There was no shortage of business headlines this year. Between Encana Inc. shedding its Canadian identity by announcing a name change and plans to redomicile to the United States, the shifting regulatory environment for Canada’s budding cannabis sector, and the continuing growth of technology giant Amazon.com Inc., BNN Bloomberg’s personalities were split on which business story stole the spotlight in 2019.
Below, they make their cases for the top story of the year, the most compelling business leader, the biggest blunder, and which companies you should watch in the new year.
Paul Bagnell, anchor, The Street
Most important story of the year
The departure of Encana from Canada. The decision by Encana to redomicile to the United States stunned the country and appeared to be a final indignity to the Alberta oil patch. Encana had been acquiring and emphasizing oil assets in the U.S. for years, but its move to disassociate itself with Canada seemed to confirm investors’ worst fears — that interest among international investors in Canadian energy producers has all but disappeared, and may not come back. Reaction was immediate. Critics of the Liberal federal government were quick to point to the federal carbon tax and pipeline-unfriendly Bill C-69. But the company also faced criticism from investors who called the redomiciling nothing more than a cop-out from a management team unable to build shareholder value.
Most compelling business leader
Satya Nadella, CEO of Microsoft Corp. This is not a terribly topical pick, as Microsoft did not make major news in 2019. There were no major takeovers and no public dust-ups with regulators or politicians. But Microsoft shares did what they have done ever since Nadella sat down in the CEO chair in February 2014: they moved substantially higher. Nadella’s drive to move Microsoft’s offering to a subscription-based cloud model has been spectacularly successful. The stock is up nearly 50 per cent so far this year, and more than 300 per cent since Nadella became CEO. Portfolio managers we regularly speak with on BNN Bloomberg call the stock one of their go-to names in tech.
Biggest business blunder of the year
The ham-fisted attempt by CannTrust Holdings Inc. to ignore Health Canada regulations on marijuana cultivation, and adopt a “what are the odds of that?” mentality to the prospects of getting caught. In July, Health Canada inspectors arrived unannounced at a CannTrust cannabis growing facility in Pelham, Ont. They found marijuana growing in rooms that had not yet been approved for the purpose. In the days that followed, investors heard tawdry stories of walls being moved around within the facility to conceal the illegal growing in photographs. Investors watched as the CannTrust share price collapsed, and the company became a walking-dead case study in a new industry that hasn’t grown up yet.
Company to watch in 2020
Encana. Will the company’s rebranding work? If shares of the company (soon to be renamed, inexplicably, as Ovintiv) outperform those of its peers — particularly here in Canada — Canada’s image among world investors may take another big hit. If the shares appear unaffected by the redomiciling, pressure will mount for changes at the top.
Another company to watch:
BCE Inc., the parent of BNN Bloomberg. In George Cope, the company has had one of the most highly-regarded CEOs in recent Canadian history. And shareholders have benefitted. The stock has risen by 60 per cent during Cope’s tenure, and the dividend has more than doubled. If shareholders have reinvested their dividends in BCE stock, their total return is 218 per cent. In January, Mirko Bibic becomes CEO. He’s a razor-sharp, fluently bilingual executive who led the company in battles with the CRTC. In the short term, Bibic is unlikely to make big changes to BCE’s strategy or the way it executes. But new CEOs always leave their mark, and it will be interesting to see what Bibic does.
Andrew Bell, anchor, Commodities
Most important story of the year
The increasing and unchecked power of Amazon. Gizmodo.com says founder and chief executive Jeff Bezos “has built some sort of grotesque post-capitalistic empire that makes Standard Oil look like a local firewood stand.”
Most compelling business leader
Air Canada’s Calin Rovinescu was last month named CEO of the year and strategist of the year by The Globe and Mail's Report on Business Magazine. The stock nearly doubled this year as he moved to cement control of Canadian aviation with the takeover of Transat A.T. Inc. Maybe the company could afford to hire a few more people to answer the phone.
Biggest business blunder of the year
CannTrust saw its stock drop more than 80 per cent after revelations of unlicensed growing forced the company to slash its workforce. CEO Peter Aceto along with co-founder and chairman Eric Paul were ejected.
Company to watch in 2020
Tourmaline Oil Corp. Shares in Canada’s biggest natural gas producer are down 12 per cent this year, but they have bounced 40 per cent from their October low. There are signs that the gas price in Alberta, where storage is at its lowest in years, is stabilizing after changes in TC Energy Corp.’s pipeline procedures.
Greg Bonnell, anchor, The Real Economy
Most important story of the year
Canadians getting an 11th-hour reprieve from their debt burden. With interest rates on the rise as we entered 2019, the big fear/prediction was that over-indebted households would finally crack under the pressure of higher payments. A change in tone from central banks and falling yields in the bond market kept borrowing costs cheap, and the country’s largest housing market (Toronto) found its feet after rounds of housing-policy tightening. But a word of caution heading into 2020: despite money remaining cheap, Canadian insolvency rates are on the rise. The housing/debt bears would call that a big crack in the foundation.
