs listed on major Canadian and U.S exchanges. Story (Clare O’Hara)
Canopy valuation: Calculating the value of Canada’s largest ever cannabis deal seemed simple enough. To boost its stake in Canopy Growth Corp., U.S. alcohol giant Constellation Brands Inc. is purchasing 104.5 million new shares from the Canadian pot producer for $48.60 apiece. Multiply those figures together and the investment looks to be worth $5-billion. But the math isn’t so straightforward, because of a sweetener Constellation receives as part of the deal. Story (Tim Kiladze, for subscribers)
Trinidad valuation: As a shareholder of Ensign Energy Services Inc. (ESI-T), I am in favour of management’s recent lowball offer of $1.68 cash for all the shares of Trinidad Drilling Ltd. (TDG-T). But as a shareholder of Trinidad Drilling, I believe that the offer dramatically undervalues the company, and I won’t be tendering my shares anywhere near the current offer price. In fact, less than four months ago I wrote in the Report on Business that Trinidad Drilling, which was then trading at $1.75, could be bought for less than the collateral value of its drilling rigs, estimated at about $3.00 a share. Opinion (Robert Tattersall)
Investigation: Alberta regulators are investigating American short-seller Marc Cohodes regarding his stake in Badger Daylighting Inc., in the latest escalation of hostilities between the U.S. investor and the oil-services company. A lawyer with the Alberta Securities Commission (ASC) divulged the existence of a wider probe at a hearing on Wednesday, the same day a commission panel dismissed a Badger-supported application for a cease-trade order against the California-based short-seller. Story (Jeff Lewis, for subscribers)
Discipline: The former chief financial officer of failed investment firm First Leaside Securities Inc. has been banned for three years from being a CFO and fined $50,000, following a review by the Ontario Securities Commission. Story (Clare O’Hara. for subscribers)
Cannabis deal: Constellation Brands Inc., marketer of Corona beer and Kim Crawford wines, is pumping $5-billion into Canopy Growth Corp. to accelerate the Canadian cannabis company’s international expansion plans. The deal cements the link between the global alcoholic-beverage giant, with all of its marketing and deal-making expertise, and the marijuana sector, where recreational use is winning legitimacy in Canada and elsewhere. Story (Jeffrey Jones, for subscribers)
Wall Street loves cannabis: An investment banker who routinely talks to beverage and pharmaceutical executives likes to tell a quick story about the current state of the world: Every meeting with CEOs used to start with five minutes of small talk about U.S. President Donald Trump. Now every session starts with a conversation about cannabis. Story (Andrew Willis, for subscribers)
Media: Rogers Communications Inc. wants out of the magazine business. The Toronto-based telecommunications and media company is soliciting bids for a package of assets that includes eight of its digital and print magazine titles − Maclean’s, Canadian Business, MoneySense, Today’s Parent, Hello! Canada, Flare and Chatelaine’s French and English editions − as well as its custom-content group. Story (Susan Krashinsky Robertson, for subscribers)
Cohodes and Badger saga: Short-seller Marc Cohodes is free to trade shares of Badger Daylighting Inc. after Alberta regulators on Wednesday dismissed an application for a cease-trade order against the prominent U.S. investor. Story (Jeff Lewis, for subscribers)
Property fund: The value of the LaSalle Canada Property Fund has now reached more than $1-billion, including debt. The Chicago-based real estate investor has US$60-billion in assets under management. It launched the Canadian fund in December. Story (Rachelle Younglai, for subscribers)
Banks: Credit-ratings agency S&P Global Ratings has boosted the Bank of Montreal’s creditworthiness, citing good loan diversification and lower credit losses compared with its peers. On Tuesday, the ratings agency raised BMO’s standalone creditworthiness, a measure that looks at the bank’s fundamentals without factoring in the likelihood of government support, to A from A-. Story (Alexandra Posadzki, for subscribers)
New SPAC: Already a leading adviser to cannabis companies, Canaccord Genuity Corp. is now a potential buyer of a marijuana business after the investment bank launched a takeover vehicle that is searching for an acquisition worth up to $250-million. Canaccord filed the paperwork on Wednesday for an initial public offering from a cannabis-focused special-purpose acquisition corporation, or SPAC. Story (Andrew Willis, for subscribers)
Stress test: Canada’s largest banks are better prepared to weather a homegrown housing crisis than they were two years ago, even though total losses from soured mortgages would be larger, according to a new report. Moody’s Investors Service has updated its stress test for the country’s seven largest banks, which imagines a severe – though still unlikely – shock to the housing market. Story (James Bradshaw, for subscribers)
Financial products: Canadian investors looking to broaden their exposure to Asian equities can now do so through two new Asian-focused exchange-traded funds launched earlier this month by WisdomTree Asset Management Canada Inc. Story (Clare O’Hara)
