In this podcast, Motley Fool analyst Jim Gillies and host Ricky Mulvey discuss:
- Payments company Nuvei going private and the deal's winners and losers.
- A demand shift to hybrid vehicles.
- What Tesla's deliveries miss means for the carmaker.
Motley Fool personal finance expert Robert Brokamp and host Alison Southwick take a look at a couple's real-life finances.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on April 2, 2024.
Ricky Mulvey: It's not easy being a public company. You're listening to Motley Fool Money. I'm Ricky Mulvey, joined today by Jim Gillies. Jim, thanks for being here.
Jim Gillies: Thanks for the invite, Ricky.
Ricky Mulvey: In between me inviting you and you coming on the show, a Canadian tech company went private. Nuvei, a payment processor focused on e-commerce payments around the world is being bought out by a private equity firm, Advent International, for $6.3 billion, that's U.S. dollars. It's adjacent to Stripe and Adyen, but I would say it plays in spaces like crypto and gambling, went public, three-bagged, fell back to earth, was the target of a couple of Spruce Point short reports. You think Nuvei is just real tired of being a public company these days? What's going on?
Jim Gillies: One hundred percent. I think they said, to hell with this, and they got out. They can do so because they have three large shareholders who basically control, I think, it's something like 92% of the vote when this thing went public in 2021. I think it's '21. They came public with a dual share class structure, most of the common plebes, like yourself or myself, we own subordinate voting shares, one vote per share, but of course, there is a super-voting class, multiple voting shares, 10 votes per share, and all of those shares are held by three parties, one of which is the CEO and founder, Philip Fayer, one of which is another private equity group, Novacap, I believe their name is, and then the third one is the Quebec Pension Plan. All three of those companies are all entities. They are all rolling their positions into this new private enterprise. A couple of them are taking of a few bucks out, but they're largely rolling it into the now private entity that will be formed by Advent International. There's no real consequence for them. Nuvei is an interesting one for me. I'm going to try to thread this needle, which I think might be a bit of a theme for this show. I'm going to try to thread the needle here because I'm of two minds about Nuvei being taken away from us. This is a recommendation in the service I run, Hidden Gems Canada. Basically if you'd bought when I said buy, you've doubled your money at eight months. This is a good outcome, but it's been a recommendation in several other services as well that focus on partnerships. We like owner-managers of companies.
As I've just mentioned, Phil Fayer is one of the three-headed entity that controls a large number of the votes here and has a very large stake, and a couple of quarters ago, he said, "I'm not taking any equity compensation anymore because they just initiated a dividend." I think this could be two payments of the dividend. He says about taking, "I'm only going to take my compensation in dividends because they own such a large share." Brilliant, love that. When these other services have recommended this company, it was at a higher price. There was a couple of actually that recommended at lower prices as well, not just Hidden Gems, but I want to be cognizant of the fact that the people who own from those, they're having a subpar experience. They are not getting out with a double in eight months. They might be taking a 50% loss after three years of owning this thing. That's because the entities that control this company can take it private because they can roll their stakes over, and public shareholders holding the subordinate of voting shares, we're just getting slapped. It's a nice outcome for me and my members, but it is a crap outcome for several other member basis of other services that I'm not real happy about. I'm sure they're not real happy about it either. It's like the people bearing the consequence of this action are not the insiders. They're not the people with multiple voting shares. They are Joe and Jane average who have bought as individual shareholders. I'm not real happy about that. Like I said, it's a bit of a mixed bag. The fairness opinion, because they always got to dress it up. They went and got a fairness opinion from TD who said the stock is worth between $33 and $42, so there being, the price works out to the $6.3 billion price tag, works up to $34 per share. I'm, like, why is it so low? I know you asked me before the show, is Advent getting a good deal? Since they're getting at the very bottom range of the fairness opinion, they are. I might humbly suggest that there might be a follow-on, or there might be someone we've seen in the past. Sometimes when you have that fairness opinion range, non-controlling shareholders, because they are allowed to have a vote, they might protest a little bit. Maybe we will see a higher price. Maybe this thing will be moved up to $36-$37 a share, but not real thrilled about some of this, put it that way.
Ricky Mulvey: I want to be pedantic for a second. I know you were talking in a hypothetical sense, but I know someone might take it in a literal sense. I'm not a Nuvei shareholder. My second comment is, I got to stop giving you the outline before the show starts.