Most compelling business leader
WeWork co-founder and former CEO Adam Neumann. Although now cast as a failed business leader after WeWork’s disastrous attempt to go public, think about what he almost pulled off. Imagine taking what is at its heart a real estate company, convincing people it’s a tech play and then generating buzz to the tune of a US$47-billion valuation (before falling back to earth). The story opens up a broader discussion about what qualifies as a tech company worthy of investor frenzy. Is having a smartphone app that connects the public to your real estate or taxi business get you into the club? I’ve often thought about that while ordering Friday night pizza on my smartphone while on the train. Is grilled-chicken pizza with roasted red peppers the next big tech play?
Biggest business blunder of the year
WeWork’s disastrous attempt to go public (see above for details).
Company to watch in 2020
Any Canadian outfit in the recreational marijuana space. After most of the big players saw their valuations cut in half during the first year of legal pot, I’m anxious to see where they go in 2020. Are edibles enough to turn this story around?
David George-Cosh, reporter
Most important story of the year
How the legalization of cannabis in Canada was bungled through a series of regulatory missteps, product oversupply and a lack of political will on the provincial level.
Most compelling business leader
Bruce Linton, the former CEO of Canopy Growth Corp. and defacto cannabis industry leader was ebullient in his expectations for the legal pot industry. Unfortunately, his board didn’t share the same view, terminating him this summer after he failed to rein in spending. Since then, Linton has moved into other roles and has invested in a range of U.S. and Canadian legal cannabis companies while the sector continues to languish in the absence of a Pied Piper.
Biggest business blunder of the year
CannTrust’s disclosure that it grew cannabis in unlicensed rooms under the alleged approval of the company’s senior executives. The disclosure led Health Canada to suspend CannTrust’s ability to sell and produce legal cannabis, while casting a pall across the entire industry that couldn’t afford any regulatory issues in the early days of legalization.
Company to watch in 2020
Canopy Growth Corp. Investors will be paying close attention to how its new CEO (former Constellation CFO David Klein) will steer the pot giant toward profitability, while keeping tabs on how its new portfolio of Cannabis 2.0 products will fare in the Canadian market.
Pattie Lovett-Reid, CTV Chief Financial Commentator
Most important story of the year
My focus is on the household balance sheet, so throughout the year I watched in awe as the Canadian economy continued to pump out jobs and growth. While it was uneven at times, it held its own. We saw debt levels climb, yet insolvencies remained stable while spending increased. Even the housing market regained its footing, helped in part by low interest rates and increased demand amid dwindling supply. It wasn't always easy for Canadians, but we muddled through another year, financially speaking.
Most compelling business leader
I applaud Bank of Canada Governor Stephen Poloz for his steady stewardship and stabilizing impact on the economy. He didn't raise or cut rates, alarm bells weren't ringing, and it was steady as she goes. Sure, there were calls to respond to lower oil prices, trade challenges, uncertainty around political risk and so much more. As central bankers around the world cut rates, I would argue Poloz was ahead of the curve. When you don't raise rates prematurely, you don't have to cut them reactively.
Biggest business blunder of the year
When it comes to blunders, trade wars and tariffs come to mind. I appreciate that free trade can be beneficial to consumers, increase competition and lead to lower prices. Yet in some cases, governments need to impose tariffs to protect goods and services, and so it is a delicate balance. Trade agreements need to be updated and revised. However, the Trump administration has proven to be unreliable for Canadian business owners, forcing Canadians to explore international markets outside the U.S., such as Asia and Europe, for the first time in decades. That isn't a bad thing, but it’s an important wake up call.
Tara Weber, Western Correspondent
Most important story of the year
Jody Wilson-Raybould. Ousted from the Liberal caucus amid the scandal at SNC-Lavalin Group Inc., she turned Canadian politics on its head this year. Recently re-elected in Vancouver Granville, she has cited electoral reform and Indigenous reconciliation as priorities and promises to "do politics differently.''
Most compelling business leader
Alex Pourbaix. He’s rebuilding Cenovus’s image, quickly paying down massive debt and has become a strong spokesperson for the oil-and-gas industry in Canada.
Biggest business blunder of the year
WeWork. Softbank Group Corp. expected to fetch US$48 billion in an IPO. The valuation was then reduced to US$8 billion over the span of 10 months. Awkward. The odd thing is, Softbank is a major investor and you’d think it would’ve had a better sense of WeWork’s value.
Company to watch in 2020
Boeing Co., for sure. The groundings of the 737 Max have had a ripple effect on the global airline industry, and has affected investor confidence in the company’s leadership. Now, with a newly-appointed CEO taking over, it will be interesting to see how and if the company comes through the other side.
Close second: SNC-Lavalin. With the legal overhang behind it, the company is one to watch in 2020.
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