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6/28/16

Andrew Kaip of BMO's poor analysis of Sandstorm Gold is confirmed...by BMO

In the post "When sellside brokerage anal ysts get it totally wrong, BMO and Sandstorm (SAND) (SSL.to) edition", we noted how Andrew Kaip of BMO vastly underestimated the upside potential of SAND by sticking a 12 month U$4.50 target price on the stock, a price that was taken out the very next day. We summed up by saying:

1) Kaip won't get into trouble for this because he basically called the stock higher and it went higher. Anal ysts face flak on those rare occasions they're daft/brave enough to call sell on a stock, not buy (or that ultimate get-out phrase, "market perform" linked to a tepid upside percentage call).

2) But it's not a "market perform" at all, it's obviously a "market outperform". He's done his readers a disservice by not getting them into a stock that moved 13.9% in the space of one day.

3) This can only mean that Kaip hasn't read SAND correctly. There's something very wrong with his basic assumptions and, as a public service, IKN invites said anal yst to consider just why he's got the call on this stock so obviously wrong. He may become better at his job from such a period of necessary introspection.

Therefore, the thronging masses here at IKN Nerve Centre had a good old guffaw and chuckle when reading the NR out of SAND yesterday announcing its U$50m bot deal, which starts like this (IKN highlights and bold-types for fun):
Sandstorm Gold Ltd. ("Sandstorm" or the "Company") (NYSE MKT:SAND)(TSX:SSL) has entered into an agreement with a syndicate of underwriters co-led by National Bank Financial Inc. and BMO Capital Markets (the "Underwriters") pursuant to which they have agreed to purchase, on a bought deal basis, 11,236,000 common shares of Sandstorm (the "Common Shares") at a price of US$4.45 per Common Share, for aggregate continues here.

And no warrants on that. In other words, BMO is happy to buy SAND shares at U$4.45 when its house target is U$4.50, which can only mean one of two things:

1) It as a brokerage is happy about offering its clients a 5c mark-up on a U$4.45 stock (or 1.1% once the holding period is done).
2) The people higher up at BMO don't agree with their own anal yst.

Guess which one is more likely?