KeyStone’s Stock Talk Podcast Episode 130

This week we start with a Case for Debate on food delivery giants DoorDash, Inc. (DASH:NASDAQ) and Uber Technologies, Inc. (UBER:NASDAQ) – Aaron takes the Case For the former, while Brennan has the Case for the later. I will act as judge, jury and executioner. We also discuss frothy valuations in the alternative energy segment on the heels of a significant acquisition by a Canadian small-cap, Xebec Adsorption Inc. (XBC:TSX-V) which was the subject of a Case For debate just two weeks ago. Finally, I will take a look at a listener’s question on a recent listing, WeCommerce Holdings Ltd. (WE:TSX-V), which has tripled in the past week since its listing on the Venture exchange. The company acquires and owns a family of companies and brands in the Shopify partner ecosystem.

We start with a Case for Debate on DoorDash, Inc. (DASH:NYSE) & Uber Technologies, Inc. (UBER:NASDAQ), we discuss a significant acquisition by a Canadian small-cap, Xebec Adsorption Inc. (XBC:TSX-V) & take a look at a listener’s question on WeCommerce Holdings Ltd. (WE:TSX-V).

Comments on Valuations in a Market with Sector Frothiness 

Alternative Energy Solutions – a transaction to look at. 

Busy week for Xebec – which we detailed a couple of weeks ago. 

Announced Bought Deal Offering and Concurrent Private Placement with CDPQ to $125 Million and $55 Million Respectively.

  • Launching hydrogen strategy with the approximately $155.9 million strategic acquisition of HyGear, a Dutch-based leader in onsite hydrogen generation solutions for industrial and fuel cell electric vehicle refueling applications
  • Acquisition of leading small-scale steam methane reforming (SMR) technology and a reference base of 66 active hydrogen generation installations worldwide to accelerate entry into the fast-growing hydrogen fuel market

The acquisition was not cheap. In fact, HyGear, better show extraordinarily strong growth in the coming years to justify the price tag. Multiples paid for HyGear represent 8.8x 2019 Revenue and 29.3x 2019 EBITDA. 

HyGear generated ($17.89 million Canadian) €11.4 million of revenues, ($5.33 million Canadian) €3.4 million of EBITDA and €2.5 of operating income in 2019 and is expected to experience double-digit annual revenue growth from 2019 to 2021 and maintain strong EBITDA and operating income margins. Great to hear the business expected double digit growth from 2019 to 2021 (2020 is basically over, so there is only one year left in this prediction). Double digits is a big range – from 10-99% – the acquisition makes more sense if the company will grow at 99% versus 10%.

The price tag appears high. Strangely, because Xebec is currently EBITDA negative, having raised funds with a higher valuations than 29 times EBITDA, it will likely be accretive. We appreciate the need for clean energy and have made a number of recommendations in the space and see the long-term potential, but the world seems a bit upsidedown when an acquisition made.


DoorDash (DASH:NYSE)

Price: $164

Market Cap: $47 billion

DoorDash is a technology company that connects customers with their favorite local and national businesses in more than 4,000 cities by offering on-demand delivery. 


  • DoorDash has more than doubled its market share over the last 2 years growing from 17% to 50% market share as of October 2020. Over this same period, the market share for UberEats declined from 27 to 26%.
  • DoorDash is a business built to prosper both during and after a pandemic shutdown. Its serves as an essential l part of food infrastructure and will continue to benefit from the food delivery trend afterwards. Uber suffers during a shutdown as people have less places to go; this is evidenced by Uber’s 18% revenue decline in the last quarter. 
  • DoorDash has less regulatory and political risk as it is a simple business that mostly services restaurants that weren’t providing delivery services. As opposed to Uber which is constantly butting up against new regulatory demands and claims that its costing people jobs. 
  • Finally, DoorDash is just getting growth going with 200% revenue growth in the last quarter and 226% for the first 9 months of 2020. Did I mention Uber’s revenue was down in the last quarter 18%?

Case For

Global rideshare and food delivery company.

