S
S E N V E S T
2021
Annual Report
Financial Highlights
SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
(years ended December 31)
SUMMARY OF OPERATIONS
Total revenues and investment gains (loss)
Net income (loss) attributable to
common shareholders
Diluted earnings (loss) per share
FINANCIAL DATA
Total assets
Total equity
2021
$
2020
$
2019
$
2018
$
2017
$
2,482,176
739,405
426,150
(316,619)
488,972
732,988
289.32
211,717
80.66
104,794
39.16
(140,086)
(51.72)
165,967
60.03
6,563,902
1,815,653
4,065,992
1,146,114
2,884,999
942,655
2,756,970
969,421
2,976,026
1,063,385
COMMON STOCK INFORMATION
The company’s common shares are listed on the Toronto Stock Exchange under the symbol SEC.
FISCAL QUARTER
First
Second
Third
Fourth
2021
$
2020
$
High
317.00
388.88
400.00
415.00
Low
174.00
308.00
370.00
359.00
High
183.00
134.94
142.00
180.00
Low
100.00
100.00
121.00
125.00
Total Assets ($ Thousands)
Total Equity ($ Thousands)
Book Value per Share
6,563,902
1,815,653
721
4,065,992
1,063,385
969,421
942,655
1,146,114
2,976,026
2,756,970
2,884,999
423
344
322
347
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
1
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
OVERALL PERFORMANCE
The report of the biggest surge in the Consumer Price Index (“CPI”) in 30 years knocked the Russell 2000 index,
the widely accepted small-cap benchmark, from its all-time high in early November. After Fed Chairman Powell
secured his renomination, he revealed the first hints of a change in monetary policy and a move to tightening by
admitting inflation was no longer “transitory”, as it was “probably a good time to retire that word”, when testifying
before Congress. Around the same time, a new, more contagious Covid-19 variant – Omicron – also surfaced.
Markets seemed to digest both the steep rise in reported cases given the relatively less deadly nature of this
mutation as well as the Fed commentary. After slipping in November, the Russell 2000 managed to eke a slight
gain for the quarter while the S&P 500 charged ahead to a record high level. Senvest Capital (“Senvest” or the
“Company”) followed a similar path with a positive quarterly performance. However, January 2022 would tell a
different story.
The release of the Fed’s December meeting minutes on January 5, 2022 revealed a “faster timetable for raising
interest rates this year” (WSJ). The following week’s CPI report showed a further spike higher, with inflation at
the highest rate in almost 40 years, further testing the Fed and suggesting more hawkishness. Fed futures markets
reacted, and CME futures pointed to four rate increases in 2022, with an end of year Fed Funds rate about a full
percentage point higher. Fed Chairman Powell, at a post-meeting press conference Wednesday January 26,
confirmed the hawkishness and then some. “Now we’re priced for ~five hikes with an increased probability of
50bps hikes in March” (Bloomberg). Subsequently the number of estimated rate increases were ratcheted up to
seven and then to nine!
While it was no secret that the twin tailwinds of fiscal stimulus and easy monetary policy would fade as we entered
2022, the relatively abrupt shift to faster and higher rate increases spooked equity investors and sparked a broad
market sell-off. Many US equity markets entered correction territory (defined as a -10% decline). High multiple
growth stocks, especially those without earnings, were hit hardest. Russia then invaded Ukraine, creating a
geopolitical crisis. This resulted in additional market uncertainty, soaring commodity costs plus the potential for
more inflation. At this point the macro environment represents an incredible challenge.
However, if one looks further ahead rather than focusing on the current volatility (not very easy to do given the
terrible macro environment), a different narrative may emerge. Strong earnings growth from many companies
can help offset the multiple compression hitting stocks. Global economies have yet to fully recover as they remain
impacted by the pandemic. Full mobility remains hindered with sporadic regional lock downs still occurring. The
Omicron wave exacerbated labor shortages as workers stayed home, and supply chains have not been restored. As
Covid-19 transitions to endemic status, pandemic related constraints should abate and thereby lift economic
activity. Consumer and corporate cash levels have never been better – Bank of America Research notes that
combined consumer and corporate cash has hit a record $19 trillion (!) and that financial obligations for both sit
at historic lows. State government budgets have money to spend. The Wall Street Journal notes that “State
revenues between April and November increased 24% from 2020 to 2021…thirty-two states said revenue
collections for fiscal years ending in 2022 were ahead of projections…[and]…states’ reserve funds have reached a
record level of nearly $113 billion.” China, the world’s number two economy, after a period of tight monetary
policy, appears to be shifting toward monetary easing with cuts in two key benchmark rates. Even with the near
certainty of Fed interest rate increases, real 10-year treasury rates remain below zero.
As we have discussed in recent letters, we think oil and natural gas price increases may not be transitory. Years of
underinvestment stemming from low commodity prices, shareholder demands for return of cash rather than
reinvestment for growth and ESG pressures on fossil fuel investments create a situation for supply to lag demand
growth. According to Goldman Sachs research “By summer…OECD oil inventories [will be at] their lowest level
2
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
since 2000.” Since we expect global demand to increase as covid related economic pressures fade, this sets up a
positive dynamic for oil prices to go higher.
As noted earlier, the market correction has seen a severe markdown of high valuation growth stocks, especially
those without profits. In other words, the “froth” in the market is receding. We view this as a healthy development
to restore rationality to valuation. Moreover, this can provide interesting opportunities as many high growth
companies with valuable franchises reinvest profits to gain market leadership. This wouldn’t be the first time
there are great opportunities to discover exceptional companies caught up in a market blow off – recall the
experience in the tech meltdown of 2000.
Some of the largest holdings as at December 31, 2021 were Paramount Resources (POU), Capri Holdings (CPRI),
Tower Semiconductors (TSEM), Arc Resources (ARX), eBay (EBAY) and Marriot Vacations (VAC). (When the
Company refers to its portfolio of holdings, the reference is to its aggregate portfolio including those in the funds
that are consolidated into the accounts of the Company). POU, CPRI and TSEM were the top performers for the
fourth quarter. Excluding GameStop (GME), which we will discuss later, these three stocks (along with ARX) were
also the best performers for the year as a whole.
Canadian oil and natural gas exploration and production (E&P) company POU stock appreciated by +30.94% in
the quarter, against a flat oil and negative Henry Hub / AECO natural gas backdrop. The company’s commentary
included in its otherwise “in-line” Q3 2021 earnings report likely spurred the strong stock performance.
Management provided details surrounding a five-year outlook, with plans to grow overall production by 5% per
year (roughly 9% production growth annually excluding its core asset, Karr), while generating cumulative free
cash flow (FCF) of greater than C$2.7 billion, or about C$20/share (around C$1 billion, or C$7.40/share, of
cumulative FCF excluding Karr). The company also announced a permanent tripling of the dividend to
C$0.72/share and expects to pay down net debt to C$300 million by the end of 2022. These factors put POU in a
unique camp (not just among E&P peers) whereby it can sustainably grow production AND return capital to
shareholders.
Apparel, footwear, and accessories designer CPRI, owner of the Michael Kors, Versace, and Jimmy Choo brands,
stock rose +34.08% in the quarter. CPRI reported its fiscal Q2 2021 earnings on November 3rd and delivered its
fifth consecutive EPS beat of at least 60% vs. consensus. CPRI reported adjusted EPS of $1.53 vs. consensus
expectations of $0.91 with revenue growth of 17.1% vs. consensus of 14.3%. Even more impressive was gross
margin expansion of 440bp, trouncing consensus expectations of an 80bp improvement. Importantly, full year
EPS guidance was raised to $5.30 vs. prior guidance of $4.50 and consensus of $4.57. It is worth noting that the
$5.30 earning guidance is 41% higher than the guidance given in May 2021 of $3.75 at the midpoint.
Leading specialty analog foundry Tower Semiconductor (“TSEM” or “Tower”) posted a stock price gain of +32.71%
in Q4 2021 on the continued strengthening demand for its diversified product portfolio of semiconductors across
multiple end markets. Q3 2021 revenue increased +25% year over year and 7% quarter over quarter with organic
revenue growth of +38% year over year (which excludes fixed legacy contracts) driven by strength in its RF
Wireless (+75% year over year organic growth), Sensor (+65% year over year organic growth), and Power (+50%
year over year) applications. Tower’s fourth quarter guidance was well above consensus at $410 million and
represents the first time quarterly revenue will exceed $400 million, a historic target the company had previously
aspired to. TSEM’s organic growth is being driven from multiple vectors including 1) capacity additions and 2) a
richer mix of higher Average Selling Prices (“ASP”). Additionally, more customers are entering into new long-term
agreements that are translating into more predictable revenue streams. Tower is benefitting from opportunities
focused around 5G smartphones and cloud infrastructure driving its RF and optical businesses, while a rebound
in the automotive market along with the growing adoption of electric vehicles and industrial IoT is driving its
sensing and power management businesses.
3
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
During Q4 2021, shares of space systems supplier and earth-observation satellite operator MDA (“MDA”) declined
-41.61% as the company reported disappointing third quarter earnings and lowered its mid-term 2022 financial
targets. We suspect that a large shareholder also liquidated its position indiscriminately, which in the face of
historically low trading volume for a relatively newly listed company on the Toronto Stock Exchange, further
contributed to the slide in the stock price. The reduction in financial targets stemmed from delays in several key
projects including one of its flagship programs, low-earth orbit satellite constellation, TeleSat Lightspeed, in which
the prime contractor pushed out the project timing due to supply-chain issues. Recall that in March 2021, MDA
completed its IPO raising C$320 million valuing the company at C$1.6 billion. Senvest was an investor in MDA
while it was a private company and also participated in the IPO offering. MDA is best known for developing space
related technologies including designing, building, and servicing satellite and robotic solutions for contractors,
government agencies, and emerging space companies. MDA is pursuing several key opportunities in geo-
intelligence, robotics, and satellite systems including the CanadArm3 (as part of the Lunar Gateway program) and
TeleSat’s Lightspeed. At the time of the IPO, the company targeted C$850 million in revenue and C$170M in
adjusted EBITDA in 2022. However, given project delays the company lowered its revenue target to C$750-$800
million with adjusted EBITDA of C$140-$160 million. While these delays should not affect the lifetime value of
MDA’s flagship programs, they will impact the near-term revenue profile of the company.
We note some positive takeaways from the quarter, however, including the backlog increasing to C$829M, +29%
quarter over quarter and +47% YTD. In addition, the company was awarded several contracts including an
altimeter contract from JAXA’s Martian moon mission and landing sensors for two upcoming lunar missions.
Additionally, MDA also announced the successor to its RadarSat2 earth observation platform, CHORUS which
will include C-band and X-band (through a partnership with satellite constellation operator ICEYE) radar
imaging. CHORUS will be used for maritime surveillance and other time-critical applications such as land
intelligence and disaster response to provide monitoring of crops, infrastructure, deforestation, and illegal fishing.
We see demand for space technologies increasing meaningfully over the next decade given the dramatically
lowered cost of a launch and improved functionality of low-earth orbit satellites providing global imaging services
and broadband connectivity.
The investment in videogame retailer GME) contributed over 35% of the net change in fair value of equity
investments and other holdings for the year. Although we discussed this investment with our first quarter results
the impact it has had on our financial results necessitate that we repeat that discussion in our year end letter. The
text below is from our Q1 MDA.
“GME’s financial results and its stock price had been suffering for years for several reasons. Most notably, the late-
stage maturation of the gaming console cycle and the increased digital distribution of video games adversely
affected the company’s retail and physical disc-based distribution business model. The Covid-19 pandemic
exacerbated GME’s issues as mandated economic shutdowns led to the closing of retail stores and as stay-at-home
consumers increasingly downloaded games digitally. However, a reconstituted board and new executive team
came in during 2019. They started to implement meaningful changes in the business, including cost-cutting, the
sale of assets, reduction in working capital, a significant reduction in debt, and the buyback of stock. These
changes positioned the company to capitalize on the new console cycle and fortuitously enabled it to better handle
the challenges posed by Covid-19. Moreover, these are some of the hallmarks of change and transformation that
we look for in the investment process.
Two additional pieces of our fundamental value case included the imminent launch of a new gaming console cycle
by Microsoft and Sony, which we believed would catalyze sales at Gamestop, and the involvement of an activist
investor, Ryan Cohen, the co-founder of Chewy.com, a leading online retailer of pet supplies (and also originally
from Montreal). Cohen not only had the experience of beating Amazon in e-commerce, but he also made a fortune
selling Chewy.com to Petsmart. We believed that if Cohen were to become more involved with the company, he
4
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
could provide valuable input as well as credibility in any plan to transform Gamestop’s business model. Such a
plan would entail evolving beyond physical retail by leveraging relatively nascent e-commerce and digital
strategies. We also thought GME’s 64-million-member loyalty program and its preeminent online gaming
publication “Game Informer” represented underappreciated assets.
We also believed that Wall Street sell side estimates significantly underestimated Gamestop’s future earnings and
cash flow potential once new console inventory became readily available. While we established the core of our
investment in the fourth quarter, all but one (of eight) analysts had either a “hold” or “sell” recommendation on
the stock. The disconnect between consensus expectations and what our research suggested helped support our
conviction in the fundamental, value-based investment thesis.
