Into the 21st Century
By Robert Godwin
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| The COM DEV website on February 8th, 2016. |
As outlined most recently in the January 24th,2016 post, "Did the Government Let COM DEV Go Because They Have Bigger Fish to Fry?" iconic Canadian space company COM DEV International has been purchased by US based Honeywell International.
But while we were happy enough to acquiesce to the COM DEV sale, there are limits to the types of sales we allow.
For example, we don't allow foreign ownership of our chartered banks and in exchange for that quasi-monopoly our banks have acceded to some relatively stringent regulations which were certainly useful for cushioning our economy from the worst vicissitudes of the global meltdown of 2008.
And, in 2009, we also refused to allow BC based MacDonald Dettwiler (MDA) to be purchased by US based Alliant Techsystems (ATK).
In this new age of mega-data, information and incessant global security fears, it would simply seem prudent to establish safeguards to protect our high tech industry...
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| COM DEV stock price and volume of trades on the Toronto Stock Exchange (TSX) covering the period from April 9th, 1999 until February 8th, 2016, when COM DEV was delisted from the TSX. As shown in the chart, COM DEV stock peaked on November 24th, 2000, dropped precipitously afterwards and never regained those heights. Graph c/o FactSet. |
Three months later the company cut its wireless components business and posted losses yet again. This time shares dropped like a rock to $3. Consolidation was inevitable and just five days before the catastrophe of 9/11 they announced that they would be selling off their plants in England, China and New Brunswick.
Evidently the stock price had already fallen so low during the summer of 2001 that the events of 9/11 didn't have any immediate impact. Things were already pretty desperate. They lost $16Mln on the year and sold off their RF Conditioning and satellite ground station component business to Montreal's Mitec, essentially returning the company's very first business back to its home town.
By the summer of 2002 COM DEV share value was so low O'Donovan seized the opportunity and started to buy back stock. He then sold the company's broadband business, for an $11Mln CDN loss, to Axio Wireless of California. COM DEV shares plummeted to $1.53.
In the spring of 2003 the next big trough in the sky was the US Strategic Defense Initiative (SDI). This represented a massive cash-cow for any company who could acquire a piece of the action. The so-called "Star Wars" had been on contractors' radar since President Ronald Reagan had first expressed his desire to put an impenetrable umbrella over the United States in the 1980s.
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| SDI, or the "Star Wars" program, as it was called, was generally expected to cost upwards of $1 trillion dollars when it was developed in the 1980's. But the program was derailed by the Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985 and the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987, both of which coincided with the growing public perception that a "peace dividend" or tax surplus would develop as defence programs were curtailed or cancelled in the aftermath of the fall of the Soviet Union. But after the events of September 11th, 2001, military spending again increased and all sorts of old ideas were back on the table. Graphic c/o The Space Handbook. |
In the ensuing decades the idea had continued to stew in the corridors of Washington and it was once again back on the front burner as the repercussions to Western economies and security had been laid bare by the attacks of 9/11. Enormous pressure to join in on the program was brought to bear on Ottawa by the Bush Administration.
It became a contentious political issue in Parliament, but needless to say, companies like COM DEV were in dire need of a boost. The company publicly advocated for a role for Canada but the cards weren't going to fall their way. By the summer of 2003 COM DEV shares were at just $1.25. The CIBC and National Banks both stepped in and bought $9.5Mln worth, so that COM DEV could pay off an old promissory note it had made in a complex investment south of the border in 1998.
Between 2004 and 2009 COM DEV shares bobbed up and down from as low as $2.60 and as high as $6. The surging Canadian dollar hurt exports, but the company had made some smart moves hedging currency and was able to weather this latest storm. The advent of HDTV helped, as did contracts with the Europeans worth close to $15Mln and in Asia worth $9Mln.
According to financial house Guru Focus, over the past 13 years, the median trailing annual dividend yield of COM DEV stock was 1.64%. The company share price at the time of writing ( in early February 2016, just before the firm was officially delisted from the Toronto Stock Exchange on February 9th) is $5.62, but the Canadian dollar is once again down to about 75 cents US, which made the purchase of COM DEV particularly attractive.
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| Robert Godwin. |
The timing of the purchase has raised some questions about "getting it done" while Trudeau's cabinet were still locating their offices. i.e. while no one was paying attention.
But based on historical fact it seems more likely that no one in Ottawa really cares.
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But based on historical fact it seems more likely that no one in Ottawa really cares.
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Last Week: From Strength to Strength. At Least for Awhile as part 3 of "A Short History of COM DEV International" continues!
Next Week: Epilogue as "A Short History of COM DEV International" concludes!Last Week: From Strength to Strength. At Least for Awhile as part 3 of "A Short History of COM DEV International" continues!
No mention of the company's largest contract, the JWST FGS @ $160 M?
ReplyDeleteFor that, you may need to wait for next week and part 5.
ReplyDelete