Coloured Ties Capital is effectively a Canadian closed end investment fund investing mostly in listed stocks. The ticker is TIE on the Canadian Venture exchange.
The focus is on lithium investments. When it invests in unlisted stocks it seems to act as a venture capitalist hoping the shares will get listed eventually for a much higher price. See here. The company also tries to develop lithium mining assets itself, in Canada.
The balance sheet is similar to that of most other funds: lots of liquid instruments and almost no liabilities. Apart from listed and unlisted stocks and the lithium assets the balance sheet also shows a big cash pile.
See the information circular (12 August 2022) for the annual general meeting, last financial report (30 June 2022) and the financial report over the year ending on 30 September 2021.
The company was previously known as “GrowMax Resources Corp”. The name was probably changed after an activist investor, “BullRun Capital” took over. See for example here. The name changed on 29 November 2021, see page 4 of the information circular. Searches on the company name and the other 2 names and keyword “fraud” did not reveal any other issues.
This stock is much cheaper than it seems from looking into the financial statements. After balance sheet date the share price of one of its main holdings, Patriot Battery Metals, sharply increased. At 5.81 CAD per share for Patriot Battery Metals my somewhat conservative estimate of liquidation value is 17 million CAD. With 23.28 million shares the market cap is about 7.8 million CAD at 0.335 CAD per share. Therefore Liquidation Value/Market cap = 17/7.8 = 2.2. To me it seems the market has not noticed yet the company will most likely report good investment results.
Substantial shareholders (page 4 information circular): CDS Inc 81.35%, Rauni Mahi 12.83%. CDS Inc is a share depository. The company writes it does not know who controls CDS Inc. It might be a street name.
A large part of the shares of the Rauni Malhi are held in escrow. Another 673k shares are also held in escrow. There shares are owned by the CEO/chairman Kulwant Malhi. In total he holds 1.04 million shares plus 1.11 million warrants at 0.80 CAD per share expiring on 23 July 2026.
Red flags: the CEO and chairman are the same person. Moreover he has a directorship with another public company suggesting less focus. Furthermore 2 other directors each have 8 or more directorships at listed companies. I think such directors often do not spend enough time for the company.
Related party transactions: Pages 3, 4 and 5 of the annual information form do not mention any specific transactions. Last financial year the CEO/chairman earned 180k CAD. The company paid 36k CAD of rent to a related party and 95k CAD of consulting fees. See also page 22 of the annual information form.
My take: promising closed-end fund, net-net and nanocap that is extremely cheap based on Liquidation Value/Market cap. A short-term catalyst for the stock could be the publication of new quarterly results with much better than expected investment results.
I have not found any blocking governance issues. I think this is a good stock to own, on a statistical basis. A risk is the mining business. Developing lithium mining assets might result in large cash burn.
Disclosure: long Coloured Ties Capital.
Do you still own it? Any thoughts on the current situation? (halted)