Private equity: Callidus Capital Corp. shares tumbled 15 per cent to a new low on Tuesday after the lending company reported a seventh consecutive quarterly loss and announced chief executive officer Newton Glassman is stepping aside to take a medical leave. Callidus, a lender to distressed companies that Mr. Glassman took public in 2014 at $14 a share, lost $40.8-million in the most recent quarter, up from a loss of $7-million in the first quarter. Story (Andrew Willis and Jeffrey Jones, for subscribers)
Governance: Hydro One Ltd. has unveiled its new of board of directors after the utility’s previous board resigned en masse and its chief executive officer retired under pressure from Ontario’s newly elected premier. Similar to the previous board, many of the 10 new directors have deep Bay Street connections – and a number have held senior positions at investment banks. Story (Tim Kiladze, for subscribers)
Mortgages: Home Capital Group Inc. is feeling the sting as rising interest rates make it more expensive to raise term deposits, putting pressure on a key source of funding as the alternative mortgage lender continues to recover from a liquidity crisis last year. Story (James Bradshaw, for subscribers)
Energy: Ensign Energy Services Inc. has launched a $470-million hostile takeover bid for Trinidad Drilling Ltd. two weeks after Trinidad concluded a formal search for a buyer with no deal. Ensign, whose chairman and largest shareholder is London-based billionaire Murray Edwards, is offering $1.68 a share in cash for Trinidad, a rival oil and gas drilling contractor. That represents a premium of 20 per cent over Trinidad’s average price in the first 10 trading days of August. Story (Jeffrey Jones, for subscribers)
Regulation: The Sequoia Resources Corp. bankruptcy is an ugly mess, not least for Alberta’s energy watchdog. Among the many threads in the case – in which an insufficiently financed gas producer left a clean-up bill of $225-million – the Alberta Energy Regulator (AER) has much to answer for. And a difficult task to change its ways. What’s become clear since Sequoia failed in March is that the legislation AER operates under has a gaping loophole that has allowed financially weak companies to bypass the regulator’s usual scrutiny and take ownership of assets burdened with high environmental liabilities. Most of Sequoia’s assets were acquired in one transaction that used that loophole. Opinion (Jeffrey Jones, for subscribers)
Banking privacy: Canadian government and bank officials are snooping on a grand scale, scouring our financial transactions by the millions. It’s part of the fight against money laundering and financing of terrorist groups, but the magnitude and quality of the process raise questions about whether watchdogs and financial institutions may be going too far. “It’s sort of a widespread development in policing that we don’t normally think of as policing,” said Dr. Vanessa Iafolla of the University of Waterloo, co-author of a study that documents the effort. Story (Michael Babad, for subscribers)
Utility takeover approval: U.S. regulators, concerned about the forced departures of Hydro One Ltd. chief executive Mayo Schmidt and the company’s board in July, are now questioning whether the utility will try to make up for a possible decline in Ontario revenue by raising rates for customers of Avista Corp. The public utility commission in Washington state, where Avista serves just less than 400,000 gas and electric customers, is evaluating the protections Hydro One agreed to earlier this year in order to get its acquisition of Avista approved. Story (David Milstead, for subscribers)
MORE FINANCIAL SERVICES ND DEALS NEWS FROM FRIDAY
Regulation: U.S. President Donald Trump asked securities regulators to explore replacing quarterly reporting requirements with half-yearly filings at the urging of executives including PepsiCo Chief Executive Indra Nooyi, reigniting a debate about how often companies should give financial updates to investors. Story
Government approval: The federal government says it will review Constellation Brand Inc.’s proposed $5-billion investment in Canopy Growth Corp. Story
Taking Tesla private saga: Elon Musk was at home in Los Angeles, struggling to maintain his composure. “This past year has been the most difficult and painful year of my career,” he said. “It was excruciating.” The year has only gotten more intense for Musk, chairman and chief executive of the electric-car maker Tesla, since he abruptly declared on Twitter last week that he hoped to convert the publicly traded company into a private one. The episode kicked off a furor in the markets and within Tesla itself, and he acknowledged Thursday that he was fraying. Story
It’s different across the border: Louisiana is using the bond market to stick up for the Second Amendment. The state’s bond commission voted 7 to 6 Thursday to ban Bank of America Corp. and Citigroup Inc. from working on its upcoming debt sale because of the banks’ ”restrictive gun policies,” the state treasury said in a statement. Story
The Streetwise newsletter is Tuesday to Saturday. If you’re reading this on the web, or if someone forwarded this e-mail to you, you can sign up for Streetwise and all Globe newsletters on our signup page.