University
ofMontreal
writesanew
chapter in
itshistory
THURSDAY, AUGUST 1, 2019 | THEGLOBEANDMAILO REPORTONBUSINESS| B3
May was a solid month on the
whole for Canada’s economy as
thegrossdomesticproductedged
up 0.2 per cent, exceeding econo-
mists’ expectations.
The strong GDP numbers from
Statistics Canada suggest the
country could be tracking better
than the Bank of Canada’s an-
nualized second-quarter growth
forecast of 2.3 per cent, econo-
mists say.
Many economists at Canada’s
top banks said Wednesday morn-
ing that the country’s GDP could
riseatanannualizedrateofabout
3 per cent in the second quarter,
rather than the 2.5 per cent that
most were looking at prior to this
report.
“It’s certainly good news,”
SherryCooper,chiefeconomistat
Dominion Lending Centres, said.
“All the economists are raising
their forecast for Q2 growth.”
Economists now say the Bank
of Canada will probably not cut
interest rates like its counterpart,
the U.S. Federal Reserve, did on
Wednesdayafternoon.TheAmer-
ican central bank’s interest rates
are now set to hover between 2
per cent and 2.25 per cent. Cana-
da’s prime rate is currently 3.95
per cent.
“Unless financial conditions
deteriorate enough to jeopardize
the outlook for the second half of
2019 and 2020, don’t expect the
Bank of Canada to match the Fed-
eral Reserve’s interest rate cuts,”
Krishen Rangasamy, managing
director and senior economist
with National Bank, said in a re-
search note.
The third solid monthly GDP
report in a row signals Canada’s
economy is recovering after a
weak start to the year.
Strength in manufacturing led
the growth as vehicle production
levels returned to normal after
temporary shutdowns at some
plants in April.
Construction also made gains,
with the residential construction
sector posting its strongest
growth in more than a year. But
levels are still about 5 per cent be-
lowwheretheywerethistimelast
year, according to Canadian Im-
perial Bank of Commerce manag-
ing director and chief economist
Avery Shenfeld.
The transportation sector grew
as well, with rail transportation
increasing 4.9 per cent in May.
More coal, petroleum and auto-
motive products travelled by
train that month. By contrast,
pipeline transportation de-
creased slightly because of less
natural gas moving through Can-
adian lines.
Retail and wholesale industri-
es posted contractions. Some
economists predicted Raptors
mania,spreadoverMayandJune,
could give retail sales a boost. But
bad weather dampened overall
springtime purchases and the
sector shrunk by 0.4 per cent.
Wholesaletradealsofell1.4per
cent in May, and oil and gas ex-
traction decreased 2.5 per cent af-
ter two months of growth.
The Toronto Raptors probably
did boost the arts and entertain-
ment sector though, according to
the Bank of Nova Scotia’s head of
capital markets economics Derek
Holt. The sector grew by 0.5 per
cent in May, “in part because of
higher attendance at spectator
sports,” according to Statistics
Canada.
However, Stephen Brown,
chief Canada economist with
Capital Economics, cautioned
that temporary factors played in-
to May’s strong numbers – like an
end to a winter full of severe
weather and Alberta increasing
its ceiling on oil production.
Mr. Brown believes faltering
GDP growth elsewhere in the
world could cause uncertainty in
Canada later this year.
But others said we’re in a good
place compared with other mar-
kets.
“Canada’s a standout right
now,” Ms. Cooper said. “Around
the world, central banks are busy
cutting interest rates. And here ...
you talk about 3-per-cent growth
when unemployment is at a re-
cord low. That’s really quite as-
tonishing.”Mayprovesastrongeconomic
monthasGDPrises0.2%
MEGAN DEVLIN
Cannabis companyTilt Holdings
Inc.has amended two major fi-
nancial filings under orders from
British Columbia’s securities
watchdog, disclosing more about
its recent US$496-million write-
downandremovinglanguagethe
regulator deemed promotional,
among other changes.
The refiling is the latest devel-
opment in a three-month saga
that has seen the company blame
its auditor for the writedown, re-
place its chief executive, and pay
executives and board members
US$60-million after disclosing
the writedown.
Tilt said the amendments were
made after a “continuous disclo-
sure review” by the British Co-
lumbiaSecuritiesCommission.In
ane-mail,theBCSCsaidittypical-
ly does not disclose the reasons
for such reviews, but added that
“statements in the media from
the company’s former CEO
formed part of our review but
were not the sole reason.”
The review also came after a
US$119-million financing by Tilt
in November that was underwrit-
ten by Canadian investment
banks and led by Canaccord Ge-
nuity. The private placement was
priced at $5.25 a share, and the
stock closed at 85 cents Wednes-
day on the Canadian Securities
Exchange.
Massachusetts-based Tilt is
one of many companies market-
ed to Canadian investors as a
means of capitalizing on the po-
tential of cannabis use being le-
galized in the United States. With
multiple divisions, Tilt offers can-
nabis production, retail software
for dispensaries and consulting
services.
As of Wednesday, Tilt has up-
dated its “management’s discus-
sionandanalysis,”orMD&A,doc-
uments for two separate time pe-
riods: fiscal 2018, and the first
quarter of fiscal 2019. Chief
among the changes is a detailed
explanation of the company’s re-
cent writedown, which was an-
nounced in May when Tilt report-
ed its results for fiscal 2018.
