Shares of Power Corp. of Canada soared to an unprecedented high after the financial services giant unveiled robust quarterly earnings and announced its strategic intention to pursue further acquisitions, fueled by a significantly strengthened cash reserve.
Strong Financial Performance Drives Growth
The company, controlled by the billionaire Desmarais family of Montreal, reported adjusted earnings per share of $1.35 for the quarter. This figure represents a substantial 26 per cent increase compared to the same period last year and slightly exceeded analyst expectations. This powerful performance propelled the stock to a record high of $71.97 in early trading, pushing its market capitalization above $45 billion.
Chief Executive Jeffrey Orr emphasized the company's fortified financial state in a call with analysts. “The cash position of Power Corp. had quite a material jump over the quarter,” Orr stated, clearly outlining the corporate strategy. “If there were further opportunities to make acquisitions, that would be capital priority No. 1.” This directive includes seeking deals to enhance Great-West Lifeco Inc., the firm's largest holding.
Strategic Deals and Portfolio Value
Investor sentiment towards Power has been fundamentally reshaped by a series of successful transactions within its portfolio. A key highlight is the company's majority stake in Wealthsimple Financial. The online brokerage's recent funding round valued it at an impressive $10 billion, creating significant unrealized value for Power.
Another major win stems from Power's ownership of mutual fund manager IGM Financial Inc., which holds a 20.5 per cent stake in Rockefeller Capital Management. A recent recapitalization of Rockefeller at an enterprise value exceeding $6.6 billion has caused IGM's valuation of its stake to skyrocket by 89 per cent to $1.6 billion since its initial investment in 2023.
Orr pointed to these successes as evidence of the hidden potential within their holdings. “The Wealthsimple and Rockefeller transactions demonstrated not just the quality, but the magnitude of the value-creation that can be created in that part of the portfolio,” he said.
Net Asset Value and Shareholder Returns
The company's underlying value has seen remarkable growth. Power reported that its adjusted net asset value reached $72.24 per share by the end of the third quarter, marking a surge of nearly 20 per cent in just nine months. Historically, Power's stock traded at a discount to this stated value, but that gap has now virtually closed, reflecting renewed market confidence.
Power also demonstrated its commitment to shareholders, revealing that it has returned over $2 billion to shareholders so far this year through a combination of share buybacks and dividends.
While most news is positive, the company's alternative asset management arm, Sagard Holdings Inc., reported an $11 million net loss on an adjusted basis for the quarter, indicating it has yet to achieve sustained profitability. However, the division has shown strategic progress, attracting its first U.S. institutional shareholder and combining operations to create a platform with over US$23 billion in private equity assets.