Jim Gillies: [laughs]
Ricky Mulvey: Then we just start ripping through the outline. Anything else you want to say about this? I know you were talking passionately in the pre-show chatter about why the price you pay matters, not just especially for tech companies, but this is playing out in this case.
Jim Gillies: I regularly annoy other Fool analysts because I'm the valuation guy. This is not a universal opinion, nor should it be a universal opinion, but it is my opinion. On the spectrum of valuation, it doesn't matter until valuation is the only thing that matters. I'm real close to that second end. It's not the only thing that matters, but boy, when it matters, it really matters, and that's the problem. It has nothing to do with any other Fool service, but during 2021, when all of a sudden payment tech and everything gets new, they got swept up with all the excitement of the time. This happens every single time where valuations get distended. It's happened. I can think of at least four occasions during my professional career, and it's happened many times before that. The Nifty Fifty says hi from the '60s. Valuations, people forget, they matter. They don't care. Being taken out like this is, the only reason they could do this, is because they have those multiple voting shares. This is a risk, and this is one of the risks you don't really think about when you get into valuation matters arguments, but this is one of the big risks. You have three entities that control the fate of this company, and they are working together and aligned.
Maybe when you're buying this, they should put a bit of a discount on what you're willing to pay for these things, but again, I am someone who is always going to be, valuation matters first and foremost, and growth, quite often you'll have people put up what I think is frankly a straw man argument, but they'll say they'll pit value investors against growth investors. I reject that war because I've always said growth is input to valuation. We're not these two oppose camps with weapons pointed at each other. We shouldn't be. We should be one camp of investors where we are all trying to look through the glass half darkly, if you will, to see where we see the world can go. Unfortunately, with Nuvei, unless you are a recent buyer and have enjoyed the gain off the bottom, this is a disappointing end, and I don't think we should lose sight of that. I don't think we should lose sight of the people who are actually hurt by this, whether they're Foolish members or not because management here had the ability to take it away from us. I think that's about all I'm going to say about that.
Ricky Mulvey: I think we've said a lot about it. Let's move to the next topic. Long-time Fools are going to hear me attempt what I'm calling the near impossible by quickly mentioning Tesla with Jim Gillies and then seeing if we can move to a broader story. Let so see if we can do it. A few things are interesting in the car market as delivery numbers come in. Tesla missed on deliveries, but it reclaimed its title as the world's largest electric vehicle seller back from BYD. The analysts wanted 450,000 vehicles. Tesla delivered 386,000. I will stop here before going to the macro story. Anything you want to say on that, Jim?
Jim Gillies: Yeah. [laughs] It's generally a good idea not to ask me about Tesla because I do have some rather striking opinions about them. I will say this. I don't think the deliveries in this quarter are the story. I think the story is the fact that they delivered 387,000 vehicles. Whatever delivered means in their accounting parlance. They produced 433,000 vehicles. There's some 46,000 vehicles as surplus inventory. Just from this quarter alone, cumulatively, I think it's at about 155,000. Don't quote me on that.
Ricky Mulvey: You know there's a transcript of what you're saying.
Jim Gillies: I know.
Ricky Mulvey: When you say don't quote me on that.
Jim Gillies: I guess you can quote.
Ricky Mulvey: [laughs]
Jim Gillies: I have the number roughly.
Ricky Mulvey: I got you wrong.
Jim Gillies: That's a lot of metal lying around. They've been lowering price for the better part of a year, which some people have attributed it to Elon playing three-dimensional chess again. I'm not that smart so I look at this and go, it's attributable to the fact that they're overproducing. This quarter did not improve that situation. I think where you're going to want to go with this is what is the consumer looking for? Increasingly, I'm thinking the consumer is realizing that full-battery electric vehicles are maybe a subpar solution as opposed to some of the other things available out there.
Ricky Mulvey: There's a lot of talk that fully electric cars are harder to fix if you need to get maintenance on them. They're very expensive. Now you have the legacy car makers that have been tarnished, producing much better hybrid vehicles that they've been working on for more than 20 years now. I mean, is there more to the shift we're starting to see more plug-in hybrid sales, especially as car prices plateau. You have folks with range anxiety and also the difference between maybe industry, Wall Street government bodies expecting a full shift to electric vehicles in what people actually want, which is, I want to save money on gas, but I also want to be able to drive to another city without worrying about my car dying.
