Fairfax Financial Holdings Ltd. bought back US$1-billion of its own stock at a premium price on Christmas Eve, after selling a stake in a subsidiary for US$900-million to institutional investors OMERS and the Canada Pension Plan Investment Board.
A global property and casualty (P&C) insurance company, Fairfax announced plans in November to buy back up to 8.7 percent of its own stock at a price of between US$425 and US$500 for each subordinated voting share. At the same time, Fairfax said it sold a 9.9 percent stake in its Stamford, Conn-based division Odyssey Group Holdings Inc. to CPPIB and OMERS, two of Canada’s largest pension fund managers.
Fairfax is the latest in a string of Canadian financial services companies to launch significant share buybacks, as regulators ease capital restrictions imposed during the pandemic and allow banks and insurers to deploy their cash as they see fit.
Toronto-based Fairfax set the purchase price on its buyback last Friday using a “modified Dutch auction”, which allows shareholders to select the price they are willing to tender their stock. The auction was “modestly oversubscribed,” according to a report by analyst Phil Hardie at Scotiabank.
Fairfax ended up acquiring two million shares at US$500 each, the top end of its pre-set range. That day, Fairfax shares closed at US$464.02 on the New York Stock Exchange, so the buyback played out at an 8 per cent premium to where the company’s stock was trading at the time.
The decision to sell a stake in a subsidiary and use the capital to buy back shares “provided an elegant solution to enhancing book value per share in the near term while also supporting future growth,” said Mr. Hardie.
The CPPIB and OMERS investment valued Odyssey at 1.7 times its book value. In contrast, the buyback saw Fairfax repurchase its own shares at a 10 per cent discount to the company’s reported book value, which is US$561.88 per share. Mr. Hardie said: “The Odyssey deal highlights the significant gap between Fairfax’s stock price and the estimated intrinsic value of the company and its holdings.”
Fairfax, controlled by entrepreneur Prem Watsa, also raised capital in October by selling a 14 per cent interest in London-based reinsurance subsidiary Brit Ltd. to OMERS for US$375-million.
Historically, Fairfax has used the cash generated from its operating companies and investments to grow through acquisitions, rather than to pay for share buybacks. In recent years, the company expanded in India and Africa.
The property, casualty and reinsurance industries are consolidating around their largest players, which include Fairfax. “With P&C business becoming more risky and complex, capital requirements and need for reinsurance will rise,” said Swiss Re, the world’s largest reinsurer in a recent report. The Zurich-based company said: “Property will be the fastest growing segment, with global premiums forecast to increase by 5.3 percent annually to 2040. Climate risks will be a main driver of the growth in property.”
Fairfax is expected to continue snapping up smaller rivals. In a report last week, analyst Mark Dwelle at RBC Capital Markets said: “The company has well over $1 billion of holding company cash and has the operating flexibility to pursue a variety of near term and long-term growth initiatives and acquisitions.”
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