A final important consideration in our thesis was the unprecedented level of short interest in GME shares, with
more than 100% of shares outstanding short and an even greater amount of the effective “float” being short. We
believed that GME was the most shorted stock on the US market, and in the entirety of all our careers, we had
never seen such a level of short interest. This setup gave GME “coiled spring” potential for any change in the
company’s narrative. From what we could tell, the short thesis was that all videogames would be distributed
digitally and that GME would go bankrupt. Our research indicated that GME faced little risk of bankruptcy. We
believed that the circumstances for a potential “short squeeze” created a non-trivial chance of a huge upside move
and created an asymmetric risk-reward profile in GME.
We spoke to sell side research analysts as well as understanding the short interest/stock loan at the major prime
brokers and through third-party short interest data providers. Furthermore, as we do with virtually all our
investments, we engage in dialog with management teams and, at times, we engage with other shareholders. In
this case, we communicated both with the company and with Ryan Cohen. Based on a letter Cohen sent to the
GME board and made public on November 16, 2020, it appeared he was dissatisfied with the company’s progress
in transforming into an e-commerce and digital gaming outlet and also rejected the company’s overtures to him
with the offer of a single board seat. After the release of this letter, we felt compelled to communicate our opinion
to the company: a potential proxy fight with Ryan Cohen would be damaging to the company, and since Ryan
Cohen would win such a battle anyway, it would make sense to settle with him. We believed he could add great
experience and credibility in helping the company’s transformation. Considering that Senvest was one of GME’s
largest shareholders with roughly 7% of its shares, we suspect our views carried some weight with the company.
We did not foresee the unusual catalyst for the short squeeze which occurred in GME starting on January
25th. Reddit’s “Wallstreetbets” participants effectively crowdsourced the short squeeze that sprang the coiled
spring. After trimming the position on Friday, January 22nd, we went into that weekend with greater awareness
of what was happening. Pre-market trading, while it officially opens at 4am EST, rarely gets going until an hour
before the market opens at 9:30am EST. On Monday, January 25th, however, GME stock began its incredible
surge at 4am EST, and we began to trade the stock in those early pre-market hours. We exited roughly half of the
position on that day, which provided us with an extraordinary gain from which we had the flexibility to “play with
the house’s money” and to see where the stock could go. A tweet on Tuesday, January 26th, from social media
business darling Chamath Palihapitiya sent the stock higher and we sold more. Finally, after the market close on
that same Tuesday, the titan of all business social media, Elon Musk, who has a particular disdain for short sellers
who he has regularly battled publicly, tweeted a single word – “Gamestonk!” – which sent GME investors into a
frenzy. We believed that things couldn’t get any better than that in terms of the immediate term trading mania,
and as a result, we sold our remaining GME shares in the post-market trading hours and into Wednesday, January
28th regular trading. Many have questioned when the individual investor would come back to the stock market.
It appears that the individual investor is back with a vengeance, armed with the power of the internet.”
5
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
Senvest recorded a net income attributable to common shareholders of $733.0 million or $289.32 per basic and
diluted common share for the year ended December 31, 2021. This compares to a net income attributable to
common shareholders of $211.7 million or $80.66 per basic and diluted common share for the 2020 year. For the
year, the US dollar did not change very much against the Canadian dollar and the result was a currency translation
gain of about $1.6 million. This amount is not reported in the Company’s statement of income rather it’s reflected
in its statement of comprehensive income. As a result, the comprehensive income attributable to common
shareholders was $734.6 million for the year ($186.7 million in 2020).
The Company’s income from equity investments was the biggest contributor to the results. The net change in
equity investments and other holdings including securities sold short and derivative liabilities totaled $2,423.8
million in the year versus $693.9 million in 2020.
The Senvest Master Fund (Senvest Partners Fund) is focused primarily on small and mid-cap companies. The
fund recorded a return of 4.7% net of fees in the fourth quarter and 86.2% for the year to date. With most of the
long portfolio invested in small and mid-cap stocks, the fund outperformed its most relevant benchmark, the
Russell 2000 for the quarter and for the year. The fund underperformed the S&P 500 index for the quarter but
outperformed it for the year, even though it does not consider this index as a benchmark. The fund has issued an
institutional share class which requires a minimum investment of $75 million US, and includes a longer duration
element, which further enhances the stability of its capital base and its ability to make long-term investments to
help generate returns for the benefit of all of our partners. Senvest’s internal capital is subject to the same liquidity
provisions of the institutional share class. Due to the extraordinary performance of this fund over the last twelve
months there have been significant redemptions over the year as certain investors look to “cash in” some of their
gains.
The Senvest Technology Partners Fund (prior name Senvest Israel Partners) was initiated in 2003 to focus on
investing in Israel related companies. In 2019, the Israel Fund broadened its geographic investment mandate to
focus on global technology investments. To better reflect the evolving global complexion of its technology
investments, the Israel Fund underwent a name change to Senvest Technology Partners. After investing in Israel-
related technology for 15 years, its holdings extended across the global technology universe. The Technology Fund
maintained the same investment philosophy and continued to leverage the existing diligence and understanding
of global technology and end markets. This fund recorded a return of 2.6% net of fees for the fourth quarter and
26.4% for the year (monthly results of the two funds can be found on the Company’s website). Both of these funds
are consolidated into the accounts of the Company.
The Company has a portfolio of real estate investments as at December 31, 2021. One part of this amount
represents investments in different US REITs and partnerships. These REITs and partnerships are not publicly
traded and there is no established market for them. The most likely scenario for a disposal of these holdings is an
eventual sale of the underlying real estate properties of the REITs and partnerships and the distribution to its
holders. Also, there are minority interests in private entities whose main assets are real estate properties. As
described above for the REITs and partnerships, the most likely scenario for a disposal of these holdings is an
eventual sale of the underlying real estate properties.
The Company also has investment properties in lands and buildings--specifically self-storage units in Madrid,
Spain. Investment properties are initially measured at cost, including transaction costs. Subsequent to initial
recognition, investment properties were remeasured at fair value, using the fair value model. The fair value is
based on external valuations from third party valuators. Gains or losses arising from changes in fair value of
investment properties are included in the Company’s net profit or loss.
6
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
The Company consolidates the Senvest Management LLC (SML) entity that serves as the investment manager of
Senvest Partners and Senvest Technology Partners as well as the general partners of the funds. The portion of the
expected residual returns of structured entities that do not belong to the Company is reflected as a non-controlling
interest on the statement of financial position. This non-controlling interest is owned by an executive of the
Corporation. This non-controlling interest was $11 million as at December 31, 2021 from $48.1 million as at
December 31, 2020.
At the end of December 31, 2021, Senvest had total consolidated assets of $6,563.9 million versus $4,066.0 million
at the end of 2020. Equity investments and other holdings totaled $6,272.8 million from $3,880.0 million in
December 2020. The Company purchased $5,189.5 million of investment holdings in the year and sold $5,323.9
million of such holdings. The Company’s liabilities increased to $4,748.2 million this year versus $2,919.9 million
in 2020. The main difference between the periods was a significant increase in the liability for redeemable units
due to the funds’ appreciation. There was also an increase in securities sold short and derivative liabilities of about
$569.2 million from last December. The proceeds of securities sold short were $7,547.7 million and the amount
of shorts covered was $6,941.1 million in the year. Overall, the trading figures were more than the corresponding
amounts for the prior year.
Functional currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of
the primary economic environment in which the entity operates (the functional currency). The functional currency
of the parent company is the US dollar.
Presentation currency
The Company has adopted the Canadian dollar as its presentation currency, which in the opinion of management
is the most appropriate presentation currency. Historically, the Company’s consolidated financial statements have
been presented in Canadian dollars, and since the company’s shares are listed on a Canadian stock exchange,
management believes it would better serve the use of shareholders to continue issuing consolidated financial
statements in Canadian dollars. The US dollar consolidated financial statements are translated into the
presentation currency as follows: assets and liabilities – at the closing rate at the date of the consolidated
statement of financial position; and income and expenses – at the average rate for the period. All resulting changes
are recognized in other comprehensive income as currency translation differences. Equity items are translated
using the historical rate
Risks
Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including fair value interest rate risk,
cash flow interest rate risk, currency risk and equity price risk), credit risk and liquidity risk.
The Company’s overall risk management program seeks to maximize the returns derived for the level of risk to
which the Company is exposed and seeks to minimize potential adverse effects on the Company’s financial
performance. Managing these risks is carried out by management under policies approved by the Board.
The Company uses different methods to measure and manage the various types of risk to which it is exposed; these
methods are explained below.
7
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
Market risk
Fair value and cash flow interest rate risks
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result
of changes in market interest rates.
The majority of the Company’s debt is based on floating rates which expose the Company to cash flow interest rate
risk. The Company does not have a long-term stream of cash flows that it can match against this type of fixed debt,
so it prefers to use short-term floating rate debt. The Company does not mitigate its exposure to interest rate
fluctuation on floating rate debt. If interest rates spike, then the Company could enter into interest rate swaps or
more probably just reduce its debt level. As at December 31, 2021, the Company had listed sufficient equity
securities that it can sell to reduce its floating rate debt to zero.
Currency risks
Currency risk refers to the risk that values of monetary financial assets and liabilities denominated in foreign
currencies will vary as a result of changes in underlying foreign exchange rates. The Company’s functional
currency is the US dollar. The Company has foreign currency exposure to the Canadian dollar, the British pound
sterling, the Euro, and the Israeli shekel.
Equity price risk
Equity price risk is the risk that the fair value of equity investments and other holdings and equities sold short and
derivatives will vary as a result of changes in the market prices of the holdings. The majority of the Company’s
equity investments and other holdings and all of the securities sold short are based on quoted market prices as at
the consolidated statement of financial position date. Changes in the market price of quoted securities and
derivatives may be related to a change in the financial outlook of the investee entities or due to the market in
general. Where non-monetary financial instruments − for example, equity securities − are denominated in
currencies other than the US dollar, the price, initially expressed in a foreign currency and then converted into US
dollars, will also fluctuate because of changes in foreign exchange rates.
Securities sold short represent obligations of the Company to make future delivery of specific securities and create
an obligation to purchase the security at market prices prevailing at the later delivery date. This creates the risk
that the Company’s ultimate obligation to satisfy the delivery requirements will exceed the amount of the proceeds
initially received or the liability recorded in the consolidated financial statements. In addition, the Company has
entered into derivative financial instruments, which have a notional value greater than their fair value, which is
recorded in the financial statements. This creates a risk that the Company could settle these instruments at a value
greater or less than the amount that they have been recorded in the financial statements.
The Company’s equity investments and other holdings have a downside risk limited to their carrying value, while
the risk of equities sold short and derivatives is open ended. The Company is subject to commercial margin
requirements which act as a barrier to the open-ended risks of the securities sold short and derivatives. The
Company closely monitors both its equity investments and other holdings and its equities sold short and
derivatives.
8
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
The impact of a 30% change in the market prices of the Company’s equity holdings with quoted value and
derivatives, securities sold short and derivative liabilities as at December 31, 2021 would be as follows (in
thousands):
Fair value
Estimated fair value Estimated fair value
30% price decrease
30% price increase
Equity investments and other holdings
Listed equity securities and derivatives
Securities sold short and derivative
liabilities
5,880,143
7,644,186
4,116,100
(888,254)
(1,154,730)
(621,778)
Pre-tax impact on net earnings
1,497,567
(1,497,567)
These impact numbers could be lower as they would also be adjusted for the applicable share of profit or loss
allocated to the Liability for redeemable units.
Liquidity risk
Liquidity risk is the risk the Company will encounter difficulties in meeting its financial obligations. The
Company’s largest assets are equity investments and other holdings. Most of these assets are made up of equities
in public holdings which can be liquidated in a relatively short time. Due to its large holding of liquid assets, the
Company believes that it has sufficient resources to meet its obligations.
All financial liabilities other than securities sold short and derivative liabilities, liability for redeemable units and
some other payables as at the consolidated statement of financial position date mature or are expected to be repaid
within one year. The liquidity risk related to these liabilities is managed by maintaining a portfolio of liquid
investment assets.
Credit risk
Credit risk is the risk that a counterparty will fail to fulfill its obligations under a contract and will cause the
Company to suffer a loss.
All transactions in listed securities are settled or paid for upon delivery using approved brokers. The risk of default
is considered minimal, as delivery of securities sold is executed only once the broker has received payment.
Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either
party fails to meet its obligations.
The Company is also exposed to counterparty credit risk on its cash and cash equivalents, restricted short-term
investment and due from brokers.
From time to time, the Company enters into derivative financial instruments consisting primarily of options and
warrants to purchase or sell equities, equity indices and currencies, equity swaps, foreign currency forward
contracts, and foreign currency futures contracts. These derivative instruments are marked to market. There is
deemed to be no credit risk for futures and certain options that are traded on exchanges. The warrant contracts
and certain options that are not traded on an exchange allow the Company to purchase underlying equities at a
fixed price. Equity swaps represent future cash flows that are agreed to be exchanged between the Company and
counterparties at set dates in the future. Foreign currency forward contracts are contracts to buy or sell foreign
currencies at a specified price at a future point in time.