Jim Gillies: Full disclosure, you are talking to a biased audience here. I own to plug-in electric vehicles a 2018 and a 2023, we are in the process of buying a third, the newest one I have, which I've had for three months. I'm averaging about 107 miles per gallon. I won't give you the Canadian. The Canadian version of so many liters per 100 kilometers, it works out to about 170 miles per gallon. The improvements that they've made on plugin hybrid range. Pretty much every plug-in hybrid electric vehicle out there, the range is doubled from where it was five years ago. The electric only range, I should say. That as you say, if I want to go on a seven hour trip, I don't have to stop and plan my stops at a superchargers and hope there's no lineup and hope I can get in and out and under 40 minutes, it runs on gas. I think, the movement to people, realizing that Toyota has got this fantastic fleet of hybrid vehicles don't even have to be a plug-in. People are increasing cost of living where of course we have car prices have gone up substantially over the past few years. We all know about the inflation stories. Interest rates have gone up as well so you're now talking about higher car payments so people now taking six, seven, eight years on a car loan, which personally gives me hives, but that's just me. Then coupled with things again, I'm trying to be nice here. I don't like to talk about Tesla frankly, but a certain CEO of the company making reference to Tesla's being appreciating assets. He himself has dis-proven that argument. I'll put it that way. If your whole attempt was, Hey, Tesla's are appreciating asset so I'll buy this model for a couple of years and sell it for more and by another one, that isn't happening and I think it should be worrying. These numbers that were released today should be worrying to Tesla shareholders, I think because I think it worst-case scenario and things are never the best and things are never the worst, but there's usually a turn in the middle. The worst-case scenario today was the death of the Tesla growth story.
Ricky Mulvey: That's the worst-case scenario. You know what? I want to make it clear, Jim is not the only Fool analysts we have on staff. We do have bulls. We have Tesla bulls that's why we have a Motley group of opinions.
Jim Gillies: I will say I actually liked the cars. I almost bought a Tesla Model X a couple of years ago then I realized with those gull-wing door I couldn't get my ski blocks on top, which is why that Kai bars that i liked the cars.
Ricky Mulvey: I got you.
Jim Gillies: But I'm a little worried I saw this, this was actually worse than I thought it would be today. I'm like, that's not good.
Ricky Mulvey: Last thing, I'll leave the listeners on average, monthly payment on a new car is about $750. That's in February of 25% from three years ago, you're going to see some decisions being made because of that, that are going to continue to play out affecting spending and also the car industry. Anyway, Jim Gillies, as always, appreciate your time and your insight.
Jim Gillies: Thank you very much.
Ricky Mulvey: Alright, before the next segment, I'm going to do a quick ad. If liked to this conversation and are ready to take your investing drops to the next level. Head over to fool.com/sign-up to join Stock Advisor. That's our flagship investing service. As a Stock Advisor member, you'll get two new stock picks each month, rankings of a whole scorecard of companies, and access to all episodes of our premium podcast Stock Advisor Round Table. That show is only available to premium Motley Fool members. It focuses on Foolish recommendations and takes a deeper dive into the businesses we covered, featuring Fool analysts, you already know and love from listening to Motley Fool Money. Tom appears regularly on bonus episodes of Stock Advisor round table to discuss what's new in the Stock Advisor universe and to answer questions sent in for Motley Fool members. I will also include a link in the show notes. Up next, some real life money questions with Allison Southwick and Robert Brokamp as they help a couple of figuring out saving, estate planning and 401K loans.
Allison Southwick: You've obviously, very busy. You're both working. You have twin boys. How do you divide up the money, chores and your house? Tyler, why don't you go first.
Tyler Satre: A little while ago, I guess it was when we got married, is when we really start to combine finances and actually I'll take a step back. It was, I don't know, maybe a year and change into our relationship. We knew or serious, there was a lot of going out and pretty much always split everything 50-50 and at some point we decided to just get a joint credit card because it made it made things a lot easier, far less overhead of keeping track, I paid for dinner this time or you've InMode me or just keeping her running tab for any big expenses. So we started with a somewhat combined earlier on what that joint credit card, but when we got married than we just completely combined our finances and really at that point, Cristen was the one who wanted to take control of making sure that bills were paid. As she's the one who does, I would say the accounting is that the way I would describe it. I'm just tracking what we've gotten, what's coming in and what's going out.
Allison Southwick: Cristen, so you are the accountant in the family, what does Tyler do?
