Monday, November 19, 2018

Maxar Shareholders Approve "US Domestication." Fed's Should Now Find New Canadian Based Firms to Support

          By Chuck Black

Someone should tell Howard Lance, the CEO of Westminster CO based Earth imaging and satellite data focused Maxar Technologies, about political optics.

As outlined in the November 19th, 2018 Financial Post article, "Meet the New York investor who's making all the right calls in shorting Canadian stocks," Maxar isn't just being judged because its leaving Canada. According to the article, in August 2018, New York NY based short seller Spruce Point Capital released a report "raising questions about some of its (Maxar's) accounting practices and warning that the company’s shares could lose more than half their value." Two weeks ago, Maxar reported a $432Mln CDN net loss for the third quarter, "mainly due to impairment losses and inventory obsolescence. Its shares, which had reached a high of $72.68 CDN in July and were at $56.80 CDN" when Spruce Point released its report, "plunged more than 44% to $17.68 CDN. They have since rebounded somewhat, and closed Friday at $24.63 CDN." Image c/o Financial Post

At the very same time that NASA Administrator Jim Bridenstine visited Ottawa last week to request billions of Canadian dollars to facilitate Federal funding for a "3rd generation Canadarm" for the US Deep Space Gateway (DSG), Maxar and its Brampton ON based Canadarm building MDA Space Missions subsidiary (the company most likely to benefit from any new Canadarm contracts) were busy finishing off their long-standing plan to re-incorporate as a US based, US owned and US operated entity.

Maxar even issued a press release to promote its re-invention.

As outlined in the November 16th, 2018 Maxar press release, "Maxar Technologies Shareholders Approve US Domestication," Maxar shareholders have given final approval to something the press release called "US domestication" at a special shareholder meeting held Friday.

It's essentially a Maxar plan to re-incorporate as a US based and managed company, in order to mitigate the onerous regulatory requirements restricting non-US owned entities from receiving US government and military contracts. As outlined in the press release, Maxar anticipates that the plan will be completed "on or about January 1st, 2019." 

And while there is certainly nothing wrong with the plan from a business perspective, especially given that the US market is so much larger than the Canadian market, there are a few problems when you're also in the midst of positioning yourself as an iconic and distinctly Canadian based company in order to receive Canadian government contracts.

That's because Maxar and MDA Space Missions are no longer Canadian based companies. They haven't really been Canadian based for several years. The Canadian Space Agency (CSA) should realize this and begin the search for replacement, Canadian based, space mission contractors immediately.

As outlined most recently in the August 17th, 2018 post, "Let's Pick a Canadian Contractor to Build the New Canadarm for the Lunar Orbital Platform-Gateway," the first Canadarm was derived from a distinctly Canadian origin, which is part of the reason why it's such an iconic piece of Canadian technology.

A next generation Canadarm should be built the same way, by using Canadian based assets to provide a distinctly Canadian based contribution to the exploration of the final frontier. 

On Parliament Hill, the optics of potential new Federal funding for the latest generation of iconic Canadian technology being pumped into a company so very intent on renouncing its Canadian heritage was certainly not lost on the Justin Trudeau led Federal government which, as of now, has simply refused to decide whether to contribute to the US program.

As outlined in the November 15th, 2018 post, "Innovation Minister Navdeep Bains Politely Pushes NASA Administrator Jim Bridenstine Under the Bus," the Trudeau government is expected to withhold approval of Canadian contributions to the DSP until either just before or just after the next Federal election, currently scheduled for sometime on or before October 19th, 2019.

This should give the Fed's enough time to come up with something, probably.

The Canadian government will likely make a decision just as soon as they figure out how to prevent the lion's share of the requested Canadian funding from falling into foreign owned Maxar's greedy little paws.

This blog agrees. We're rather have the funding for the next generation Canadarm end up in a Canadian company, where it can help to grow Canadian capabilities and contribute to Canada's future, just like the first Canadarms.

Sorry about that, Howard. It's just that, from a political perspective, the optics are bad. 
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

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