9
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
Capital risk management
The Company’s objective when managing its capital is to maintain a solid capital structure appropriate for the
nature of its business. The Company considers its capital to be its total shareholders equity. The Company
manages its capital structure in light of changes in economic conditions. To maintain or adjust its capital structure,
the Company initiates normal course issuer bids or adjusts the amount of dividends paid. The Company monitors
capital on the basis of its net liabilities-to-capital ratio, which is as follows (in millions):
Total net liabilities
Total equity
Net liabilities to capital ratio
December 31, 2021
December 31, 2020
$4,678.9
$1,815.7
2.58
$2,893.7
$1,146.1
2.52
1 87
In the past the Company’s objective was to maintain a debt-to-capital ratio below 2.0. The Company believes that
limiting its debt-to-capital ratio is the best way to monitor risk. The Company’s debt to capital ratio was at 2.58 at
the end of December 2021 from 2.52 at the end of 2020. However, the Company is cognizant of the fact that the
largest liability on its financial statements, the “Liability for redeemable units” is considered “equity” and not a
liability in the individual financial statements of the underlying funds that it consolidates. As a result the debt to
equity ratio of the individual funds is lower than that of the parent company. The Company has concluded that it
has been too conservative in limiting its net liabilities to capital ratio at 2.0 and believes that a higher ratio of 3.0
is more appropriate.
Investment Risk
To the extent not discussed above, the Company is subject to additional risks with respect to the investments
made.
The value of the Company’s portfolio may decrease as well as increase, due to a variety of factors, including general
economic conditions, and market factors. Additionally, investment decisions made by the Company may not
always be profitable or prove to have been correct. Investment strategies, at any given time, may incur significant
losses. Losses can occur for a number of reasons, including but not limited to, an overall decline in the underlying
market, a lack of liquidity in the underlying markets, excessive volatility in a particular market, government
intervention or monetary and/or fiscal policies of a specific region or country. The profitability of a significant
portion of the Company’s investments also depends to a great extent upon the Company’s ability to correctly assess
the future course of the price movements of securities and other investments. There can be no assurance that the
Company will be able to accurately predict these price movements.
The Company’s investment strategy is speculative and involves risk. The Company trades in options and other
derivatives, as well as using short sales and utilizing leverage. The portfolio may not be diversified among a wide
range of issuers or industries. In addition, the Company may take concentrated positions in its high conviction
ideas, invest in high yield securities or invest in foreign markets outside the US and Canada. Accordingly, the
investment portfolio may be subject to more rapid change in value than would be the case if the Company were
required to maintain a wide diversification in the portfolios among industries, areas, types of securities and
issuers.
10
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
The Company may make investments in the securities of high growth companies. More specifically, the Company
may have significant investments in smaller-to-medium sized companies with market capitalizations of less than
$2 billion US. While smaller companies may have potential for rapid growth, they often involve higher risks
because they lack the management experience, financial resources, product diversification, and competitive
strengths of larger corporations. These factors make smaller companies far more likely than their larger
counterparts to experience significant operating and financial setbacks that threaten their short-term and long-
term viability. In addition, in many instances, the frequency and volume of their trading is substantially less than
is typical of larger companies. As a result, the securities of smaller companies may be subject to wider price
fluctuations and exiting investments in such securities at appropriate prices may be difficult, or subject to
substantial delay. Furthermore, some of the portfolio may be invested in technology, technology-related markets
and biotech. These types of companies may allocate greater than usual amounts to research and product
development. The securities of such companies may experience above-average price movements associated with
the perceived prospects of success of the research and development programs. Also, these companies could be
adversely affected by lack of commercial acceptance of a new product or products or by technological change and
obsolescence. Some of these companies may have limited operating histories. As a result, these companies may
face undeveloped or limited markets, have limited products, have no proven profit-making history, operate at a
loss or with substantial variations in operating results from period to period, have limited access to capital and/or
be in the developmental stages of their businesses.
The Company tries to manage the above risks by monitoring its leverage, actively following its investee companies
and trying to react to market conditions. At the same time the Company expects its portfolio to exhibit a higher
degree of volatility than portfolios that invest in larger more stable companies and that invest within more defined
limits. As at December 31, 2021, approximately 88.2% of the Company’s portfolio was invested in Level 1
securities. The Company monitors its Level 1 securities as percentage of its total investments; however, it does not
have a fixed number that this percentage cannot fall below.
Climate Change Risk
Climate change risk refer to the physical risks and transition-related risks related to the changes in climate
patterns that may have a significant impact on communities and the economy. While the direct exposure of the
Corporation’s operations to climate change risk is relatively low, as an investor in equities and other assets, the
Corporation could indirectly be impacted by this risk through its portfolio investments.
The Corporation’s portfolio investments face the potential direct impact of more frequent and more intense
extreme weather events, as well as the potential indirect impact of any related supply chain disruptions. The
exposure of the Corporation’s portfolio investments to climate change risk also arises from the movement toward
a low-emission economy, which may result in increased reputational, market, regulatory, policy, legal and
technology-related risks. Existing portfolio investments in carbon-intensive industries and in other markets which
are dependent on such industries may be more exposed to such transitional risks as a result of significant changes
in customer perceptions and preferences, the increasing cost of carbon emissions and competition from renewable
energy.
Critical accounting estimates and judgments
The Company makes estimates and assumptions concerning the future that will, by definition, seldom equal actual
results. The following are the estimates applied by management that most significantly affect the Company’s
consolidated financial statements. These estimates have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
11
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
Consolidation of entities in which the Company holds less than 50% of the voting rights.
Management considers that the Company has de facto control of Senvest Management LLC (SML), RIMA Senvest
Master Fund GP LLC, and Senvest Technology Partners GP LLC., three legal entities wholly owned by an executive
of the Company, because of the Company’s board representation and the contractual terms of the investment
advisory agreement. SML is the investment adviser to the Funds, whereas RIMA Senvest Master Fund GP LLC is
the General Partner of Senvest Master Fund LP and Senvest Technology Partners GP LLC is the General Partner
of Senvest Technology Partners Master Fund LP.
Management considers that the Company has control of Senvest Master Fund LP, Senvest Technology Partners
Master Fund LP and Senvest Cyprus Recovery Investment Partners LP even though the Company has less than
50% of the voting rights in each of the Funds. The Company assessed that the removal rights of non-affiliated
unitholders are exercisable but not strong enough given the Company’s decision-making authority over relevant
activities, the remuneration to which it is entitled and its exposure to returns. The Company, through its structured
entity, is the majority unitholder of each of the Funds and acts as a principal while there are no other unitholders
forming a group to exercise their votes collectively.
Fair value estimates of investment properties
The Company has adopted the fair value model in measuring its investment properties. The fair value of the
investment properties is performed by external independent valuators located in the area of the properties. Inputs
used in the property valuation models are based on appropriate assumptions that reflect the type of property and
location. Management reviews the assumptions made and models used to ensure they correlate with their
expectation and understanding of the market. Changes in assumptions about these factors could affect the
reported fair value of financial instruments.
Fair value estimates of financial instruments
The fair value of financial instruments where no active market exists or where quoted prices are not otherwise
available are determined by using valuation techniques. In these cases, the fair values are estimated from
observable data in respect of similar financial instruments or by using models. Where market observable inputs
are not available, they are estimated based on appropriate assumptions. To the extent practical, models use only
observable data; however, areas such as credit risk (both the company’s own credit risk and counterparty credit
risk), volatilities and correlations require management to make estimates. Changes in assumptions about these
factors could affect the reported fair value of financial instruments.
Financial instruments in Level 1
The fair value of financial assets and financial liabilities traded in active markets are based on quoted market
prices at the close of trading on the consolidated statement of financial position date. The quoted market price
used for financial assets and financial liabilities held by the Company is the close price. Investments classified in
Level 1 include active listed equities and derivatives traded on an exchange. The financial assets classified as Level
1 were approximately 88.2% of the total financial assets.
Financial instruments in Level 2
Financial instruments classified with Level 2 trade in markets that are not considered to be active but are valued
based on quoted market prices, dealer quotations or valuation techniques that use market data. These valuation
techniques maximize the use of observable market data where available and rely as little as possible on entity-
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
12
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
included in Level 2. These include corporate bonds, thinly traded listed equities, over-the-counter derivatives and
private equities.
The Company uses a variety of methods and makes assumptions that are based on market conditions existing at
each year-end date. Valuation techniques used for non-standardized financial instruments such as options and
other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to
other instruments that are substantially the same, discounted cash flow analyses, option pricing models and other
valuation techniques commonly used by market participants, making maximum use of market inputs and relying
as little as possible on entity-specific inputs. The financial assets classified as Level 2 were approximately 6.4% of
the total financial assets.
Financial instruments in Level 3
Investments classified in Level 3 have significant unobservable inputs, as they trade infrequently. Level 3
instruments consist mainly of unlisted equity investments and real estate investments. As observable prices are
not available for these securities, the Company has used valuation techniques to derive the fair value. The financial
assets classified as Level 3 were approximately 5.4% of the total fair value of financial assets.
Level 3 valuations are reviewed by the Company’s Chief Financial Officer (CFO), who reports directly to the Board
on a quarterly basis in line with the Company’s reporting dates. On an annual basis, close to the year-end date, the
Company obtains independent, third party appraisals to determine the fair value of the Company’s most
significant Level 3 holdings. The annual valuations of the significant level 3 holdings are carried out externally.
The Company’s CFO reviews the results of the independent valuations. Emphasis is placed on the valuation model
used to determine its appropriateness, the assumptions made to determine whether it is consistent with the nature
of the investment, and market conditions and inputs such as cash flow and discount rates to determine
reasonableness.
As at December 31, 2021, Level 3 instruments are in various entities and industries. The real estate investments
are made up of investments in private real estate companies, and in real estate income trusts and partnerships.
For the main Level 3 instruments, the Company relied on appraisals carried out by independent third party
valuators or on recent transactions. There was no established market for any of these investments, so the most
likely scenario is a disposal of the underlying assets. For the investments in real estate income trusts and
partnerships, the Company relied mainly on audited financial statements, valuing the assets at fair value. The
most likely scenario is an eventual sale of the underlying properties and their subsequent distribution to the
holders.
Liability for redeemable units
Liability for redeemable units represents the units in Senvest Master Fund, L.P., Senvest Technology Partners
Master Fund, L.P. and Senvest Cyprus Recovery Investment Partners, L.P. Fund (collectively the Funds or
individually a Fund) that are not owned by the Company. Senvest Master Fund, L.P. and Senvest Technology
Partners Master Fund, L.P. units may be redeemed as of the end of any calendar quarter, however for a particular
class the there is a maximum quarterly redemption of 17% of the investor units and a maximum annual
redemption of 34% of the investor units. Redemptions made within the first 24 months will be subject to a
redemption fee of 3% to 5% which is payable to Senvest Master Fund, L.P. and Senvest Technology Partners
Master Fund, L.P. In addition, there are notice periods of 60 days that must be given prior to any redemption.
Senvest Cyprus Recovery Investment Partners, L.P. Fund has units that can be redeemed semi-annually with a
120 day notice. These units are recognized initially at fair value, net of any transaction costs incurred, and
subsequently units are measured at the redemption amount.
13
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
Redeemable units are issued and redeemed at the holder’s option at prices based on each Fund’s net asset value
per unit at the time of subscription or redemption. Each Fund’s net asset value per unit is calculated by dividing
the net assets attributable to the holders of each class of redeemable units by the total number of outstanding
redeemable units for each respective class. In accordance with the provisions of the Funds’ offering documents,
investment positions are valued at the close price for the purpose of determining the net asset value per unit for
subscriptions and redemptions.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in
determining the worldwide provisions for income taxes. There are many transactions and calculations for which
the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues
based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the current and deferred
income tax assets and liabilities in the year in which such determination is made.
QUARTERLY RESULTS
(In thousands except for earnings(loss) per share information)
Total revenue and
investment
gains(losses)
Net income (loss)-
common shareholders
Earnings(loss)
per share
232,882
(76,453)
440,016
1,885,731
1,172,742
118,853
418,401
(970,591)
58,954
(51,179)
150,715
574,498
363,574
28,889
161,247
(341,993)
24.03
(19.27)
60.29
224.27
138.36
10.83
60.85
(129.38)
Year
2021-4
2021-3
2021-2
2021-1
2020-4
2020-3
2020-2
2020-1
SELECTED ANNUAL INFORMATION
(In thousands except for earnings per share information)
Total revenue and investment
gains
Net income – common
shareholders
Earnings per share
Total assets
2021
2020
2019
2,482,176
739,405
426,150
732,988
289.32
211,717
104,794
80.66
39.16
6,563,902
4,065,992
2,884,999
14
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
The Company has equity investment capital commitments of $13,806 and has real estate equity investment capital
commitments of $18,618.
The Company has had wide swings in profitability from quarter to quarter in the past two years, as seen above.
The profit has fluctuated a significant amount quarter to quarter. The highest earning quarter showed a profit of
over $570 million and the least profitable quarter had a loss of over $340 million. These wide swings are primarily
due to the large quarterly mark to market adjustments in the Company’s portfolio of public holdings. However,
we expect the volatility and choppiness of the markets to result in wide profit swings from year to year and from
quarter to quarter. Reference is made to the section on Investment risk above.
The Company maintains accounts with several major financial institutions in the U.S. who function as the
Company’s main prime brokers. The Company has assets with the prime brokers pledged as collateral for leverage.
Although the prime brokers are large financial institutions, there is no guarantee that any financial institution will
not become insolvent. In addition, there may be practical or time problems associated with enforcing the
Company’s rights to its assets in the case of such insolvency.
While both the U.S. Bankruptcy Code and the Securities Investor Protection Act seek to protect customer property
in the event of a failure, insolvency or liquidation of a broker dealer, there is no certainty that, in the event of a
failure of a broker dealer that has custody of the Company’s assets, the company would not incur losses due to its
assets being unavailable for a period of time, ultimately less than full recovery of its assets, or both. As a significant
majority of the Company’s assets are in custody with three prime brokers, such losses could be significant.
