MTY News & Notes
|Publication Date||Source(s)||Article Title/Description|
MTY Chairman Stanley Ma announced he’s selling more than $42 million in stock
After a long history of selling no shares, MTY Chairman Stanley Ma announced he’s selling more than $42 million in stock. This announcement came after Stanley Ma dispatched CEO Eric Lefebvre and Audit Chairman, Gary O'Connor to make false statements to investors (see February 24, 2020 below) to cover-up the fact that the whistleblower allegations were true. Thus, Stanley Ma was trading overpriced stock on inside information that the whistleblower allegations were true while, based on MTY’s repeated false statements and failure to publish a material impact statement, the public was left in the dark and had every reason to believe the allegations were not true.
David K. Wong Resigns from MTY Board of Directors
MTY “’will immediately look at alternatives to fill the seat left vacant by Mr. Wong’, said Stanley Ma, Chairman of the Board of MTY."
Wong just sought and received reelection to the board on May 4, 2020, therefore, his resignation was unplanned.
Investors should consider that Wong’s departure was likely due to internal strife. His exit may have related to false statements that were recently proven as so and the board’s failure to retract those statements. The board also failed to issue material impact statements to warn investors of the risk. Wong may have concluded that the board’s decisions exposed him and other board members to personal liability from shareholders who relied on those false statements.
|10-29-20||Simply Wall St||
Board Member Sells CA$220,000 Worth of Stock
MTY "Independent Director, Dickie Orr, recently sold CA$220k worth of stock at CA$44.02 per share.... the biggest insider sale of MTY Food Group shares that we've seen in the last year."
“I own a few MTY brands in Ontario and they all doing almost 20% of their sales. About 15% are permanently closed. There is no one in the downtown cities where the main revenue comes from. All the offices are still closed and won't back until next year. The company has laid off more than half of their staff and they don't visit their stores even once every three months. There is no sales to collect the royalties which is the main income of the company. Most franchisees are going to close soon if not yet. I can count hundreds of them.//
I’m not holding any position here with MTY and have no interests to have an influence on other people. I do have shares in the other companies though. I just checked on here to see what people’s opinions are about the company which I’m involved in my daily routine and actually was my first reliable income for years. Not the few but most locations are trying to get out of their lease agreements and you know What it means for a franchise based company. And the reason I’m not interested in their stock is that I know there is zero future for this company and I cannot have a short position because I’m scared that the company and the insiders manipulate the shares with false news and reports (original content here) to get rid of theirs with a higher price in a short time [emphasis added]. What I am actually sure is that in a couple of months this stock worth nothing close to what it is now.”
Investors should compare the comments of this purported franchisee that MTY makes false statements to manipulate the value of its shares for the benefit of insiders.
|7-13-20||The Motley Fool||
“MTY Food Group (TSX:MTY): What Investors Should Do After a Nasty Q2”
“Quick-service restaurant operator MTY Food Group (TSX:MTY) reported its second-quarter results last Friday. Not only were the results weak, but they also paint a gloomy picture of the company’s future. Ultimately, that might further delay MTY stock’s recovery, which has already lost 50% this year…. [MTY’s] leveraged balance sheet might concern some discerned investors. The situation might become grimmer for the company if the weaker business environment lasts longer than expected.”
“MTY Food Group reports $99.1M second-quarter loss due to one-time charge”
”MTY Food Group Inc. reported a second-quarter loss of $99.1 million as the company took a $120.3-million non-cash impairment charge… due to the pandemic.”
|6-18-20||The Motley Fool||
“WARNING: These Stocks Are Being Dropped from the S&P/TSX Composite Index”
MTY Food Group was deleted from the S&P/TSX Composite Index. “MTY Food Group has suffered from the kibosh on sit-down dining. Unlike Restaurant Brands, this name has struggled to perform even under the essential business banner.”
|April 2020||QSR Magazine||
“MTY Food Group Closes 2,100 Stores, Cuts Workforce in Half”
MTY Food Group issued material impact disclosures in response to the pandemic under creative titling. However, the company has not issued such disclosures due to the whistleblower allegations, perhaps operating from the standpoint that shareholders have attributed the company’s decline in stock value entirely to COVID-19, when that almost certainly is not true. (More on this later.)
|3-27-20||Cold Stone Creamery||
Cold Stone Creamery 2020 Franchise Disclosure Document
This MTY Food Group subsidiary issued its 2020 federal disclosures, which clearly shows the company has made changes that address whistleblower allegations that were reported to MTY Food Group as potential violations of the U.S. Federal Trade Commission’s Franchise Rule. This is relevant because the company claimed the whistleblower allegations were reported by an “active employee” and were found to be “baseless” and were “evaluated and dealt with in the past”—implying no changes were indicated.
|3-20-20||Simply Wall St||
“How Does MTY Food Group’s (TSE:MTY) P/E Compare To Its Industry, After The Share Price Drop?”