In the original MD&A, Tilt said
the non-cash charge was tied to
its reverse takeover of Canada’s
Santé Veritas Holdings Inc. in No-
vember. As part of this deal, Tilt
also acquired three other U.S.
businesses – Baker Technologies
LLC, Briteside Holdings LLC and
Sea Hunter Therapeutics LLC –
and merged them.
In May, Tilt recorded impair-
ment charges on three of these
businesses: US$132-million for
Santé Veritas Holdings Inc.,
US$158-million for Baker Tech-
nologies and US$206-million for
Briteside Holdings.
At the time, Tilt said the com-
bined writedown reflects the
“outlook on the medical canna-
bis industry in Canada as a result
of the legalized recreational mar-
ket.” Tilt has been hoping to ob-
tainalicencefromHealthCanada
to cultivate cannabis for the rec-
reational market, but there is no
assurance it will succeed.
Twelve days later, Tilt’s former
CEO Alex Coleman told The
Globe and Mail “the statement
about Canada and the medicinal
market that was in our [financial
statements] was inaccurate.” He
added that the assessment came
fromTilt’sauditor,MNPLLP,add-
ing that the auditor is “underre-
sourced.” Mr. Coleman is no long-
er with the company.
Tilt now attributes the write-
down to overpaying for the ac-
quired companies. In the amend-
ing filings, the company said its
purchase prices were based on
potential synergies and a positive
long-term perspective for the in-
dustry. However, these inputs do
not appear “in the quantifiable
measurement process of the cash
flows” for each division.
Tilt also said some of the varia-
bles involved in calculating the
purchase prices were “descrip-
tive, subjective or difficult to
measure.”
TheMD&Adocumentshaveal-
so been amended to remove lan-
guage deemed “promotional” by
the BCSC; to identify the people
involved in the company’s “relat-
edpartytransactions”;andtodis-
close more about the “significant
increase” in consulting fees, gen-
eral and office expenses, profes-
sional expenses and wages and
benefits in fiscal 2018.
In an e-mail to The Globe, Tilt
said the amendments were made
to “address comments received
[from the BCSC] and in order to
improve the company’s disclo-
sure.”TILT (TILT)
CLOSE: 85¢, DOWN 4¢CannabiscompanyTiltforced
toamendfinancialfilings
TIM KILADZE
The Federal Reserve cut interest rates on
Wednesday to shore up the economy against
risks including global weakness, but the head
of the U.S. central bank said he did not view
the move as the start of a lengthy series of rate
cuts.
Fed chairman Jerome Powell cited global
weakness, simmering trade tensions and a de-
sire to boost too-low inflation in explaining
the central bank’s decision to lower borrowing
costs for the first time since 2008 and move up
plans to stop winnowing its massive bond
holdings.
Financial markets had widely expected the
Fed to reduce its key overnight lending rate by
a quarter of a percentage point to a target
range of 2 per cent to 2.25 per cent, but many
traders expected a clearer confirmation of
forthcoming rate cuts.
In a statement at the end of its latest two-
day policy meeting, the Fed said it had decid-
ed to cut rates “in light of the implications of
global developments for the economic out-
look as well as muted inflation pressures.”
The central bank also said it will “continue
to monitor” how incoming information will
affect the economy and “will act as appropri-
ate to sustain” a record-long U.S. economic
expansion.
Mr. Powell, speaking in a news conferenceafter the release of the Fed statement, charac-
terized the rate cut as “a mid-cycle adjustment
to policy,” comments that do not imply sharp
further cuts are on the way.
U.S. stock prices fell after the Fed’s state-
ment and during Mr. Powell’s news confer-
ence. The benchmark S&P 500 was down 0.8
per cent. Yields on 2-year notes, a proxy for
Fed policy rates, rose to 1.88 per cent.
Heading into Wednesday’s Fed decision, the
S&P 500 was up about 3 per cent since June 19,
when the Fed first signalled a rate cut was
likely as it pledged then to “act as appropriate
to sustain the expansion.”
“My feeling is that what started off the fire-
storm was a comment by Powell that suggest-
ed we’re one and done,” said Jim Paulsen,
chief investment strategist for the Leuthold
Group.
The U.S. dollar index gained ground to
touch its highest in more than two years. The
index, which measures the greenback against
a basket of currencies, was up about 0.5 per
cent on the day.
The Fed’s policy decision drew dissents
from Boston Fed president Eric Rosengren and
Kansas City Fed president Esther George, who
argued for leaving rates unchanged.
Mr. Rosengren and Ms. George have raised
doubts about a rate cut in the face of the cur-
rent expansion, an unemployment rate that is
near a 50-year low, and robust household
spending.
Underscoring its decision to ease policy
across the board, the Fed also said it would
stop shrinking its US$3.6-trillion in bond
holdings starting Aug. 1, two months ahead of
schedule.REUTERSU.S. stock prices fell after the Federal Reserve’s interest-rate statement and during chairman Jerome
Powell’s news conference on Wednesday.BRENDAN MCDERMID/REUTERSFedlowersratesonconcern
overinflation,tradespats
Powellimpliesfurthercutsaren’t
likelyafterbank’sfirstreduction
ofborrowingcostssince2008ANN SAPHIR
JASON LANGE:ASHINGTON