On August 16, 2021, Senvest commenced a new normal course issuer bid to purchase a maximum of 100,000 of
its own common shares until August 15, 2022. There have been 95,500 shares repurchased in 2021 (under both
the old bid that expired in August and the new bid). The number of common shares outstanding as at December
31, 2021 was 2,503,024 and as at March 23, 2022 was 2,496,224. There were no stock options outstanding as at
December 31, 2021 and none have been issued since 2005.
The Company has financing with a bank, composed of a credit facility and a guarantee facility. A first ranking
movable hypothec in the amount of $30 million on all of its assets has been granted as collateral for both of the
facilities. According to the terms of the facilities, the Company is required to comply with certain financial
covenants. During the period, the Company met the requirements of all the covenants. The Company also has
margin facilities with brokers.
Related party transactions
The Company consolidates the Senvest Management LLC entity that serves as the investment manager of Senvest
Partners and Senvest Technology Partners as well as the general partners of the funds. The portion of the expected
residual returns of structured entities that do not belong to the Company is reflected as a non-controlling interest
on the statement of financial position. This non-controlling interest is owned by an executive of the Company and
totalled $11 million as at December 31, 2021 from $48.1 million as at December 31, 2020.
Significant Equity Investments
For information on a summary of financial information from certain significant investees please refer to the 2021
audited financial statements. The accounts of Senvest Partners, Senvest Technology Partners and Senvest Cyprus
Recovery Investment Fund are consolidated with the Company’s accounts.
15
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
COVID-19
Since February 2020, the financial markets have been very volatile in response to the developing COVID-19
pandemic. More specifically, the equity markets and credit markets have experienced significant volatility due to
concerns about credit risk and liquidity, amongst others. The Corporation continuously monitors this situation
and its potential impact on the Corporation and, more particularly, the Funds. However, it is not possible to
forecast with certainty the duration and full scope of the economic impact of COVID-19 both in the short- and
long-term. The extent of such impact will depend on future developments, which are highly uncertain, rapidly
evolving and cannot be predicted, including new information which may emerge concerning the severity of this
coronavirus and actions taken to contain the COVID-19 or its impact, among others. Such developments,
depending on their nature, duration, and intensity, could have a material adverse effect on the business, financial
position, results of operations or cash flows of the Corporation.
Operationally, the Corporation continues to function quite well during the current environment and the stay-at-
home conditions, as over the past few years the Corporation has planned and tested its systems for remote work-
from-home scenarios. The Corporation has moved its technology infrastructure to the cloud almost three years
ago and thus far has had no significant issues with its systems operating from home. However, the increased use
of electronic and remote communication tools and services may lead to heightened cybersecurity risk.
Geopolitical events
The recent invasion of Ukraine by Russia and the imposition of economic sanctions by Western countries are
causing concern in financial markets. It is difficult to predict the impact of this war on the value of the financial
assets held by the Company. Although the risk of recession is increased by this conflict, inflationary pressures have
also been on the rise. However, the Company does not hold any assets from Ukraine, Russia and Belarus which
may reduce, the extent possible, variations in the value of its financial assets.
FORWARD LOOKING STATEMENTS
This MD&A contains “forward looking statements” which reflect the current expectations of management
regarding our future growth, results of operations, performance and business prospects and opportunities.
Wherever possible, words such as “may”, “would”, “could”, “will”, “anticipate”, “believe”, “plan”, “expect”,
“intend”, “estimate”, “aim”, “endeavour”, “likely”, “think” and similar expressions have been used to identify these
forward looking statements. These statements reflect our current beliefs with respect to future events and are
based on information currently available to us. Forward looking statements involve significant known and
unknown risks, uncertainties and assumptions. Many factors could cause our actual results, performance or
achievements to be materially different from any future results, performance or achievements that may be
expressed or implied by such forward looking statements including, without limitation, those Risk Factors listed
in the Company's annual information form. Should one or more of these risks or uncertainties materialize, or
should assumptions underlying the forward looking statements prove incorrect, actual results, performance or
achievements could vary materially from those expressed or implied by the forward looking statements contained
in this MD&A. These forward looking statements are made as of March 29, 2022 and will not be updated or revised
except as required by applicable securities law.
16
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2021
OTHER FINANCIAL INFORMATION
There is additional financial information about the Company on Sedar at http://www.sedar.com/ the Company’s
website at www.senvest.com, as well the Company’s or Senvest Management’s U.S. SEC section 13 and other filings
on www.sec.gov.
INTERNAL CONTROLS
Disclosure controls and procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required
to be disclosed by us in reports filed or submitted under Canadian securities laws is recorded, processed,
summarized and reported within the time periods specified under those laws, and include controls and procedures
that are designed to ensure that the information is accumulated and communicated to management, including
Senvest’s President and CEO and Vice-President and CFO, to allow timely decisions regarding required disclosure.
As at December 31, 2021, management evaluated, under the supervision of and with the participation of the CEO
and the CFO, the effectiveness of our disclosure controls and procedures, under National Instrument 52-109 –
Certification of Disclosure in Issuers’ Annual and Interim Filings. Based on that evaluation, the CEO and CFO
concluded that our disclosure controls and procedures were effective as at December 31, 2021.
Internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting
under National Instrument 52-109. Our internal control over financial reporting is a process designed under the
supervision of the CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with IFRS. However, because of
its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a
timely basis. Management evaluated, under the supervision of and with the participation of the CEO and the CFO,
the effectiveness of our internal control over financial reporting as at December 31, 2021, based on the criteria
established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that evaluation, the CEO and CFO concluded that
our internal control over financial reporting was effective as at December 31, 2021. There have been no changes
during the year ended December 31, 2021 in our internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal control over financial report.
Victor Mashaal
Chairman of the Board and President
March 29, 2022
(Management Discussion and Analysis (“MD&A”) provides a review of Senvest Capital Inc.’s operations, performance and financial condition for the
period ended December 31, 2021, and should be read in conjunction with the 2021 annual filings. Readers are also requested to visit the SEDAR website
at www.sedar.com for additional information. This MD&A also contains certain forward-looking statements with respect to the Corporation. These
forward-looking statements, by their nature necessarily involve risks and uncertainties that could cause actual results to differ materially from those
contemplated by these forward-looking statements. We consider the assumptions on which these forward-looking statements are based to be reasonable,
but caution the reader that these assumptions regarding future events, many of which are beyond our control may ultimately prove to be incorrect.)
17
Senvest Capital Inc.
Management’s Report
December 31, 2021
The Consolidated financial statements for the fiscal year ended December 31, 2021 and December 31, 2020, were
prepared by the management of Senvest Capital Inc., reviewed by the Audit Committee and approved by the Board
of Directors. They were prepared in accordance with International Financial Reporting Standards and are
consistent with the Company’s business.
The Company and its subsidiaries maintain a high level of quality of internal controls, designed to provide
reasonable assurance that the financial information is accurate and reliable. The information included in this
Annual Report is consistent with the financial statements contained herein.
The financial statements have been audited by PricewaterhouseCoopers LLP, the company’s auditors, whose
report is provided herein.
Victor Mashaal
Chairman of the Board and President
Senvest Capital Inc.
March 29, 2022
18
Independent auditor’s report
To the Shareholders of Senvest Capital Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Senvest Capital Inc. and its subsidiaries (together, the Company) as at
December 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2021 and 2020;
the consolidated statements of income for the years then ended;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to consolidated financial statements, which include significant accounting policies and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502
“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.
19
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2021. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of level 3 debt and equity securities
Our approach to addressing the matter included the
following procedures, among others:
Refer to note 2 – Summary of significant accounting
policies, note 3 – Critical accounting estimates and
judgments and note 16 – Financial risks and fair
value to the consolidated financial statements.
Tested how management determined the fair
value estimates for a sample of the Securities,
which included the following:
As at December 31, 2021, the Company’s
investment portfolio included $6,272,837,000 of
equity investments and other holdings measured at
fair value through profit or loss, which included
$281,462,000 of level 3 debt and equity securities
(the Securities) for which quoted prices or
observable inputs were not available. Management
uses valuation techniques, including the
comparable company approach, backsolve option
pricing models and recent transactions to determine
the fair value of the Securities. In the determination
of the fair value of these Securities, management
makes significant judgment which includes the
selection of appropriate valuation techniques and
the use of significant unobservable inputs in those
techniques, such as: earnings before interest, tax
and amortization (EBITA) multiples, revenue
multiples, EBITA estimates and revenue estimates
for Securities valued using the comparable
company approach and expected volatilities for
Securities valued using the backsolve option pricing
model.
Evaluated the appropriateness of the
valuation techniques used and tested the
mathematical accuracy thereof.
For Securities valued using the comparable
company approach, assessed the
reasonableness of EBITA and revenue
estimates of the underlying companies by
comparing them to past performance.
For Securities valued using the recent
transaction approach, assessed publicly
available information having a potential to
affect the fair value between the transaction
date and December 31, 2021.
Professionals with specialized skill and
knowledge in the field of valuation were
used to assist in evaluating the
reasonableness of management’s valuation
techniques and significant unobservable
inputs, by considering comparable
companies for the EBITA multiples,
revenue multiples and expected volatilities.
Tested the underlying data used in the
valuation techniques.
20
How our audit addressed the key audit matter
Key audit matter
We considered this a key audit matter due to the
significant judgment applied by management in
determining the fair value estimates of the
Securities. This determination required the use of
appropriate valuation techniques which included
significant unobservable inputs. This in turn led to a
high degree of auditor subjectivity and judgment in
performing procedures relating to the valuation of
the Securities. The audit effort involved the use of
professionals with specialized skill and knowledge
in the field of valuation.
Valuation of investment properties
Our approach to addressing the matter included the
following procedures, among others:
Refer to note 2 – Summary of significant accounting
policies, note 3 – Critical accounting estimates and
judgments and note 9 – Investment properties to
the consolidated financial statements.
As at December 31, 2021, the Company held
investment properties amounting to $54,349,000,
which are measured at fair value. Management
uses valuation techniques, including the
comparable sales approach, the comparable rent
approach and recent transactions, to determine the
fair value of investment properties. Management
uses significant unobservable inputs in estimating
the value of the investment properties, such as:
Value/m2 for investment properties valued using the
comparable sales approach and capitalization rates
and market rent for investment properties valued
using the comparable rent approach.
Tested how management determined the fair
value of a sample of investment properties,
which included the following:
Professionals with specialized skill and
knowledge in the field of real estate
valuation assisted us in evaluating the
appropriateness of the valuation
techniques, in testing the mathematical
accuracy thereof, assessing recent
transactions and evaluating the
reasonableness of the Value/m2 used.
Tested the underlying data used in the
valuation techniques.
21
Key audit matter
How our audit addressed the key audit matter
We considered this a key audit matter due to the
significant judgments applied by management in
determining the fair value of the investment
properties. This determination required the use of
appropriate valuation techniques which included
significant unobservable inputs. This in turn led to a
high degree of auditor subjectivity and judgment in
performing procedures relating to the valuation of
investment properties. The audit effort involved the
use of professionals with specialized skill and
knowledge in the field of real estate valuation.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information, and we do not
and will not express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
22
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
23
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Linda Beauparlant.
/s/PricewaterhouseCoopers LLP1
Montréal, Quebec
March 29, 2022
1 CPA auditor, CA, public accountancy permit No. A117693
24
Senvest Capital Inc.
Consolidated Statements of Financial Position
As at December 31, 2021 and 2020
Note
4
5(a)
5(b)
6
7
8
9
12(b)
11(b)
5(a)
11
5(b)
6
12(b)
12(b)
10
2021
$
2020
$
52,189
475
69,333
6,272,837
25,360
50,765
54,349
22,865
15,729
10,915
472
26,196
3,880,017
15,926
46,684
49,134
14,354
22,294
6,563,902
4,065,992
253
96,847
998,409
888,254
187,130
1,411
2,727
143,545
2,429,673
992
55,784
987,279
319,053
22,026
185
-
56,780
1,477,779
4,748,249
2,919,878
(in thousands of Canadian dollars)
Assets
Cash and cash equivalents
Restricted short-term investments
Due from brokers
Equity investments and other holdings
Investments in associates
Real estate investments
Investment properties
Income taxes receivable
Other assets
Total assets
Liabilities
Bank advances
Trade and other payables
Due to brokers
Securities sold short and derivative liabilities
Redemptions payable
Subscriptions received in advance
Income taxes payable
Deferred income tax liabilities
Liability for redeemable units
Total liabilities
Equity
Equity attributable to common shareholders
Share capital
Accumulated other comprehensive income
Retained earnings
13
20,853
127,620
1,656,171
21,619
126,017
950,418
Total equity attributable to common shareholders
1,804,644
1,098,054
Non-controlling interest
Total equity
Total liabilities and equity
Approved by the Board of Directors
17
11,009
48,060
1,815,653
1,146,114
6,563,902
4,065,992
Victor Mashaal
Director
_____________________________
Frank Daniel
Director
The accompanying notes are an integral part of these consolidated financial statements.
25
Senvest Capital Inc.
