Lightspeed Commerce has destroyed shareholders at light speed
Now the company wants to go private
In September 2021, Lightspeed (LSPD.TO) traded at close to CDN$160 a share. Today it trades below CDN$20 a share.
Lightspeed has a pristine balance sheet sporting about CDN$750 million in cash and is debt free. And that should surprise no one. Since going public in early 2019, the company has raised CDN$4.4 billion in equity and lost about half of that on its unprofitable operations. As far as I know, Lightspeed has never earned a profit but it promises that one day it will be profitable and it will all be worthwhile. Or at least it used to make such promises.
The story is an old one. “Trust me”. The company’s earnings presentation touts growth and “adjusted EBITDA” as metrics on which the company is making great progress.
Spend a moment to explore “adjusted EBITDA” which is defined not in the foot note but in an Appendix which the footnote refers a reader to, and in the fine print of the Appendix you learn that Adjusted EBITDA is profit before Interest, Taxes, Depreciation, Amortization and (importantly) share based compensation. In the third quarter 2023 report, Lightspeed reported that its management team received CDN$107 million in “share based compensation”. And why not? They are doing such a good job on behalf of shareholders.
Having fumbled in the stock market, the company now says it is open to a “going private” transaction. With a current market capitalization of CDN$2.9 billion, about CDN$1.5 billion of the money investors ponied up to buy shares seems gone forever, and about CDN$250 million of that went to management in the form of “share based compensation” according to the notes to the company’s audited financial statements for the past five years.
It is a great gig if you can go public, tell a good story, pump up the stock price after giving yourself options and other share based compensation devices, and walk off with millions of dollars while the investors who backed you suffer losses. The ultimate end game is to go private and not have to face your shareholders at annual meetings you attend driving up in your new Bentley while they work hard to avoid bankruptcy court.
There is an old adage: “If you want to make a small fortune in the stock market, start with a large fortune” and Lightspeed has been there to speed you along that journey. In the meantime, Lightspeed management has never been shy about selling shares pretty well given to them as part of their “share based compensation”.
Your compensation for your role in this obvious “pump and dump” scheme is going to be useful when you claim your losses for tax purposes next month. If the dreams you were sold by the upbeat presentations made by management over the past five years do come true, you will be left behind when the company goes private.
Tough. You bought the story and you have no one to blame but yourself.
Nice article Michael !
Gord Hall