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Investment Q&A

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Q: Hi Team, The monitor for David's Tea has issued their report and plan of compromise to be voted on by the companies creditors on June 11th. The report can be found here https://www.pwc.com/ca/en/services/insolvency-assignments/davidstea-inc-/monitor-s-report.html. It is a pretty quick read.
It seems like a clever, well thought out plan. What do you consider the likelihood that this plan gets approved by 67% of the creditors (based on value owed) in both the US and Canada?
In cases like this, does PWC work with the creditors in advance to "secure the votes" or are they just looking to just get the best deal possible for DTEA and hope it gets approved.
In my view, the trade suppliers and employees likely vote in favor. Canadian landlords may also be okay at 22 cents on the dollar. My concern is with the US landlords who only look to be getting 3 cents on the dollar (which is still better than what they would get in a bankruptcy). My question is do landlords typically have a threshold at which they would not accept a settlement below a certain % of their claim.
If it does not get approved does the monitor look to negotiate with the creditors or is bankruptcy automatic?
If this ends up in bankruptcy the estimated cost of the bankruptcy is $27 million, DTEA does have enough cash to pay out this sum. In that case, would the common shares still hold their value and would common shareholders be entitled to equity in any newco?
I recognize this is beyond the usual scope of the questions so please deduct question credits at your discretion
Read Answer Asked by Robert on May 25, 2021
Q: Good morning, thoughts on the Q4 from DTEA and thier transition from bricks and mortar to an online retailer.
Once the CCAA is settled what do you see as a reasonable multiple on this type of business, considering thier online revenue growth rate was close to 100% year over year. Do retailers who garner the majority of thier revenue online command better multiples than traditional bricks and mortar businesses?
Read Answer Asked by Robert on May 03, 2021
Q: Hi team 5i, I may be your only member following this stock but I find it a unique and intriguing story. On July 8th they filed for CCAA/Chapter 11 and the stock traded around .80. Since then the stock has traded mostly above $1 and closed after a late run today on high volume at 1.75. I don't see any news today. I believe they will be emerging from CCAA mid-December, perhaps someone knows something?? Do you have any comments on this restructuring or can you turn up any news from your sources that I may not be able to access. From what I see, the loose leaf tea concept is a hot trend right now and these guys are the market leader.
Read Answer Asked by Robert on December 01, 2020
Q: Hi 5i, David's Tea filed for CCAA and Chapter 11. Seems thier plan is to wiggle out of their lease commitments and emerge from creditor protection focused mostly online and wholesale distribution while maybe keeping a few stores. How does this work for the common equity holders? They have cash and may have a good business going forward but I would have thought the current equity holders would get wiped out in a restructuring. But the stock still trades around the same price as when they announced the restructuring early last week. Who would be buying this stock and why, what scenario would they be banking on?
Thanks
Rob
Read Answer Asked by Robert on July 13, 2020
Q: Hi 5i, David's Tea has released results. Please provide comments on their results and especially where they indicate they may undertake a formal restructuring if they are not successful in negotiations with landlords. What would a restructuring mean to the common shareholders? Would management be obligated to give shareholders a fair equity value in the Newco?
Read Answer Asked by Robert on June 16, 2020
Q: What would be your opinion of this company ? I have owned this for a very long time and I am currently way down. This company was once a fast growing and exciting but in past years seems to have had board trouble and expansion growth issues. I hold this in a regular margin account and if needed I would have a nice tax loss. Is there any hope for Davids Tea? Thanks
Read Answer Asked by Kolbi on November 22, 2018
Q: This stock finished up 63% on October 2nd and I cannot find any news besides unrelated stories about CBD infused teas and other drinks potentially coming to market in the coming months-years by other companies maybe DTEA?. Is this the reason it jumped up so much or is there another reason I have been unable to source? Thanks
Read Answer Asked by Kolbi on October 03, 2018
Q: Howdy! The Kiki Delaney chapter in "Market Masters" has inspired me to invest more in Quebec-based equities. I already have BCE, CAE, CNR & GUD. Please rank the top 3 in this list (or other Quebec-based equities that I didn't list) to add right now purely on long-term (3-5 yrs) appreciation (value + dividends).
Thank you,
David L
Read Answer Asked by David on October 17, 2017