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    Wake (MEC) up when September ends…

    All hail the… Throne Speech!?

    No, the Throne Speech has nothing to do with Medieval Times.

    This Wednesday politics and economics nerds alike will be tuning in to find out the government’s priorities this parliamentary session.

    Not sure what that means?

    No worries.

    We’ve got a brand new 101 up on the (brand new) website, explaining what exactly a Throne Speech is, and why you should care.

     


    WeChat is Out. TikTok is (still) In.

    By Ruhee Ismail-Teja

    What Happened?

    TikTok and WeChat, both Chinese-based tech companies, were supposed to be banned from U.S. app stores as of yesterday, with the Trump administration claiming the companies threaten national security by sharing user data with China.

    On Saturday night, TikTok negotiated a deal with the Trump administration, agreeing to establish a new company, ‘TikTok Global’ in the U.S. The majority of its investors will be American, and all of its data will be held by the U.S.-based firm Oracle.

    WeChat has had no such luck negotiating a deal and will be unavailable to download or use as of midnight tonight.

    Interesting. So what does this mean for the market?

    Glad you asked

    . In terms of the stock market, TikTok is privately held (so doesn’t have stocks) and Tencent, the company that owns WeChat hasn’t taken a big hit. But things are a bit different for U.S.-based tech companies, such as the FAANGs (Facebook, Amazon, Apple, Netflix, and Google). Fears that China will retaliate against U.S.-based companies has contributed to a tech sell off, and these companies have seen a pretty significant decline in their share price since Trump announced the TikTok/WeChat ban.

    More broadly, we anticipate that data security concerns will become a bigger issue in the future. While most of these concerns wont result in Executive Orders by the US President, they will have impacts to the market. We have already seen concerns about privacy and data protection impacting several companies’ stock (think Facebook, even if only short term).

    The EU brought in a ‘General Data Protection Regulation’ a few years ago. If similar legislation was proposed in the U.S. or Canada, we would definitely see an impact to the stock market (though we would all have better privacy!)

     


     

    Loblaw is back in the banking game

    And what that means for the digital banking revolution

    By Sabrina Dotsch

    Innovative new fintech companies in Canada, like those pictured above, are pressuring the big banks to up their game.

    Over the past 20 years, The Big 5 banks have been under increasing pressure to innovate their products and services to compete with Fintech (financial technology) companies. Now, President’s Choice Financial (aka Loblaw) has thrown their hat into the ring, re-entering the banking industry with new digitally focused options.

    PC previously provided consumer banking products like chequing and savings accounts until 2017, when they cut ties with CIBC, their provider, forcing over 2 million clients to switch over to CIBC’s digital based bank Simplii. But now they’re back, and this week  launched the PC Money Account.

    What is The PC Money Account?

    The PC Money Account is a prepaid Mastercard that also includes a bank account. You can pay bills including pre-authorized withdrawals for things like memberships and utility bills, and transfer funds between banks. Essentially, by loading money onto the card and paying bills and purchases with it, you will earn PC Optimum points every time you use your card to make a purchase online or in-store and can use your card everywhere Mastercard is accepted.

    What is a Digital Bank?

    Many Canadians are making the switch to digital-only banks because of the better interest rates, low/no-fee accounts, and ease of digital banking. In fact, 76% of Canadians use mobile or online banking to conduct majority of their banking needs.

    A digital-only bank is able to offer no fee accounts and higher interest rates for savings accounts because there are no major overhead fees for branches and a reduced workforce as transactions are completed online or via the phone. Many digital banks use a network of ATMs at affiliated banks, so customers still have access to cash on the go.

    As online and mobile banking continues to evolve, it can be expected that traditional banks will shift their products to stay competitive with digital banks.

     


    MEC is going private… and members are not pleased…

    By Taryn Bergin

    On September 14, 2020 Mountain Equipment Co-op (MEC), Canada’s largest consumer cooperative, announced it would be selling all assets, including its retail locations to Los Angeles based investment firm Kingswood Capital Management.

    First off, what’s a consumer cooperative?

    Co-ops come in many shapes, but the main priorities are to meet the needs of its membership in a productive, self-sufficient, and socially responsible way.  In this case MEC provides goods and services to its members while giving back to outdoor spaces and environmental organizations.

    MEC, well known for its loyal following and great guarantee program, has been struggling financially since 2018 and has lost over $11 million CAD in the last year trying to keep up with consumer trends.

    Kingswood Capital is acquiring MEC under the Creditor Arrangement Act – a federal law that allows insolvent corporations that owe their creditors in excess of $5 million to restructure their business and balance sheets.  Kingswood has committed to keeping the majority of MEC’s 22 retail locations open and promises to also keep 75% of employees.

    But what about your $5?

    MEC currently has over 5 million members across Canada (quick math: that’s $25,000,000 in “equity”). But if you are one of those 5 million, don’t count on your $5.  Equity, in all transactions, is the lowest on the list of debt repayment, and MEC has a lot of debt to repay before it even gets to its members.

    In response to the news, a petition was created by members requesting to halt the sale. It’s been signed by over 80,000 people at this point. Members say, that as shareholders, they should have been informed of the sale by the Board of Directors before the announcement went public.

    Hard to say what will happen to the Canadian icon that has been around since 1971, but private equity sales have few examples of successful turn arounds (think Toys R Us or Sears).  Guess you should get that tent you’ve been eyeing sooner rather than later…

     

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