Cristen Oehrig Satre: I would say Tyler is more of the strategist. He has the further outlook, that's just the way he approaches life in general, is he looks at the long term. I'm a very here and now person and so he is great at looking at our overall nest-egg where we want to go, big picture investments type stuff that I'm perhaps not as skilled at or as my nature isn't inclined to those things.
Allison Southwick: I think the doctor is ready to see you now. Is that correct, Dr. Bro?
Robert Brokamp: Yeah.
Allison Southwick: Again, not a real doctor.
Robert Brokamp: Not a real doctor.
Allison Southwick: You're going to a get tired of me saying that.
Robert Brokamp: No.
Allison Southwick: You should just get your doctorate already in something, two masters and you couldn't go for a doctorate. Come on.
Robert Brokamp: I'll work on that over the weekend I'll get one. Before the show, we talked to about what concerns you had, you indicated that one challenge you have is differences in risk tolerance and we've touched on it a little bit, and it's a term, it's often applied to investments, but could actually be applicable to most financial decisions. How much you spend, how much debt you take on, how much insurance you get. It really gets down to your financial fears, what are you most worried about when it comes to money? Cristen, let's start with you. What risks are you most concerned about? What worries you most about money?
Cristen Oehrig Satre: Great question. I don't deal well with change in life in general. I'm very resistant to change and I think the impermanence of money is terrifying to me and the experience we went through with this house build and the harrowing hit venture that we had to go through really reinforced that fear for me in a way that I think now has exacerbated maybe some of those perspectives that nothing ever works out. Money comes and goes, there's never a real savings and we'll be working until we die because we'll never have every other retirement.
Robert Brokamp: As long time listeners will know you and I actually have a good bit in common and Alison likes to call me to awfulizer because I'm always worried about the worst-case scenario happening. I'm going to ask you some clarifying questions that have helped me cope with my awfulizing. Do you know someone similar to you, your background, your work ethic, your situation, who has essentially lost everything and never could retire, everything they had was gone.
Allison Southwick: No.
Robert Brokamp: That doesn't mean it doesn't happen. There are people, maybe people listening to this podcast that it's happened to, but it's probably not a likely event. That doesn't mean your concerns aren't valid, but one thing that has helped me is to put my fears into probabilities. It's not likely to happen to you or to me that we're going lose everything. You are working for the federal government, is it the federal government you're working for?
Cristen Oehrig Satre: Yes.
Robert Brokamp: Will you receive a pension?
Cristen Oehrig Satre: Yes.
Robert Brokamp: That's something that you have. The reason I point this out and I think it's good too, it's really to right-size your concerns. It's never good for you to be worried 75% of the time that you're going to lose everything when there's a very small chance of it happening. Really, it's a way of permitting yourself to relax and to think about some of the things that you have in place. I'm going to put a pin on that because we're going to attack a few more questions about your finances to hopefully make you feel a little bit more comfortable.
We've talked about how you are actually good communicators, but there's some differences in your mind, every couple has some differences. Some of that is due to personal preferences because people are different and there's no right or wrong answer, but some things are essentially things that every family should be doing with their finances, that it can help to work with a financial planner to provide an objective, neutral third-party opinion that helps differentiate between what's negotiable and what's not negotiable. I'm not your financial planner, but let's start by asking you a few things about your finances that a typical financial planner would ask and recommend that just about any families should do. First of all, do you have an emergency fund which is that three to six months of cash that you could live off of in case there was a big ticket expense or one of you lost your job?
Cristen Oehrig Satre: We don't have an emergency fund that is liquid. We do have investments that we can draw on, that we have drawn on, but obviously, those come with the cost of capital gains.
Tyler Satre: I would add, we did just open up a HELOC on her house, which is to basically act as an emergency fund if we need to be able to draw something, we've got some room to work with their though realizing there would be some interest to pay, but if there was an immediate need for a big expense that we could pay off in the near-term, we have that option with it.
Robert Brokamp: You've opened that now, which is great because often when you try to open one of those in the middle of an emergency, you won't be able to get it. That was smart. Do you each have enough life insurance so that your family would be financially OK if one or both of you passed away?
Tyler Satre: Yes. I think both of us do. That's one thing we've made. Once we had kids, we made sure to up that to the max we could get from benefits just because if something happens with two kids, there's plenty of expenses.
Robert Brokamp: Excellent. Do you have an update at a state plan which includes all your legal documents like a will, healthcare directives, maybe a trust if it's appropriate for your situation. Not everyone needs a trust, but some people think it makes sense for them?
