Below is my latest article on Seeking Alpha which you can access for free. There are already some interesting discussions in the comments section. Below is just a sample of the article because Seeking Alpha has the rights to it. The article are my general comments on the bailout of Bombardier by the government of Quebec.
- The Quebec government invested US$1 billion (CA$1.3) for 49.5% of Bombardier’s CSeries and 200m warrants for BBD.B.
- The government is not in for the money, but to solve a confidence crisis. The CSeries is not expected to deliver free cash flow until 2020.
- Bombardier’s CSeries is in a Catch-22. The CSeries program can’t survive without orders, and there’s won’t be orders unless the CSeries program survives.
- I’m disappointed in the deal. I wish the government had better represented the interest of the taxpayers.
- Bombardier is too big to fail in Quebec and Canada. It’s the heart of the aerospace industry.
Bombardier Inc. is primarily traded on the Toronto Stock Exchange under the tickers BBD.B and BBD.A. Class A has ten votes per share, and Class B has one vote per share. The Beaudoin-Bombardier family has 54.35% of all the voting rights. BBD.B is the most commonly traded ticker.
Note: Dollar amounts are in Canadian $ unless mentioned otherwise. The price of 1 USD in CAD as of October 31, 2015 is USD-CAD 1.3146.
This is not a valuation of Bombardier (BBD). I’m providing my general comments on the latest Bombardier bailout by the Quebec government. I was never a shareholder of the company, I’m “not a shareholder today”, and I don’t plan to invest in the company in the future. I used quotation marks because, as a Quebec taxpayer, I’m now indirectly a shareholder of Bombardier. Actually, I should clarify that the taxpayers are a shareholder in BBD’s CSeries program, not the parent company. If you don’t read the media report carefully, it might lead to the conclusion that the Quebec government is a shareholder in Bombardier, which they are not. Like many others, I woke up on Thursday morning as an indirect shareholder in the now-infamous CSeries program that’s sinking the company.
This leads to many questions. What’s the upside for the taxpayers? What are the risks? Why would the government get involved? Plus, the timing of the investment was a little insulting. It came a day after a one-day strike in the public sector to protest the government’s austerity budget, after cuts in the education and health sector. Without getting sidetracked, the government’s rationale for investing in Bombardier is that the cost of not investing is greater. Well, this rationale also applies to education. The cost of not investing in education is higher than not investing.
Let’s find out what my dear provincial government got me involved.