Consolidated Statements of Income
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except per share data)
Revenue
Interest income
Dividend income
Other income
Investment gains
Net change in fair value of equity investments and other holdings
Dividend expense on securities sold short
Net change in fair value of real estate investments
Net change in fair value of investment properties
Share of profit (loss) of associates
Foreign exchange gain
Total revenue and net investment gains
Operating costs and other expenses
Employee benefit expense
Interest expense
Transaction costs
Other operating expenses
Change in redemption amount of redeemable units
Income before income tax
Income tax expense
Net income for the year
Net income attributable to:
Common shareholders
Non-controlling interest
Earnings per share
Basic and diluted
Note
7
2021
$
9,208
29,419
6,079
44,706
2,423,815
(4,265)
6,510
5,052
682
5,676
2,437,470
2,482,176
156,403
15,552
21,005
21,377
214,337
1,431,017
836,822
12(a)
100,950
735,872
732,988
2,884
2020
$
9,727
32,920
10,636
53,283
693,887
(5,280)
(1,622)
1,186
(3,560)
1,511
686,122
739,405
57,302
20,373
18,937
12,972
109,584
364,825
264,996
26,677
238,319
211,717
26,602
14
289.32
80.66
The accompanying notes are an integral part of these consolidated financial statements.
26
Senvest Capital Inc.
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars)
Net income for the year
Other comprehensive income (loss)
Currency translation differences
Comprehensive income for the year
Comprehensive income attributable to:
Common shareholders
Non-controlling interest
2021
$
2020
$
735,872
238,319
1,562
737,434
734,591
2,843
(26,860)
211,459
186,664
24,795
Other comprehensive income includes currency translation differences arising from the Company’s interest in
foreign entities. Accumulated other comprehensive income arising from currency translation differences arising
from the Company’s interest in foreign entities will be reclassified to profit and loss upon the disposal of such
entities. Currency translation differences arising from the translation of the Company’s consolidated financial
statements’ translation to the presentation currency will not be subsequently reclassified to profit and loss.
The accompanying notes are an integral part of these consolidated financial statements.
27
Senvest Capital Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars)
Equity attributable to owners of the parent
Note
Share
capital
$
Accumulated
other
comprehensive
income(loss)
$
Retained
earnings
$
Non-
controlling
interests
$
Total
$
Total
equity
$
Balance – December 31, 2019
22,051
151,070
746,269
919,390
23,265
942,655
Net income for the year
Other comprehensive loss
Comprehensive income (loss)
for the year
-
-
-
-
(25,053)
211,717
-
211,717
(25,053)
26,602
(1,807)
238,319
(26,860)
(25,053)
211,717
186,664
24,795
211,459
Repurchase of common shares
13
(432)
-
(7,568)
(8,000)
-
(8,000)
Balance – December 31, 2020
21,619
126,017
950,418 1,098,054
48,060
1,146,114
Net income for the year
Other comprehensive income (loss)
Comprehensive income for the year
-
-
-
-
1,603
732,988
-
732,988
1,603
2,884
(41)
735,872
1,562
1,603
732,988
734,591
2,843
737,434
Repurchase of common shares
Distributions to non-controlling interest
13
(766)
-
-
-
(27,235)
(28,001)
-
(39,894)
(28,001)
(39,894)
Balance – December 31, 2021
20,853
127,620
1,656,171 1,804,644
11,009
1,815,653
The accompanying notes are an integral part of these consolidated financial statements.
28
(in thousands of Canadian dollars)
Cash flows provided by (used in)
Senvest Capital Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2021 and 2020
Note
2021
$
2020
$
Operating activities
Net income for the year
Adjustments for non-cash items
Purchase of equity investments and other holdings held for trading
Purchase of securities sold short and derivative liabilities
Proceeds on sale of equity investments and other holdings held for trading
Proceeds from securities sold short and derivative liabilities
Dividends and distributions received from real estate investments
Changes in non-cash working capital items
15(a)
15(b)
735,872
(918,161)
(5,189,492)
(6,941,058)
5,323,891
7,547,723
4,700
26,826
238,319
(299,965)
(3,310,394)
(3,479,861)
2,628,380
3,303,480
3,738
1,135,050
Net cash provided by operating activities
590,301
218,747
Investing activities
Transfers to restricted short-term investments
Purchase of real estate investments
Purchase of investment properties
Purchase of investment in associates
Purchase of equity investments and other holdings at
fair value through profit or loss
Proceeds on sale of equity investments and other holdings at
fair value through profit or loss
Proceeds from investments in associates
Net cash used in investing activities
Financing activities
Decrease in bank advances
Payment of lease liability
Repurchase of common shares
Proceeds from issuance of redeemable units
Amounts paid on redemption of redeemable units
(5)
(2,421)
(4,599)
(9,290)
(17)
(1,533)
(4,859)
(140,796)
(103,156)
5,273
577
1,774
689
(151,261)
(107,102)
11(b)
(432)
(1,190)
(28,001)
16,591
(385,185)
(4)
(854)
(8,000)
36,304
(145,562)
Net cash used in financing activities
(398,217)
(118,116)
Increase (decrease) in cash and cash equivalents during the year
40,823
(6,471)
Effect of changes in foreign exchange rates on cash and
cash equivalents
Cash and cash equivalents – Beginning of year
Cash and cash equivalents – End of year
4
Amounts of cash flows classified in operating activities:
Cash paid for interest
Cash paid for dividends on securities sold short
Cash received on interest
Cash received on dividends
Cash paid for income taxes
451
10,915
52,189
15,258
3,720
8,847
31,040
21,866
The accompanying notes are an integral part of these consolidated financial statements.
109
17,277
10,915
24,369
5,624
11,664
31,713
5,213
29
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
1 General information
Senvest Capital Inc. (the “Company”) was incorporated under Part I of the Canada Corporations Act on
November 20, 1968 under the name Sensormatic Electronics Canada Limited, and was continued under the
Canada Business Corporations Act under the same name effective July 23, 1979. On April 21, 1991, the
Company changed its name to Senvest Capital Inc. The Company and its subsidiaries hold investments in equity
and real estate holdings that are located predominantly in the United States. The Company’s head office and
principal place of business is located at 1000 Sherbrooke Street West, Suite 2400, Montréal, Quebec H3A 3G4.
The Company’s shares are traded on the Toronto Stock Exchange under the symbol “SEC”. Refer to note 17 for
the composition of the Company.
2
Summary of significant accounting policies
Basis of preparation
The Company prepares its consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
The Board of Directors (Board) approved these consolidated financial statements for issue on March 29, 2022.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying the
Company’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where
assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for
financial assets and financial liabilities at fair value through profit or loss, including derivative instruments, and
investment properties which have been measured at fair value.
30
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Consolidation
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Company has control. The Company
controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date
on which control is transferred to the Company. They are deconsolidated from the date that control ceases.
The financial statements of the Company consolidate the accounts of the Company, its subsidiaries and its
structured entities. All intercompany transactions, balances and unrealized gains and losses from intercompany
transactions are eliminated on consolidation. Where applicable, amounts reported by subsidiaries, associates
and structured entities have been adjusted to conform with the Company’s accounting policies.
Investments in associates
Associates are entities over which the Company has significant influence but not control, generally
accompanying a holding of between 20% to 50% of the voting rights.
Investments in associates held by the Company’s investment entities are included in the Company’s
consolidated financial statements as financial assets at FVTPL. The accounting policies applied to these
investments in associates are similar to those applied to the Company’s other financial assets at FVTPL and are
disclosed in the accounting policy notes discussing the classification and measurement of financial assets and
liabilities.
Investment in associates that are not held by the Company’s investment entities are included in the Company’s
consolidated financial statements using the equity method.
Equity method
Subsequent to the acquisition date, the Company’s share of profits or losses of associates is recognized in the
consolidated statements of income. The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. When the Company’s share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Company does not recognize further
losses, unless it has incurred obligations or made payments on behalf of the associate.
Dilution gains and losses arising from changes in interests in investments in associates are recognized in the
consolidated statements of income.
The Company assesses at each year-end whether there is any objective evidence that its interests in associates
are impaired. If impaired, the carrying value of the Company’s share of the underlying assets of associates is
written down to its estimated recoverable amount (being the higher of fair value less cost to sell and value in
use) and charged to the consolidated statement of income. In accordance with IAS 36 Impairment of Assets,
impairment losses are reversed in subsequent years if the recoverable amount of the investment subsequently
increases and the increase can be related objectively to an event occurring after the impairment was recognized.
31
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Liability for redeemable units
Liability for redeemable units represents the units in Senvest Master Fund, L.P., Senvest Technology Partners
Master Fund, L.P. and Senvest Cyprus Recovery Investment Partners, L.P. Fund (collectively the “Funds” or
individually a “Fund”) that are not owned by the Company. Senvest Master Fund, L.P. and Senvest Technology
Partners Master Fund, L.P. units may be redeemed as of the end of any calendar quarter subject to the required
notice of redemption period, maximum quarterly amounts and redemption fees., Senvest Cyprus Recovery
Investment Partners, L.P. Fund has units that can be redeemed semi-annually with a 120 day notice. These
units are recognized initially at fair value, net of any transaction costs incurred, and subsequently units are
measured at the redemption amount.
Redeemable units are issued and redeemed at the holder’s option at prices based on each Fund’s net asset value
per unit at the time of subscription or redemption. Each Fund’s net asset value per unit is calculated by dividing
the net assets attributable to the holders of each class of redeemable units by the total number of outstanding
redeemable units for each respective class. In accordance with the provisions of the Funds’ offering documents,
investment positions are valued at the close price for the purpose of determining the net asset value per unit for
subscriptions and redemptions.
Non-controlling interests
Non-controlling interests represent equity interests in the consolidated structured entities owned by outside
parties. The share of net assets of the structured entity attributable to non-controlling interests is presented as a
component of equity. Their share of net income and comprehensive income is recognized directly in equity.
Changes in the Company’s ownership interest in the structured entity that do not result in a loss of control are
accounted for as equity transactions.
Foreign currency translation
Functional currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of
the primary economic environment in which the entity operates (the functional currency). The functional
currency of the Company is the US dollar.
Transactions and balances
Foreign currency transactions are translated into the relevant functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
foreign currency transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in currencies other than an entity’s functional currency are recognized in the
consolidated statement of income.
All foreign exchange gains and losses are presented in the consolidated statement of income in foreign exchange
gain (loss).
32
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Consolidation and foreign operations
The financial statements of an entity that has a functional currency different from that of the parent company
are translated into US dollars as follows: assets and liabilities – at the closing rate at the date of the
consolidated statement of financial position; and income and expenses – at the average rate for the period (as
this is considered a reasonable approximation of actual rates). All resulting changes are recognized in other
comprehensive income as currency translation differences.
When an entity disposes of its interest in a foreign operation or loses control or significant influence over a
foreign operation, the foreign exchange gains or losses accumulated in other comprehensive income related to
the foreign operation are recognized in net income. If an entity disposes of part of an interest in a foreign
operation which remains a subsidiary, a proportionate amount of foreign exchange gains or losses accumulated
in other comprehensive income related to the subsidiary are reallocated between controlling and non-
controlling interests.
Presentation currency
The Company has adopted the Canadian dollar as its presentation currency, which in the opinion of
management is the most appropriate presentation currency. Historically, the Company’s consolidated financial
statements have been presented in Canadian dollars, and since the Company’s shares are listed on a Canadian
stock exchange, management believes it would better serve the use of shareholders to continue issuing
consolidated financial statements in Canadian dollars. The US dollar consolidated financial statements
described above are translated into the presentation currency as follows: assets and liabilities – at the closing
rate at the date of the consolidated statement of financial position; and income and expenses – at the average
rate for the period. All resulting changes are recognized in other comprehensive income as currency translation
differences. Equity items are translated using the historical rate.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits held with banks and other short-term highly liquid
investments with original maturities of three months or less.
Financial assets and liabilities
Classification and measurement
The classification of financial assets is based on the Company’s business models and the financial asset’s
contractual cash flow characteristics. Business models are reassessed periodically, and contractual cash flows
characteristics are assessed to determine whether they are “Solely payments of principal and interest” (SPPI).
Financial assets, including hybrid contracts, are classified as either amortized cost, fair value through other
comprehensive income (FVOCI), or the residual classification of fair value through profit and loss (FVTPL).
Financial assets with cash flows that are SPPI and are held within a business model where the objective is to
hold the financial assets in order to collect contractual cash flows (“Hold to collect” business model) are
measured at amortized cost.
33
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Financial assets with cash flows that are SPPI and are held within a business model where the dual objective is
to hold the financial assets in order to collect contractual cash flows and selling financial assets (“Hold to collect
and sell” business model) are measured at FVOCI.
Financial assets with cash flows that are SPPI but are not held within the “Hold to collect” or “Hold to collect
and sell” business models are measured at FVTPL.
Financial assets with cash flows that do not meet the SPPI conditions are measured at FVTPL.
Equity investments held for trading are classified as FVTPL. For all other equity investments that are not held
for trading, the Company, on initial recognition, may irrevocably elect to present subsequent changes in the
investment’s fair value in other comprehensive income. This election is made on an investment-by-investment
basis.
Financial liabilities are measured at amortized cost unless they must be measured at fair value through profit or
loss (such as instruments held for trading or derivatives) or if the Company elects to measure them at fair value
through profit or loss.
The Company assesses its business models individually at the level of the subsidiaries and the associated
companies. Information that is considered in determining the business models includes policies and objectives
for the financial instrument held in each entity, how risk and performance is measured at the entity level and
reported to management and expected future events for the financial instrument with respect to valuation,
holding period and selling. All of the group entities’ financial assets are managed on a fair value basis with the
exception of bank balances and short-term trade receivables. The Company does not hold any long-term
financial assets with the intent of solely collecting payments of principal and interest or collecting such
payments and selling the assets.
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the
assets have expired or have been transferred and the Company has transferred substantially all risks and
rewards of ownership. Financial assets and financial liabilities are recognized on the trade date, the date on
which the Company commits to purchase or sell the investment.
