The Good, the Bad, and the Ugly (June 2025)
Welcome to your monthly recap of the Canadian microcap market!
There’s an old adage in the financial world: Sell in May and go away. This refers to the historically weak performance of stocks from May to October, suggesting that investors should consider exiting the market in May and re-entering it six months later. So far, this wouldn’t have been a wise decision this year. Markets surged in June, with the S&P/TSX SmallCap Index advancing 6.2% and the major US indices performing almost equally well (the S&P 500 was up 5.1%).
We saw some more M&A activity in Canadian microcaps, with two transactions announced during the month. Lorne Park Capital Partners (TSX-V: LPC) will be privatized by a private equity firm for a 41% premium, while Banxa Holdings (TSX-V: BNXA) will be acquired by a strategic for a 46% premium.
Let's dive into some of the main highlights from last month!
The concept is simple for those who recently signed up for this newsletter. I feature the news that caught my attention during the previous month after skimming through all the press releases on the Canadian market. Every press release, every single day!
The Good
Gatekeeper Systems (TSX-V: GSI), a provider of video and data solutions for public transportation fleets, has been on fire in June. The company announced six new contracts collectively worth over $4.4 million upfront, plus monthly recurring revenues. To cap off the month, some investors discovered that the company had likely secured a record $23 million contract with the New York Metropolitan Transportation Authority. However, the company could not confirm this yet. The stock finished the month up 128%!
Tantalus Systems Holdings (TSX: GRID), a technology company dedicated to helping utilities modernize their distribution grids, announced two new deployments with significant customers, Riverside Public Utilities and Indiana Municipal Power Agency. Those represent solid validations of Tantalus’ value proposition for utilities, and the market saw it as such. The stock increased by as much as 35% during the month, ultimately ending 22% higher than its starting point.
Auxly Cannabis Group (TSX: XLY), one of the leading Canadian cannabis licensed producers, announced an impressive debt restructuring transaction. Firstly, the company will refinance its debt with BMO to extend the term to two years and revise the covenants, thereby providing more flexibility. Secondly, it agreed with Imperial Brands, its largest shareholder, to cancel a convertible debenture and accrued interests at a significant discount. Essentially, Auxly will issue approximately $8.9 million worth of shares to cancel $21.6 million in debt, thereby saving $12.7 million. The company was rewarded with a 25% increase in its share price during the month.
After two challenging years of revenue declines, it looks like Alithya Group (TSX: ALYA) might have turned the corner in its fourth quarter of 2025 (which ended on March 31, 2025). The Montreal-based IT consultancy firm grew revenue by 4% in Q4. Most importantly, the gross margin percentage increased by 470 basis points, and SG&A expenses remained flat. The results were adjusted net earnings and adjusted EBITDA increases of 102% and 72% year-over-year, respectively. The stock climbed 43% in June.
The Bad
Xtract One Technologies (TSX: XTRA), a provider of tech-enabled weapons and threat detection systems, published disappointing third-quarter financial results. The 26% revenue decline was the first quarterly decline in eight quarters. After the stock dropped from $0.56 to $0.44 over the next few days (-21%), the company announced a $7 million bought deal financing at $0.39, an 11% further discount. The financing apparently pissed off some shareholders, causing the share price to reach a low of $0.315, before recovering somewhat. All in all, the stock ended June 23% lower.
Reitmans (Canada) Limited (TSX-V: RET) published its first-quarter financial results, which showed a 4.1% decrease in net revenues and a 4.5% decline in comparable sales. The company attributed the decline to bad weather and near-record snowfall accumulations, which reduced in-store traffic. Meanwhile, Groupe Dynamite (TSX: GRGD), another Montreal-based clothing retailer, posted 20% revenue growth and 13% comparable store sales growth for the same period. Both companies reported results on the same day, but they couldn’t be more different. RET declined by 15% over the following two weeks, while GRGD increased by 59%. Maybe it wasn’t all about the weather?
With Bitcoin reaching a new all-time high in May, crypto speculation is back on in microcaps. Several issuers announced Bitcoin treasury strategies or pivots to focus on digital currencies in June, including SolarBank (CBOE: SUNN), Universal Digital (CSE: LFG) (I’m not surprised with this ticker symbol), Belgravia Hartfort Capital (CSE: BLGV), Sixty Six Capital (CSE: SIX), Planet Ventures (CSE: PXI), and The Good Flour (CSE: GFCO). As I may have mentioned before, I have no issue with cryptocurrencies, but I do have a problem with microcaps embarking on the hype train to raise capital. Some things will never change!
The Ugly
Simply Solventless Concentrates (TSX-V: HASH) published its late fiscal 2024 results and Q1 2025 results in June. This one has been discussed extensively on social media and message boards, so I won’t rehash (no pun intended) everything here (this post provides a good recap). Essentially, the auditor believed that the company was employing an incorrect methodology for recording tolling revenues, which had the dual effect of inflating revenues and inventory. That made the company appear net income profitable throughout the first nine months of the year, despite generating negative cash flows from operations (which is a common red flag I look for). The $2.15 million in net income after 9 months turned out to be a $5.5 million net loss in the full-year audited financials. That was quite a surprise for shareholders, who watched the stock plummet 51% for the month. The company now faces the challenging task of rebuilding its credibility with shareholders.
Two months ago, I covered Prime Drink Group (CSE: PRME) after creditors filed an application pursuant to Section 243 of the Bankruptcy and Insolvency Act (Canada) to try to recover over $54 million in unpaid debts from Triani Canada, Prime’s production and bottling subsidiary. If you recall, Prime had acquired Triani for $11.4 million only six months earlier. On June 10th, Prime confirmed that Triani had been placed in receivership and had ceased operations. A week later, Prime announced a rights offering to raise a minimum of $3 million and a maximum of $29.2 million (if all rights are exercised). The proceeds will be used to recapitalize the company and try to re-acquire Triani through the receivership process. Are they really asking shareholders for more money to pay twice for the same asset?
That's all I have for you this month! I hope you enjoyed it.
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Did I miss any crucial developments last month? Let me know in the comments which news or earnings reports caught your attention!
Disclaimer
This publication is for informational purposes only. Nothing produced under the Stocks & Stones brand should be construed as investment advice or recommendations. Mathieu Martin, the author, is employed as a Portfolio Manager with Rivemont Investments. This publication only represents Mathieu Martin’s own opinions and not those of Rivemont. Rivemont may own positions and transact on any securities mentioned in this publication at any time without prior notice. At the time of this writing, the Rivemont MicroCap Fund does not hold shares in any of the companies mentioned. Always do your own research and consult a professional before making investment decisions.
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Hold in May, and stay to play should be the new adage