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FTX crisis serves as warning to retail investors as major funds get burned

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BRAZIL - 2022/02/01: In this photo illustration, the logo of the FTX, a cryptocurrency exchange is displayed on a smartphone screen. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)
A number of major institutional funds that backed crypto exchange FTX are seeing their investment in the company on shaky ground as the platform deals with a liquidity crunch. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

The potential collapse of one of the world’s largest cryptocurrency exchanges this week has seen a number of big-name investors get burned on their stakes in the company, providing yet another warning to smaller, mom-and-pop investors about the dangers of following major funds and celebrities on putting money to work in volatile sectors.

“This falls into, at the very least, the highly speculative investment category. Which tells you that, to me, it’s kind of like going to Las Vegas,” Lorne Steinberg, the president and portfolio manager of Montreal-based Lorne Steinberg Wealth Management, told Yahoo Finance Canada in a phone interview. His firm does not invest in the crypto sector.

Crypto exchange FTX shocked the market Tuesday after announcing its rival, Binance, signed a non-binding letter of intent to acquire the company as it grapples with a liquidity crunch. The preliminary agreement fell apart not even a day later when Binance scrapped its takeover offer.

Cryptocurrency prices slumped on the news as investor jitters rippled through the industry. FTX Token, FTT, cratered while bitcoin dropped to trade at its lowest point since late-2020.

Major funds including BlackRock, the Ontario Teachers’ Pension Plan, SoftBank, Tiger Global and Sequoia Capital have all invested in the owner of the FTX exchange, FTX Trading Ltd. Star NFL quarterback Tom Brady and supermodel Gisele Bündchen have also bought into the company.

 

The fact that big names are in there, should mean absolutely nothing to anyone.Lorne Steinberg, president of Lorne Steinberg Wealth Management

But Steinberg cautions retail investors about being enticed to put money into speculative holdings just because influential funds and celebrities have bought in.

“What we all really know is that these massive companies or super wealthy people are putting, probably, pennies of their net worth or value into crypto. So, for BlackRock or Ontario Teachers’, if they lose the whole thing, it is a rounding error,” Steinberg said.

 

“The fact that big names are in there should mean absolutely nothing to anyone. It’s a function of how much of their net worth do they actually have in these things?”

The FTX liquidity crunch is just the latest stumble in the crypto industry that some institutional investors have found themselves wrapped up in. Quebec’s pension giant Caisse de dépôt et placement du Québec decided to fully write off its US$150 million investment in Celsius Network LLC earlier this year after the crypto lender went bankrupt.

Steinberg’s advice to retail investors is that “the more speculative the investment, the tinier the investment.”

He says it’s easy to get caught up when a sector is flying high and it appears there could be easy profits to be made. Whether it was the dot-com era, cannabis stocks or the past craze over junior miners, smaller investors are at risk of putting too much of their portfolio into one sector, he says.

“A lot of smaller investors end up putting way too much of their net worth in these things. Because they look at it as a way of getting rich, so to speak. Without even knowing what they’re buying. And this happens regularly,” Steinberg said.

His firm prefers investments with a proven track record, though he acknowledges the approach can be considered “boring” to some.

“It’s like watching paint dry. But, you know, these are profitable businesses that generate pretty good returns over a long period of time. It’s how Warren Buffett made his money,” he added.

“And this once again will undoubtedly be a good lesson to a lot of people. Because as human beings we unfortunately, all of us, learn best from our mistakes. Make sure an investment makes sense before you make it and if you don’t understand it, don’t make the investment.”

Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

The Canadian Press. All rights reserved.

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