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of
financial position when there is a legally enforceable and unconditional right to offset the recognized amounts
and when there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
i)
Financial assets and financial liabilities held for trading
A financial asset or financial liability is classified as held for trading if it is acquired or incurred
principally for the purpose of selling or repurchasing in the near term or if on initial recognition it is
part of a portfolio of identifiable financial investments that are managed together and for which there
is evidence of a recent actual pattern of short-term profit taking. Derivatives are also categorized as
held for trading. The Company does not classify any derivatives as hedges in a hedging relationship.
34
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
The Company makes short sales in which a borrowed security is sold in anticipation of a decline in the
market value of that security, or it may use short sales for various arbitrage transactions.
From time to time, the Company enters into derivative financial instruments for speculative purposes.
These instruments are marked to market, and the corresponding gains and losses for the year are
recognized in the consolidated statement of income. The carrying value of these instruments is fair
value, which approximates the amount that would be received or paid if the derivative were to be
transferred to a market participant at the consolidated statement of financial position date. The fair
value is included in equity investments and other holdings if in an asset position or equities sold short
and derivative liabilities if in a liability position.
ii)
Financial assets managed as fair value through profit or loss
Financial assets managed as fair value through profit or loss are financial instruments that are not
classified as held for trading but form part of a portfolio that is managed and whose performance is
evaluated on a fair value basis in accordance with the Company’s documented investment strategy.
The Company’s policy requires management to evaluate the information about these financial assets
and financial liabilities on a fair value basis together with other related financial information.
Recognition, derecognition and measurement
Financial assets and financial liabilities at fair value through profit or loss are initially recognized at fair
value. Transaction costs are expensed as incurred in the consolidated statement of income.
Subsequent to initial recognition, all financial assets and financial liabilities at fair value through
profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of
financial assets or financial liabilities at fair value through profit or loss are presented in the
consolidated statement of income in net change in fair value of equity investments and other holdings
or net change in fair value of real estate investments in the period in which they arise.
Dividend income from financial assets at fair value through profit or loss is recognized in the
consolidated statement of income as dividend income when the company’s right to receive payment is
established. Interest on debt securities at fair value through profit or loss is recognized in the
consolidated statement of income in interest income based on the contractual rate on an accrual
basis. Dividend expense from equities sold short is recognized in the consolidated statement of
income as dividend expense on equities sold short.
Financial assets at amortized cost
Classification
Financial assets at amortized cost are non-derivative financial assets with cash flows that are “solely from the
payment of principal and interest” (SPPI) and that are managed under a “held to collect” business model.
The Company’s financial assets at amortized cost consist of cash and cash equivalents, restricted short-term
investment and due from brokers, as well as loans to employees, which are included in other assets.
35
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Recognition and measurement
At initial recognition, the Company measures its financial assets at its fair value plus transactions costs
incurred. The amortized cost is the amount at which the financial asset is measured at initial recognition minus
the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any
difference between that initial amount and the maturity amount and adjusted for any loss allowance.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial
assets.
Financial liabilities at amortized cost
Classification
The Company’s financial liabilities at amortized cost are non-derivative liabilities that comprise bank advances,
trade and other payables, due to brokers, redemptions payable, subscriptions received in advance and liability
for redeemable units.
Recognition and measurement
Trade and other payables are initially recognized at fair value. Subsequently, trade and other payables are
measured at amortized cost using the effective interest method. Bank advances, due to brokers, redemptions
payable and subscriptions received in advance are recognized initially at fair value, net of any transaction costs
incurred, and subsequently at amortized cost using the effective interest method.
Impairment
Substantially all of the Company’s financial assets at amortized cost are short-term assets and from sources
with low credit risk. The Company monitors its financial assets measured at amortized cost and counterparty
risk.
Due from and to brokers
Amounts due from and to brokers represent positive and negative cash balances or margin accounts, and
pending trades on the purchase or sale of securities.
Where terms in the prime brokerage agreements permit the prime broker to settle margin balances with cash
accounts or collateral, the due from brokers cash balances are offset against the due to brokers margin balances
at each prime broker.
36
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Investment properties
Investment properties are properties held to earn rental income and/or for capital appreciation and are not
occupied by the Company. Investment properties are measured initially at cost, including transaction costs.
Subsequent to initial recognition, investment properties are measured at fair value. Changes in fair values are
recognized in the consolidated statement of income as part of net change in fair value of investment properties
in the period in which they arise.
Provision
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive
obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required
to settle the obligation.
Interest income and dividend income
Interest income
Interest income on debt financial assets measured at amortized cost or fair value through other comprehensive
income is recognized using the effective interest method. It includes interest income from cash and cash
equivalents.
Dividend income
Dividend income is recognized when the Company’s right to receive payments is established.
Transaction costs
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of an
investment.
Transaction costs related to financial assets and financial liabilities at fair value through profit or loss are
expensed as incurred. Transaction costs for all other financial instruments are capitalized.
Income tax
Income tax comprises current and deferred tax. Income tax is recognized in the consolidated statement of
income except to the extent that it relates to items recognized directly in equity, in which case the income tax is
also recognized directly in equity.
Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the
consolidated statement of financial position date in the countries where the Company and its subsidiaries
operate and generate taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
37
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted at
the consolidated statement of financial position date and will apply when it is expected that the related deferred
income tax asset will be realized or the deferred income tax liability settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be used.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled
by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
Employee benefits
Post-employment benefit obligations
Employees of companies included in these consolidated financial statements have entitlements under Company
pension plans which are defined contribution pension plans. The cost of defined contribution pension plans is
charged to expense as the contributions become payable and is included in the same line item as the related
compensation cost in the consolidated statement of income.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issue of new common
shares or options are recorded in equity as a deduction, net of tax, from the proceeds.
Dividend distribution
Dividends on the Company’s common shares are recognized in the Company’s consolidated statement of
changes in equity in the year in which the dividends are declared and approved by the Company’s Board.
38
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Earnings per share
Basic earnings per share is calculated by dividing the net income for the year attributable to equity owners of
the parent by the weighted average number of common shares outstanding during the year.
Diluted earnings per share are calculated by adjusting the weighted average number of common shares
outstanding to assume conversion of all potentially dilutive instruments. The Company currently does not have
any dilutive instruments.
Accounting standards and amendments issued but not yet adopted
The Company presents the developments that are relevant to its activities and transactions. The following
revised standards and amendments are not mandatory for the December 31, 2021 reporting periods and the
Company has not early adopted these standards and amendments.
IFRS 10, ‘Consolidated Financial Statements’, and IAS 28, ‘Investments in Associates and Joint Ventures’,
were amended in 2014 to address an inconsistency between those standards when accounting for the sale or
a contribution of assets between an investor and its associate or joint venture. The main consequence of the
amendments is that a full gain or loss is recognized when the transaction involves a business combination,
whereas a partial gain is recognized when the transaction involves assets that do not constitute a business.
The mandatory effective date of this amendment will be determined by the IASB at a future date. Voluntary
application is permitted.
IAS 1, ‘Presentation of Financial Statements’ and IFRS Practice Statement 2 ‘Making Materiality
Judgements’. In February 2021, the IASB issued amendments to IAS 1 to assist entities in determining
which material accounting policies are required to be disclosed. To support the IAS 1 amendment, the IASB
has provided guidance to demonstrate the application of materiality in a 'four-step materiality process'
described in IFRS Practice Statement 2 to accounting policy disclosures. The amendments issued are
effective for annual periods beginning on or after January 1, 2023, but early application is permitted. The
Company is currently evaluating the impact that this standard will have on its financial statements.
IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’. In February 2021, the IASB
issued amendments to IAS 8 to help entities distinguish between changes in accounting policies and
accounting estimates. The amendments issued are effective for annual periods beginning on or after
January 1, 2023 and changes in accounting policies and changes in accounting estimates that occur on or
after the start of that period. Early application is permitted. The Company is currently evaluating the
impact that this standard will have on its financial statements.
39
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
3 Critical accounting estimates and judgments
Critical accounting estimates
The Company makes estimates and assumptions concerning the future that will, by definition, seldom equal
actual results. The following are the estimates applied by management that most significantly affect the
Company’s consolidated financial statements. These estimates have a significant risk of causing a significant
adjustment to the carrying amounts of assets and liabilities within the next fiscal year.
Fair value of financial instruments
The fair value of financial instruments, including real estate investments, where no active market exists or
where listed prices are not otherwise available are determined by using valuation techniques. In these cases, the
fair values are estimated from observable data in respect of similar financial instruments or by using models.
Where market observable inputs are not available, they are estimated based on appropriate assumptions. To the
extent practical, models use only observable data; however, areas such as credit risk (both the Company’s own
credit risk and counterparty credit risk), volatilities and correlations require management to make estimates.
Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Refer to note 16 for more information on fair value measurements and risk sensitivity for the Company’s
financial instruments.
Fair value of investment properties
The Company has adopted the fair value model in measuring its investment properties. The fair value of the
investment properties is performed by external independent knowledgeable valuators located in the area of the
properties. Inputs used in the property valuation models are based on appropriate assumptions that reflect the
type of property and location. Management reviews the assumptions made and models used to ensure they
correlate with their expectation and understanding of the market.
Changes in assumptions about these factors could affect the reported fair value of investment properties.
Refer to note 9 for more information on fair value measurements and risk sensitivity for the Company’s
investment properties
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in
determining the consolidated provision for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact the current and deferred
income tax assets and liabilities in the year in which such determination is made.
40
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Geopolitical events
The recent invasion of Ukraine by Russia and the imposition of economic sanctions by Western countries are
causing concern in financial markets. It is difficult to predict the impact of this war on the value of the financial
assets held by the Company. Although the risk of recession is increased by this conflict, inflationary pressures
have also been on the rise. However, the Company does not hold any assets from Ukraine, Russia and Belarus
which reduces the extent of possible variations in the value of its financial assets.
COVID-19
The COVID-19 pandemic continues to evolve and the economic environment in which the Company operates
continues to be subject to sustained volatility, which could negatively impact the Company’s financial results, as
the duration of the COVID-19 pandemic and the effectiveness of steps undertaken by governments and central
banks in response to the COVID-19 pandemic remain uncertain. The current environment requires particularly
complex judgments and estimates in certain areas. The Company is closely monitoring the changing conditions
and their impacts.
Critical accounting judgments
Consolidation of entities in which the Company holds less than 50% of the voting rights
Management considers the Company to have de facto control of Senvest Management L.L.C. (RIMA), RIMA
Senvest Master Fund GP, L.L.C., and Senvest Technology Partners GP, L.L.C. three legal entities wholly owned
by an executive of the Company, because of the Company’s Board representation and the contractual terms of
the investment advisory agreement. RIMA is the investment adviser to the Funds, whereas RIMA Senvest
Master Fund GP, L.L.C. is the General Partner. As compensation for its sub-advisory services, the Company is
entitled to receive 60% of the management and incentive fees earned by RIMA each fiscal year.
Management considers the Company to have control of Senvest Master Fund, L.P., Senvest Technology
Partners, Master Fund L.P. and Senvest Cyprus Recovery Investment Fund, L.P. even though the Company has
less than 50% of the voting rights in each of the Funds. The Company assessed that the removal rights of non-
affiliated unitholders are exercisable but not strong enough given the Company’s decision-making authority
over relevant activities, the remuneration to which it is entitled and its exposure to returns. The Company,
through its structured entities, is the majority unitholder of each of the Funds and acts as a principal while
there are no other unitholders forming a group to exercise their votes collectively.
41
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
4 Cash and cash equivalents
Cash on hand and on deposit
Short-term investments
5 Credit facilities and due from and due to brokers
a)
Credit facilities
Bank advances
2021
$
52,056
133
52,189
2020
$
10,530
385
10,915
The Company has a credit facility with a Canadian bank and has available a demand revolving loan (credit
facility) and a guarantee facility. The credit facility is in the amount of $3,000 and is payable on demand.
As at December 31, 2021, $253 was outstanding (2020 – $992). Under the credit facility, the Company
may, upon delivery of a required notice, opt to pay interest at the bank’s prime rate plus 0.25%, the bank’s
US base rate plus 0.25%. All of the credit facility available is also available by way of banker’s acceptances
plus a stamping fee of 1.75% per annum, or by US dollar advances.
Guarantee facility
The Company also has available a USD 450 thousand guarantee facility (2020 – EUR 450 thousand) to
issue standby letters of credit. A fee of 1.00% per annum on the face amount of each standby letter of credit
applies. All amounts paid by the bank under the guarantee facility are payable immediately on demand. As
at December 31, 2021, no standby letters of credit were outstanding; however, the Company has provided a
$475 (2020 – $472) term deposit to guarantee future letters of credit. This term deposit has been disclosed
in restricted short-term investments on the consolidated statement of financial position.
In addition, a first-ranking movable hypothec in the amount of $30,000 on all of the Company’s assets has
been granted as collateral for both the credit and guarantee facilities. According to the terms of the
facilities, the Company is required to comply with certain financial covenants. As at December 31, 2021
and 2020, the Company had met the requirements of all the covenants.
b) Due from and due to brokers
The Company has margin facilities with its prime brokers. As at December 31, 2021 and 2020, the
Company’s amounts due to brokers have no specific repayment terms, and they are governed by the
margin terms set forth in the prime brokerage agreements. As at December 31, 2021, listed equity
securities and due from brokers amounting to $5,781,724 have been pledged as collateral (2020 –
$3,561,755) . The fair value of the collateral-listed equity securities is calculated daily and compared to the
Company’s margin limits. The prime brokers can at any time demand full or partial repayment of the
margin balances and any interest thereon or demand the delivery of additional assets as collateral.