“Unfortunately for some shareholders, the MTY Food Group (TSE:MTY) share price has dived 67% in the last thirty days. Given the 69% drop over the last year, some shareholders might be worried that they have become bagholders…. MTY Food Group’s net debt is considerable, at 109% of its market cap. This level of debt justifies a relatively low P/E, so remain cognizant of the debt, if you’re comparing it to other stocks…. The P/E reflects market pessimism that probably arises from the lack of recent EPS growth, paired with significant leverage. What can be absolutely certain is that the market has become more pessimistic about MTY Food Group over the last month…. For those who prefer invest in growth, this stock apparently offers limited promise….”
While this publication attributes MTY’s “relatively low P/E” and “market pessimism” to the company’s considerable net debt and “lack of recent EPS growth”, we believe these factors are more likely the market’s negative reaction to the company and or CEO Eric Lefebvre’s false statements to investors.
"MTY’s Delayed Earnings Call Leaves Analysts Baffled With Few Answers On ‘Whistleblower’ Claims"
Forbes published an article, including questions that were asked but not answered by MTY or CEO, Eric Lefebvre. The article addressed whistleblower allegations that were reported by MTY on February 14, 2020 and suggested that CEO Eric Lefebvre and or MTY had not been truthful in some of their statements relating to the whistleblower allegations.
|2-24-20||The Globe and Mail||
“Restaurant operator MTY Food Group says whistleblower’s claims ‘baseless’”
“MTY's stock has fallen more than 10 per cent since it announced the delay [emphasis added]. / Restaurant conglomerate MTY Food Group Inc. says that a whistle-blower’s allegations that delayed its latest earnings report are baseless, but has not specified what those allegations were... [emphasis added]. The allegations were made by an ‘active employee’ of the company, and ‘the matters raised are all topics that MTY had evaluated and dealt with in the past,’ MTY said in a statement on Monday [emphasis added]. On a conference call to discuss the results, Mr. Lefebvre said the allegations covered ‘a wide area’ and were not focused on one topic. He declined to answer questions on the subject of the complaints. ‘We can't go into specifics, simply for the reason that the allegations were deemed to be baseless, so there's no point listing them at this time,’ Mr. Lefebvre said on the call.”
|2-14-20||Bloomberg Securities Law News||
“Pinkberry Owner Plunges Amid ‘Information Void’ on Whistleblower”
“MTY Food Group Inc… plunged by the most in 14 years, after delaying the release of its quarterly results on a whistleblower complaint about the company. Shares of the St. Laurent, Quebec-based franchiser tumbled as much as 13%, its biggest intraday decline since October 2005.” The lack of details in the company’s press release caused one financial analyst to respond: “There is a massive information void…. We would fully anticipate the stock will respond as such.”
“MTY Food Group delays Q4 results after alleged whistleblower complaint”
“MTY Food Group Inc. is delaying the release of its quarterly results citing allegations made by a whistleblower employee.” Following the announcement, the company “saw its shares lose $4.66 or 7.8 per cent at $55.07 in early afternoon trading on the Toronto Stock Exchange.” One financial analyst echoed the concerns expressed by the investment community by stating, “the allegations could be ‘serious’ and leave a negative impression.”
“How Canada's Serruya Family Made Some $300 Million Off A Bunch Of Faded Food-Service Brands”
Michael and Aaron Serruya made a fortune by selling “Kahala Brands, an under-the-radar franchisor of faded food-service brands, including Cold Stone Creamery… to a publicly traded Canadian firm, MTY Group, for around $320 million in cash and stock…. Why are 18 food brands, some of which have been shrinking for years, worth such a hefty price?” The article goes on to state: “In 2012, franchising trade publication Blue MauMau named both Cold Stone Creamery and Blimpie to its list of worst franchises to buy. Default rates on its franchisees’ SBA loans soared, landing it near the top of the worst-defaulters for the decade ended in 2013, according to an analysis of SBA data by the Wall Street Journal…. The number of U.S. Cold Stone Creamery outlets shrank 7% to 1,035 in 2015 from 1,111 in 2013…”.