Uber Technologies (UBER:NYSE) 

Current Price: $51.86

Market Cap: $93.6 Billion

For Case:

  • Uber is a more established business with 6x the revenue of DoorDash and is diversified between both ride-share and food delivery services.
  • A dark cloud was recently removed from Uber’s stock in November as it won a battle in California with voters approving a ballot measure to preserve the business model of ride-share companies. 
  • Uber’s revenue growth remains strong, increasing over 25% in 2019. And trades at an attractive P/S multiple of 7x, whereas Doordash trades at over 21x sales. 
  • Although DoorDash grew revenues by 200% in 2019, the stock is “priced to perfection” at 21x sales and if its growth rate falters in the coming years investors will likely be punished. 
  • The holy grail of investing books, “The Intelligent Investor” written by Warren Buffets mentor, Benjaman Graham warns of new IPOs (such as DoorDash) identifying that new issues have special salesmanship behind them. Noting that its likely better to invest in a stock years after its IPO as you have a better chance of buying the stock at a discount price. 


WeCommerce Holdings Ltd. (WE:TSX-V) 

Price: $21.93

Market Cap: $820 Million

The company announced that its shares will begin trading on the TSX Venture Exchange on December 14, 2020 under the symbol WE. Based in Victoria, British Columbia, the holding company went public for $7 a share. Within 24 hours, WeCommerce stock had doubled and has now tripled. 

As a result, investors are keeping a close eye on this growing venture in Canada. And everyone is highlighting co-founder Andrew Wilkinson has been dubbed, but some media outlets, as the “Warren Buffett of tiny tech.” And he envisions the company to be the Berkshire Hathaway of small tech companies.

What is WeCommerce?

WeCommerce is a holding company that owns a family of companies and brands in the Shopify partner ecosystem, including Pixel Union, Out of the Sandbox, Yopify, SuppleApps, Rehash and Foursixty. 

  • Pixel Union & Out of the Sandbox  – website design templates & apps to plug into the Shopify ecosystem as well as support programs. 
  • Yopify, SuppleApps, & Rehash  – apps. 
  • Foursixty – shoppable SaaS Instagram platform. 

WeCommerce is focused on acquiring businesses with growth potential, a sustainable competitive advantage and that are, or have the potential to become, a leader within their particular market. These businesses consist largely of Software as a Service, Digital Goods and Services businesses The Company targets businesses within the Shopify ecosystem due to its confidence in the Shopify platform, the fragmented nature of the ecosystem and the attractive economics that the businesses generally exhibit. 

You are tied to the Shopify Platform – if someone builds a better ecosystem and users move from Shopify – it will go poorly.

From a financial perspective – good growth in the business. Some organic – large parts from acquisitions it appears. 

Q3 2020 Highlights

Total revenues for Q3 2020 increased by $2,037,507 or 52.2% over the same period in 2019

Net income after tax for Q3 2020 increased by $122,256 or 30.7% over the same period in 2019

Adjusted EBITDA increased by $807,988 or 61.2% over the same period in 2019.

Q3 2020 includes three full months of operating results and EBITDA contribution of Foursixty Inc.

The company has not reported full financials as a public entity, so the details remains incomplete. 


Even if we annualized the company’s EBITDA from its latest quarter (prior to taking on the increased costs associated with a public company) to a range of $8.5 million, WeCommerce 

37,560,763 * $21.85 = Market Cap: $820 Million.

Price to EBITDA of 96 times. EV/EBITDA of 89 times. 

The company just raised $60 million, so it will have capital to deploy to continue its growth-by-acquisition strategy. We like the strategy in the space. Management appears competent and is targeting profitable growing businesses. We do not know if they will see a ready market of targets at reasonable prices in this environment. There is likely targets, but valuations are high. 

With WeCommerce at high valuations, it would be advisable to raise as much capital as they can over the next year. We will monitor it, but the stock is richly valued after listing over the past month at present – particularly when it hit just under $30.

We can like a business, but not its price.  


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