Is Farmers Edge (TSE: FDGE) an Innovative Agtech Startup or a Trap for Investors?
Wade Barnes launched an Agricultural Technology startup in Canada in 2005 named Farmers Edge (FE) as a platform for businesses and farmers to coordinate their operations using technology. Its primary focus was correct decisions based on data.
What do We Know about Farmers Edge?
FE is an Artificial Intelligence (AI) based digital research company that collects real-time Agridata through various sensors on the ground and in the air, processes these reams of data, and suggests to stakeholders on their palmtop how to improve yields and revenues. So, it is FE’s FarmCommand software that directly helps about 3000 growers in 23 million Agricultural Farms spanning over six counties, including Canada, the USA, Brazil, Russia, Ukraine, and Australia.
Farmers Edge Data streaming sources:
- Civilians use Drones of Green Aerospace Technology
- Weather forecasting from the weather service station
- Terrain imagery and mapping from Sentinel 2, Landsat 8, Landsat 8 satellites
- Commercial Aircraft company data e.g. Airbus
Using big data technology and AI in improving yields is music to investors’ ears and that’s why FE has repeatedly been able to mop up funds from financial markets since its inception in 2005. Until June 2017, they had raised $ 94 m in funding, mostly used to fund the costly expansion in far-off continents.
Burdened with the need for more operational finances, FE went public in March 2021 with a 16% stake. Subsequently, Fairfax Financial Holdings (FFH) now owns 65% shares. Despite this infusion of cash, by November 2021, FDGE share had fallen from $20 to $2.75.
The bright side of Farmers Edge Finances
In June 2021, FE still had the liquidity of CA $ 94 m, negligible debt, and revenues expected to grow 35.4% every year. Earnings had grown 4.35 for the past five years. Yet, the liquidity burn rate for the last FY was incredibly high at CA$63 m, just about enough for 18 months.
Simple mathematics states that a market cap of CA $225 m, and spending $63 m is 28% of the company’s value, which is unacceptably high. Now a market cap is even less than $143 m. This points to another round of share selling, thereby antagonizing shareholders further and endangering long-term sentiment.
FE Financial Performance Issues
To put it bluntly, FE is currently unprofitable and is forecasted to stay the same in the next three years.
Their partner company Fairfax Financial Holdings (FFH) lost $10.5 m in 2017 and $32.7 m in 2018 due to investments in FE. In 2018, FFH poured in $64 m and recorded more losses of $32.7 million.
The woes don’t end here. FE’s market capitalization has dropped precipitously from $612.54 m in March to $115.2 m in November 2021.
When the concept of technology in Agriculture is feasible, then management must take some of the blame for poor financial performance and there is evidence to support this claim.
Lack of Professional Managers
Wade Barnes, is rumored to have appointed personal relations like school buddy Trevor Armitage as Chief Operating Officer (COO) and wife Marina Barnes as Chief Marketing Officer (CMO). Executive positions, out of necessity have to be dished out on merit, and this decision alone reflects in weak business judgment.
Then, the CMO Marina Barnes decided to enter Central Asian and US markets despite not having forecasted returns available in these areas.
Marina Barnes’s official biography of 2009 to 2013, states that she managed the multimillion expansion of the company’s Eastern European business. However, FE’s Eastern European sector generates just around 2% of sales, and the company lost 1.6 m acres in the area.
Marina Barnes was an interpreter when she met Wade and is now the CMO of a company.
Naturally, such glaring unprofessionalism is reflected in former employees’ testimonials about the FE internal work.
Employees reviews of Farmers Edge
“Extremely toxic, depressing and stressful environment” – open source
“No personal development or training budget” – open source
“Senior management very far removed from technology and R&D” – open source
“Your goal every week is to sign up 15000 acres, but they only care for their investors, not growers” – open source
The worst review is of management not being focused on the people who matter – farmers.
Four Top Managers Left FE in 2021
· Joel Duda, VP of Technology July, 2019-May 2021,
· Perry Liu, Board Observer March 2015 – March 2021
· Lori Robidoux, CFO, 2005-202 (retired) His successor, CFO David Patrick, left in less than a year
· Jorge Padua, VP of Latin America 2016-2021
Perhaps the experienced CFO’s leaving could have triggered the exodus in 2021, but there is no evidence to suggest the same.
The high rate of employee turnover is never healthy and that too in the executive echelon is suicidal.
“After three years of that, I wasn’t’ 100% happy with the services we were getting versus what we were paying… I think our bill was going to be around $ 37000… and I decided to part ways” – open source
“Having to hound them for six months before anything gets done” – open source
While Farmers Edge has a promising concept of green technology enabling food production, negative testimonies, and rumors on whimsical strategic management, liquidity crunch, and long-term losses does not bode well for investor confidence.
Therefore, Farmers Edge gets thumbs down from an investment standpoint.