42
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Due from and due to brokers balances are presented on a net basis by broker in the consolidated statement
of financial position. Under the prime broker agreements, the broker may upon events of default offset, net
and/or regroup any amounts owed by the Company to the broker by amounts owed to the Company by the
broker. The following tables set out the offsetting of the Company’s various accounts with prime brokers.
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
69,787
355,210
454
1,353,619
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
36,203
78,881
10,007
1,066,160
2021
Net
amount
$
69,333
(998,409)
2020
Net
amount
$
26,196
(987,279)
Due from brokers
Due to brokers
Due from brokers
Due to brokers
6
Equity investments and other holdings, securities sold short and derivative liabilities
Equity investments and other holdings
Assets
Financial assets at fair value through profit or loss
Held for trading
Equity securities
Debt securities
Derivative financial assets
Financial assets at fair value through profit or loss
Other
Equity securities
Debt securities
Derivative financial assets
Current portion
Non-current portion
Note
2021
$
2020
$
5,670,043
57,142
211,428
6(a)
3,525,694
53,088
66,638
5,938,613
3,645,420
268,910
58,815
6,499
209,431
24,543
623
6,272,837
3,880,017
5,938,613
334,224
3,645,420
234,597
43
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Securities sold short and derivative liabilities
Liabilities
Financial liabilities
Held for trading
Securities sold short
Listed equity securities (proceeds of $900,914;
2020 – $306,520)
Derivative financial liabilities (proceeds of $697;
2020 – $105)
Note
2021
$
2020
$
6(a)
883,880
4,374
888,254
301,644
17,409
319,053
a)
From time to time, the Company enters into derivative financial instruments consisting primarily of
warrants and options to purchase or sell equity indices and currencies, equity swaps, foreign currency
forward contracts and foreign currency futures contracts. The following tables list the notional
amounts, fair values of derivative financial assets and financial liabilities and net change in fair value
by contract type, including swaps, options, warrants, rights, foreign currency futures contracts,
foreign currency forward contracts and swaps and options sold short included in equity investments
and other holdings or securities sold short and derivative liabilities:
Fair value
of derivative
financial
assets
$
166,427
12
51,488
Notional
value
$
250,083
1,863
366,810
Notional
value
$
137
14,118
-
As at
December 31,
2021
Fair value
of derivative
financial
liabilities
$
3,758
616
-
For the
year ended
December 31,
2021
Net
change in
fair value
$
177,522
4,177
(37,824)
618,756
217,927
14,255
4,374
143,875
Fair value
of derivative
financial
assets
$
9,112
1,414
56,735
Notional
value
$
66,432
163,022
125,308
Notional
value
$
1,351
3,823
-
As at
December 31,
2020
Fair value
of derivative
financial
liabilities
$
17,402
7
-
For the
year ended
December 31,
2020
Net
change in
fair value
$
17,946
271
35,865
-
-
-
-
(16,600)
354,762
67,261
5,174
17,409
37,482
Equity swaps
Equity options
Warrants and rights
Equity swaps
Equity options
Warrants and rights
Foreign currency futures
contracts
44
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
7
Investments in associates
The following have been included in the consolidated financial statements using the equity method.
Grant and Geary Partners LP(i)
Other associates
The Company’s share of:
Net loss and comprehensive loss
Grant and Geary Partners LP(i)
Other associates
2021
$
13,924
11,436
25,360
(227)
910
682
2020
$
14,396
1,530
15,926
(4,034)
474
(3,560)
i)
Grant & Geary Partners LP is a limited partnership in which the Company has an approximate 28.5%
economic interest in the underlying property, which is commercial real estate property held in the
United States. Grant & Geary Partners LP’s assets and liabilities are $60,232 (2020 – $64,121) and
$11,375; (2020 – $13,610), respectively.
Commitments, contingent liabilities and borrowing arrangements of associates
There are no commitments, contingent liabilities or borrowing arrangements relating to the Company’s
interests in these associates.
8 Real estate investments
Real estate investments comprise the following:
Financial assets at fair value through profit or loss
Investments in private entities
Investments in real estate income trusts and
partnerships
Non-current portion
Note
8(a)
8(b)
2021
$
12,765
38,000
50,765
50,765
2020
$
14,129
32,555
46,684
46,684
a)
These investments are minority interests in private entities whose main assets are real estate properties.
There is no established market for these investments. The most likely scenario for a disposal of these
investments is an eventual sale of the underlying real estate properties.
b) These real estate investments are in US real estate income trusts (commonly referred to as REITs) and
partnerships. A REIT is an entity that owns and operates income-producing real estate and annually
distributes to its holders at least 90% of its taxable income. The Company’s investments are non-publicly-
45
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
traded REITs. There is no established market for these REITs and partnerships. The most likely scenario
for a disposal of these holdings is an eventual sale of the underlying real estate properties of the REITs and
partnerships and the distribution to their holders.
9
Investment properties
Opening balance as at January 1
Purchases
Capitalized subsequent expenditure
Net gain from fair value adjustment
Currency translation adjustments
Closing balance as at December 31
Non-current portion
a) Amounts recognized in profit or loss for investment properties
Rental income
Direct operating expenses from property that generated rental
income
Direct operating expenses from property that does not generate
rental income
Net change in fair value of investment properties
b)
Investment properties are commercial properties situated in Spain.
c)
Contractual obligations
2021
$
49,134
3,042
872
5,052
(3,751)
54,349
54,349
2021
$
5,596
3,519
794
5,052
2020
$
41,418
-
3,748
1,186
2,782
49,134
49,134
2020
$
4,966
3,714
520
1,186
Refer to note 19 for disclosure of contractual obligations to purchase, construct or develop investment
property or for repairs, maintenance and enhancements.
d)
Leasing arrangements
The investment properties are leased to tenants under short-term month-to-month operating leases with
rentals payable monthly.
e)
Fair value measurements
Investment properties are measured at fair value in these consolidated financial statements. Assumptions
and estimates are made in determining the fair values of the investment properties. Based on the source of
the inputs used in determining the fair value, the Company has classified its investment properties in
Level 3 of the fair value hierarchy (a description of the levels is provided in note 16). There was no transfers
between levels for recurring fair value measurements of investment properties during the years ended
December 31, 2021 and 2020.
46
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
i)
Valuation techniques used to determine Level 3 fair values
The Company obtains independent valuations for its investment properties annually. At the end of
each reporting period, management updates their assessment of the fair value of each property, taking
into account the most recent independent valuations. Management determines a property’s value
within a range of reasonable fair value estimates.
The best evidence of fair value is current prices in an active markets for similar properties. Where
such information is not available the independent valuators consider information from a variety of
sources including:
current prices in active markets for similar properties in similar markets and in less active
market, adjusted to reflect those differences;
discounted cash flow projections based on reliable estimates of future cash flows; and
capitalized income projections based upon a property’s estimated net market income, and a
capitalization rate derived from an analysis of market evidence.
ii)
Fair value measurements using significant unobservable inputs (Level 3)
The following table summarizes the quantitative information about the significant unobservable
inputs used in recurring Level 3 fair value measurement. See (i) above for the valuation technique
adopted.
Description
Fair value
2021
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Leased buildings and
44,196
Comparable
sales approach
Value/m2
$1,139
10% +/-4,411
land
–Storage facilities
10,153
Recent
Transaction
Value/m2
$799
-
-
Description
Fair value
2020
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Leased buildings and
land
–Storage facilities
29,577
Comparable
sales approach
Value/m2
$1,210
10% +/-2,957
6,710
Comparable
rent approach
Market rent/m2
Cap rate
$7.75
9.34%
10%
+/-671
12,847
Recent
Transaction
Value/m2
$766
-
-
47
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
10 Financial instruments by category and related income, expenses and gains and losses
Assets (liabilities)
at fair value through
profit or loss
Held for
trading
$
-
-
-
5,938,613
-
-
-
-
-
(888,254)
-
-
-
Other
$
-
-
-
334,224
50,765
-
-
-
-
-
-
-
-
Financial
Assets at
amortized
cost
$
Financial
liabilities at
amortized
cost
$
2021
Total
$
52,189
475
69,333
-
-
8,514
-
-
-
-
-
-
-
-
-
(253)
(96,847)
(998,409)
52,189
475
69,333
6,272,837
50,765
8,514
(253)
(96,847)
(998,409)
-
-
-
-
-
(187,130)
(1,411)
(2,429,673)
(888,254)
(187,130)
(1,411)
(2,429,673)
5,050,359
384,989
130,511
(3,713,723)
1,852,136
2,345,086
3,413
21,077
2,369,576
85,239
31
4,077
89,347
-
1,017
-
1,017
-
(10,805)
-
2,430,325
(6,344)
25,154
(10,805)
2,449,135
Assets (liabilities) as per consolidated
statement of financial position
Cash and cash equivalents
Restricted short-term investments
Due from brokers
Equity investments and other holdings
Real estate investments
Other assets*
Bank advances
Trade and other payables
Due to brokers
Securities sold short and derivative
liabilities
Redemptions payable
Subscriptions received in advance
Liability for redeemable units
Amounts recognized in consolidated
statement of income
Net change in fair value
Net interest income (expense)
Net dividend income
* Includes other financial receivables but excludes capital assets and other non-financial assets.
48
(in thousands of Canadian dollars unless otherwise stated)
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Assets (liabilities)
at fair value through
profit or loss
Held for
trading
$
-
-
-
3,645,585
-
-
-
-
-
(319,053)
-
-
-
Other
$
-
-
-
234,432
46,684
-
-
-
-
-
-
-
-
Financial
Assets at
amortized
cost
$
Financial
liabilities at
amortized
cost
$
2020
Total
$
10,915
472
26,196
-
-
13,717
-
-
-
-
-
-
-
-
-
(992)
(55,784)
(987,279)
10,915
472
26,196
3,880,017
46,684
13,717
(992)
(55,784)
(987,279)
-
-
-
-
-
(22,026)
(185)
(1,477,779)
(319,053)
(22,026)
(185)
(1,477,779)
3,326,532
281,116
51,300
(2,544,045)
1,114,903
Assets (liabilities) as per consolidated
statement of financial position
Cash and cash equivalents
Restricted short-term investments
Due from brokers
Equity investments and other holdings
Real estate investments
Other assets*
Bank advances
Trade and other payables
Due to brokers
Securities sold short and derivative
liabilities
Redemptions payable
Subscriptions received in advance
Liability for redeemable units
Amounts recognized in consolidated
statement of income
Net change in fair value
Net interest income (expense)
Net dividend income
694,759
(2,894)
24,292
716,157
(2,034)
-
3,348
1,314
-
891
-
891
-
(8,650)
-
692,725
(10,653)
27,640
(8,650)
709,712
* Includes other financial receivables but excludes capital assets and other non-financial assets.
49
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
11 Trade and other payables
Trade payables
Employee benefits accrued
Mortgages
Lease Liability
Interest payable
Other
a)
b)
2021
$
350
80,942
7,132
3,707
821
3,895
96,847
2020
$
553
38,116
8,967
4,439
527
3,182
55,784
a) Mortgages of $7,132; (2020 – $8,967) are on investment properties. The terms of the mortgages range
from one to eleven years and bear interest rates of 0.76% to 1.47%. Investment properties of $34,805;
(2020 – $35,405) are pledged as collateral against the mortgages.
b) Lease liabilities of $3,707; (2020 - $4,439) represent future lease payments for the Company's office
spaces. Total lease payments during the year totaled $1,190; (2020 - $1,244) including interest of $164;
(2020 - $221). The right-of-use asset resulting from the Company's leases is valued at $3,890; (2020 -
$4,479), which is net of accumulated amortization of $2,674; (2020 - $1,703). The right-of-use asset is
grouped with other assets in the consolidated statements of financial position.
12 Income taxes
a)
Income tax expense
Current tax
Current tax on income for the year
Adjustments in respect of prior years
Deferred tax
Benefit arising from a previously unrecognized tax loss of a prior
period used to reduce current tax expenses
Origination and reversal of temporary differences
2021
$
15,241
(329)
14,912
(2,480)
88,518
86,038
100,950
2020
$
4,888
(2,574)
2,314
-
24,363
24,363
26,677
The tax on the Company’s income before income tax differs from the theoretical amount that would arise
using the federal and provincial statutory tax rate applicable to income of the consolidated entities. The
statutory tax rate for 2021 was 26.5% (2020 –26.5%). The difference between the Company’s income tax
and theoretical tax is as follows:
50
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Income before income tax
Income tax expense based on statutory rate of 26.5%
(2020 – 26.5%)
Prior year adjustments
Recognition of previously unrecognized deferred tax asset
Difference in tax rate
Portion of income recoverable in hands
of non-controlling interests
Non-taxable dividends
Non-taxable portion of capital gains
Non-deductible expenses
Foreign exchange
Other
Income tax expense
b) The analysis of deferred income tax assets and liabilities is as follows:
Deferred income tax assets
Deferred tax assets to be recovered
After more than 12 months
Within 12 months
Deferred income tax assets
Deferred income tax liabilities
Deferred tax liabilities to be settled
After more than 12 months
Within 12 months
Deferred income tax liabilities
2021
$
2020
$
836,822
264,996
221,758
(329)
(2,480)
2,657
(805)
(278)
(120,334)
38
112
611
100,950
70,224
(1,717)
4,664
(7,163)
(1,054)
(32,580)
669
(5,392)
(974)
26,677
2021
$
2020
$
-
-
-
143,545
-
143,545
-
-
-
56,780
-
56,780
The movement in deferred income tax assets and liabilities during the year, without taking into consideration
the offsetting of balances within the same tax jurisdiction, is as follows.
