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Crius Energy Trust: The Risks Are Overblown

Mar. 02, 2018 11:30 AM ETCrius Energy Trust (CRIUF)22 Comments
Dan Stringer profile picture
Dan Stringer


  • Crius sold off markedly after a short selling article was published on Seeking Alpha on February 28, 2018.
  • The author made several cases as to why the company's dividend and solvency were at risk and questioned the original setup of the company.
  • I address these critiques and illustrate the benefits to an investment at these levels.

It was a very eventful day in trading for Crius Energy Trust (OTC:CRIUF) on February 28, 2018, after the early morning posting of Crius Energy Trust: An Unsustainable Collision Course by Seeking Alpha author Hindenburg Investment Research. The author focused on several issues surrounding the company, from its payout ratio to its liquidity of Crius to some former business dealings of its management in the setup of the company. This gave me the impetus to look behind the article's claims and see if it was truly an impaired business.

As a background, Crius engages in the provision of electricity, natural gas, and solar products to residential and commercial customers through partnerships and direct-to-consumer marketing channels. Essentially, it serves as a middleman in marketing energy services to the end user. As Hindenburg's article notes, this is not a utility and can only operate in de-regulated markets. Crius is arbitraging the payment plans it can arrange with customers with where it can obtain power from, and making the spread.

Source: Company Presentation

The company has been rapidly rolling up companies over the last 3+ years, adding close to 700,000 customers to its business through the course of six acquisitions. Hindenburg's article notes that it has had a potential 40% annualized drop in customers, based on the annotated of its Q3. This is the customer drops for the quarter; it does not reflect the organic gains which outpaced the drops. Using similar math, the 197,000 organic gains Crius had in Q3 would be 13.6% or 54.4% annually. This business is similar to telecom and cable providers bidding for your business; people will flip between each on where they can get the best deal. Crius added 69,000 net subscribers organically or 4.7% in Q3 2017, which works out to almost 19% annually. This is a good sign for the company's base business.

This article was written by

Dan Stringer profile picture
I am interested in small capitalized companies with a high optionality to the upside compared to the relative downside risk. I am grounded in a value based approach but will also explore special and short situations. I am a trained CPA and continue to practice in industry.Warning: my twitter account is very random but will have a lot of economic and business items sprinkled with Green Bay Packer comments.

Analyst’s Disclosure: I am/we are long CRIUF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am long through the TSX listed units KWH-UN.TO

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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