Cristen Oehrig Satre: Since moving from DC to Virginia, we do need to update our state plan, but when we had children, we did get the initial ducks in a row, mostly to make sure that they would be cared for in the event of both of our deaths.
Robert Brokamp: Is there a burning desire by one of you to retire significantly early or are you comfortable with just that traditional path of retiring at some point in your mid to late 60s or so?
Cristen Oehrig Satre: If there was an option for me to retire tomorrow, I would absolutely take it, [laughs] but realizing the reality of most Americans ourselves included, I would very much like to be able to retire in my early to mid 60s. I will be eligible for my government pension after five more years of federal service. I have no doubt that I will meet that. Then I'm for sure working toward that minimum retirement age that my pension will allow for and likely beyond that to really maximize my pensions payout.
Tyler Satre: Yes, I am. Contributing the minimum amount needed to make sure I get the all the company match and don't miss anything and something, I know we both want to be able to contribute more to those, but that will come when expenses go down. Really, when day care costs stop.
Robert Brokamp: Cristen, are you maxing out the match with the TSP?
Cristen Oehrig Satre: I am maxing out the match. I just last year also opened the TSP Roth account to start putting some money in their post-tax dollars, but I aspire to be able to max out my annual contributions at some point in the near future.
Robert Brokamp: I don't know how much are contributing and how much you've already accumulated, but knowing the Fool 401K match system and knowing the TSP batch system, I know that you're both probably actually doing pretty well for retirement. I don't know how long have you been doing it, but you are taking a very big step forward and you add the pension to that and it sounds like you're probably doing pretty well, but of course you'd want to look at the numbers, but that's all very encouraging again. Then the other thing I'll just ask about is the college savings. You talked about how that's important to do. Are you able to do that now? Even if you're not able to do now, are you both on the same page in terms of the importance of that?
Cristen Oehrig Satre: Yes. We established 529 accounts actually, even before our sons were born and has been pretty regularly contributing a small amount of money just to try to at least get some tax relief from our donations in the state of Virginia, but we definitely aspire to be able to put more in there, but it is, I will say, as our kids get older, so many grandparents like I would far more be appreciative of a grandparent donating to a 509 than giving us another toy or an outfit. I think both of us have encouraged our parents to do that.
Tyler Satre: I think my dad is the only one who has taken that to heart and on birthdays and stuff, he puts in a few hundred bucks for each of them, into each of the accounting yeah. Adds up, but that happens a couple of times a year.
Robert Brokamp: Everything you've told me indicates that you too are in really good shape. You've talked about the the debt from the home purchase and we'll get into debt second, but I just want you both to know that your foundation is really solid. Like you're doing things better than the average American. I'm saying that particularly for you, Cristen, because if I were in your shoes, I am in your shoes and I need to hear that every once in a while as well. That you've got a solid foundation. Now clearly, that you've brought up the debt a couple of times, is the debt, do you feel is it too much or is it still manageable? But psychologically, you're just not comfortable with it.
Cristen Oehrig Satre: I'll go first, Tyler. I think it's the latter. It's it's very psychological at this point. Though I hate how this word gets overused, I think there was some trauma involved in the debt that we did take on and the fact that these investments that we had so carefully made in the real estate market really resulted in no net profit for us because of the debt we had taken on. It is now at a very manageable place and I would say the largest outstanding debt we have is actually to our own retirements. However, it is a bigger number than I've ever managed in my life when it comes to debt and that in and of itself, I find very discomforting.
Robert Brokamp: Anything you'd like to add to that, Tyler?
Tyler Satre: No. I would agree with Cristen. Really, the biggest debt is to TSP and 401K, when it came time that we needed to get more money, that was one of the first spots I'd look because I thought, you know, better to take a loan from ourselves when we're paying interests back, but it's going back into our accounts. We're not losing money to a third party for those loans. Went to that well first to get what we needed.
Robert Brokamp: I'll just repeat again that I think you're actually doing pretty well. I think the thing to think about what could you do to pay off the 401K TSP loans quicker if you could. I think you'll feel a lot better when you do that, because it's not only just a loan, but there are consequences if you can't pay it back. Another thing to consider is maybe if you could, boost up your emergency fund, but that may be difficult given your situation and you've taken out the HELOC if you need it, but if you have a plan to take care of those two things, you will be in great shape.
Ricky Mulvey: As always, people on the program may own stocks mentioned and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Ricky Mulvey, thanks for listening. We'll be back tomorrow.