51
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Deferred income tax assets
Equity
investments
and other
holdings
$
Investments
in
associates
$
Real estate
investments
$
Deferred
Performance
Compensation
$
Tax loss
carry-
forward
$
Total
$
As at December 31, 2019
1,124
4,160
1,496
1,160
3,569
11,509
Charged to consolidated
statement of income
Foreign exchange
differences
106
(28)
(2,001)
21
79
(33)
As at December 31, 2020
1,202
2,180
1,542
3,896
6,681
(220)
4,836
(409)
9,841
8,761
(669)
19,601
Charged to consolidated
statement of income
Foreign exchange
differences
(110)
(7)
(163)
(11)
154
(5)
(4,762)
(9,690)
(14,571)
(74)
(151)
(248)
As at December 31, 2021
1,085
2,006
1,691
-
-
4,782
Deferred income tax liabilities
Equity
investments
and other
holdings
$
Investments
in
associates
$
Real estate
investments
$
Investment
properties
$
Other
$
Total
$
As at December 31, 2019
4,190
37,448
3,168
444
588
45,838
Charged (credited) to
consolidated statement
of income
Foreign exchange differences
As at December 31, 2020
Charged (credited) to
consolidated statement
of income
390
(102)
4,478
31,369
(2,328)
66,489
4,899
66,000
Foreign exchange differences
36
461
1,081
(117)
4,132
353
(13)
As at December 31, 2021
9,413
132,950
4,472
1,136
359
(26)
777
(75)
(8)
505
33,124
(2,581)
76,381
357
(145)
71,464
2
(4)
356
482
148,327
Deferred income tax assets for temporary differences totalling $nil; (2020 – $980), non-expiring capital
loss carry-forwards totalling $nil; (2020 – $18,740) and non-expiring operating loss carry-forwards of
$nil; (2020 – $2,183) have not been recognized in the consolidated financial statements.
Deferred income tax liabilities have not been recognized on unremitted earnings totalling $69,365 as at
December 31, 2021 (2020 – $54,445) with respect to the investment in subsidiaries, branches and
associates and interest in joint arrangements because the Company controls whether the liability will be
incurred, and it is satisfied that it will not be incurred in the foreseeable future. During the year, the
Company did not distribute earnings from its Subsidiaries (2020 - $nil).
52
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
13 Share capital
Authorized
Unlimited number of common shares, without par value
Movements in the Company’s share capital are as follows:
Balance – Beginning of year
Shares repurchased
Number
of shares
2,598,524
(95,500)
2021
Amount
$
21,619
(766)
Number
of shares
2,652,424
(53,900)
2020
Amount
$
22,051
(432)
Balance – End of year
2,503,024
20,853
2,598,524
21,619
In 2021, the Company began a normal course issuer bid to purchase a maximum of 100,000 of its own common
shares before August 15, 2022. In 2021, the Company purchased 95,500 common shares; (2020 – 53,900) for a
total cash consideration of $28,001; (2020 – $8,000). The excess of the consideration paid over the stated
capital was charged to retained earnings in the consolidated statement of changes in equity.
No dividends were declared in 2021 and 2020.
14 Earnings per share
a) Basic
Net income attributable to common shareholders
Weighted average number of outstanding common shares
Basic earnings per share
b) Diluted
2021
$732,988
2,533,466
289.32
2020
$211,717
2,624,865
80.66
For the years ended December 31, 2021 and 2020, there were no dilutive instruments.
53
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
15 Supplementary information to consolidated statements of cash flows
a) Adjustments for non-cash items are as follows:
Net change in fair value of equity investments and
other holdings
Net change in fair value of real estate investments
Net change in fair value of investment properties
Share of profit (loss) of associates, adjusted for
distributions received
Amortization and depreciation
Change in redemption amount of redeemable units
Deferred income tax
b)
Changes in working capital items are as follows:
Decrease (increase) in
Due from brokers
Income taxes receivable
Other assets
Increase (decrease) in
Trade and other payables
Due to brokers
Income taxes payable
Note
2021
$
2020
$
(2,423,815)
(6,510)
(5,052)
(682)
843
1,431,017
86,038
11(b)
12(a)
(693,887)
1,622
(1,186)
3,560
738
364,825
24,363
(918,161)
(299,965)
2021
$
(42,767)
(8,477)
6,062
54,164
15,147
2,697
26,826
2020
$
162,255
(1,390)
(4,311)
26,873
952,075
(452)
1,135,050
54
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
16 Financial risks and fair value
Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including fair value interest rate
risk, cash flow interest rate risk, currency risk and equity price risk), credit risk and liquidity risk.
The Company’s overall risk management program seeks to maximize the returns derived for the level of risk to
which the Company is exposed and seeks to minimize potential adverse effects on the Company’s financial
performance. Managing these risks is carried out by management under policies approved by the Board.
The COVID-19 pandemic continues to evolve and the economic environment in which the Company operates
continues to be subject to sustained volatility, which could negatively impact the value of the Company’s
financial instruments, as the duration of the COVID-19 pandemic remains uncertain.
The Company uses different methods to measure and manage the various types of risk to which it is exposed;
these methods are explained below.
Market risk
Fair value and cash flow interest rate risks
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a
result of changes in market interest rates.
The majority of the Company’s debt is based on floating rates, which exposes the Company to cash flow interest
rate risk. The Company does not have a long-term stream of cash flows that it can match against this type of
fixed debt, so it prefers to use short-term floating rate debt. The Company does not mitigate its exposure to
interest rate fluctuation on floating rate debt. If interest rates spike, then the Company could enter into interest
rate swaps or more probably just reduce its debt level. As at December 31, 2021, the Company has listed equity
securities of $5,670,043; (2020 – $3,530,082). It can sell these securities to reduce its floating rate debt. As at
December 31, 2021, a 1% increase or decrease in interest rates, with all other variables remaining constant,
would impact interest expense by approximately $10,000 over the next 12 months; (2020 – $9,900).
The Company’s exposure to interest rate risk is summarized as follows:
Cash and cash equivalents
Restricted short-term investments
Debt securities
Credit facilities
Canadian Bank advances
European Bank advances
Guarantee facility
Trade and other payables
Due to brokers
Mortgages
2021
2020
Between nil and 0.2%
Between 0.41% and 0.64%
Between 0.25% and 12.5%
Between nil and 1.71%
Between 0.64% and 1.47%
Between 0.43% and 12.5%
Prime rate plus 0.25%
2.97%
1.00%
Non-interest bearing
0.00% to 1.15%
0.76% to 1.47%
Prime rate plus 0.25%
2.97%
1.00%
Non-interest bearing
0.00% to 1.75%
0.80% to 1.47%
55
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
The Company holds held for trading financial assets in debt securities of $57,142; (2020 – $53,088).
Debt securities are usually highly sensitive to interest rate changes. Theoretically, when interest rates rise, it
causes the value of debt securities to decline. The opposite generally happens when interest rates fall, then debt
securities usually rise in value. A change of 100 basis points in the yield to maturity will affect the fair value of
the debt securities held for trading as follows.
Estimated effect on the fair value of debt securities due to:
2021
2020
Financial assets
Held for trading
Debt securities
$
Financial assets
Held for trading
Debt securities
$
An increase of 100 basis points in the yield to maturity
A decrease of 100 basis points in the yield to maturity
(2,811)
1,275
(1,761)
1,910
Currency risk
Currency risk is the risk that the value of monetary financial assets and financial liabilities denominated in
foreign currencies will vary as a result of changes in underlying foreign exchange rates. The Company is
exposed to currency risk due to potential variations in currencies other than the US dollar. The following tables
summarize the Company’s main monetary financial assets and financial liabilities whose fair value is
predominantly determined in currencies other than the US dollar, the Company’s functional currency, and the
effect on pre-tax net income of a 10% change in currency exchange rates:
Financial
assets
$
36,281
3,283
-
98
Financial
liabilities
$
(556,194)
(29,062)
(6,533)
(20,044)
Net
exposure
$
(519,913)
(25,779)
(6,533)
(19,946)
39,662
(611,833)
(572,171)
2021
Net effect of a
10% increase
or decrease
$
(51,991)
(2,578)
(653)
(1,995)
(57,217)
Canadian dollar
Euro
British Pound
Israeli shekel
56
(in thousands of Canadian dollars unless otherwise stated)
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
Financial
assets
$
1,007
3,930
349
5,286
Financial
liabilities
$
(166,843)
(35,202)
(10,162)
Net
exposure
$
(165,836)
(31,272)
(9,813)
(212,207)
(206,921)
2020
Net effect of a
10% increase
or decrease
$
(16,584)
(3,127)
(981)
(20,692)
Canadian dollar
Euro
Israeli shekel
Equity price risk
Equity price risk is the risk that the fair value of equity investments and other holdings and equities sold short
and derivatives will vary as a result of changes in the market prices of the holdings. The majority of the
Company’s equity investments and other holdings and all of the equities sold short and derivatives are based on
quoted market prices as at the consolidated statement of financial position date. Changes in the market price of
quoted securities and derivatives may be related to a change in the financial outlook of the investee entities or
due to the market in general. Where non-monetary financial instruments − for example, equity securities − are
traded in currencies other than the US dollar, the price, initially expressed in a foreign currency and then
converted into US dollars, will also fluctuate because of changes in foreign exchange rates.
Securities sold short represent obligations of the Company to make future delivery of specific securities and
create an obligation to purchase the security at market prices prevailing at the later delivery date. This creates
the risk that the Company’s ultimate obligation to satisfy the delivery requirements will exceed the amount of
the proceeds initially received or the liability recorded in the consolidated financial statements. In addition, the
Company has entered into derivative financial instruments which have a notional value greater than their fair
value which is recorded in the consolidated financial statements. This information is disclosed in note 6(a) to
these consolidated financial statements. This creates a risk that the Company could settle these instruments at a
value greater or less than the amount that they have been recorded in the consolidated financial statements.
The Company’s equity investments and other holdings have a downside risk limited to their carrying value,
while the risk of equities sold short and derivatives is open-ended. The Company is subject to commercial
margin requirements which act as a barrier to the open-ended risks of the equities sold short and derivatives.
The Company closely monitors both its equity investments and other holdings and its equities sold short and
derivatives.
57
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
The impact of a 30% change in the market prices of the Company’s listed equity investments and other holdings
and equities sold short and derivatives would be as follows:
2021
Estimated
fair value
with a 30%
price increase
$
Estimated
fair value
with a 30%
price decrease
$
Fair
value
$
Equity investments and other holdings
Listed equity securities and derivatives
Equities sold short and derivative liabilities
5,880,143
(888,254)
7,644,186
(1,154,730)
4,116,100
(621,778)
Pre-tax impact on net income
1,497,567
(1,497,567)
2020
Estimated
fair value
with a 30%
price increase
$
Estimated
fair value
with a 30%
price decrease
$
Fair
value
$
Equity investments and other holdings
Listed equity securities and derivatives
Equities sold short and derivative liabilities
3,546,391
(319,053)
4,610,308
(414,769)
2,482,474
(223,337)
Pre-tax impact on net income
968,201
(968,201)
The above analysis assumes that listed equity securities, derivatives, equities sold short and derivative liabilities
would increase or decrease at the same rate. As these portfolios are not hedged together, a change in market
prices will affect each one differently.
Credit risk
Credit risk is the risk that a counterparty will fail to fulfill its obligations under a contract and will cause the
Company to suffer a loss.
The Company is exposed to credit risk from cash and cash equivalents, restricted short-term investments, due
from broker and debt investments. Credit risk arising from funds held at financial institutions are managed by
only investing with financial institutions with a minimum A rating The Company manages its credit risk
exposure from debt securities by closely monitoring the debt issuer and the ratings issued by various bond
rating agencies. All debt security investments measured at fair value through profit or loss are traded over stock
exchanges therefore exiting a position with increased risk is relatively easy if the credit worthiness of an issuer
falls below the Company’s threshold for credit risk exposure. All non-trading convertible debt securities are
convertible into equity of the issuer and are measured at fair value using independent third party appraisals.
The Company closely monitors the debt issuer in order to identify when the credit risk falls below the
Company’s threshold at which point the Company may exercise its option to redeem its debt holdings or
dispose of it in the less liquid private markets.
58
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Credit ratings are presented using Standard & Poor’s rating scale as follows:
Financial assets
Cash and cash equivalents
Restricted short-term investments
Due from brokers
Debt securities
Debt securities
Debt securities
Debt securities
Liquidity risk
Rating
A
A
A
A- to AAA
B- to BBB
CCC
Unrated
2021
$
52,189
475
69,333
1,282
4,962
-
109,713
2020
$
10,915
472
26,196
107
93
2,334
75,097
Liquidity risk is the risk the Company will encounter difficulties in meeting its financial obligations. The
Company’s largest assets are equity investments and other holdings. Most of these assets are made up of
equities in listed companies which can be liquidated in a relatively short time. Due to its large investments in
liquid assets, the Company believes that it has sufficient resources to meet its obligations as they come due.
All financial liabilities other than equities sold short, derivative liabilities, mortgages, lease liabilities and
liability for redeemable units as at the consolidated statement of financial position date mature or are expected
to be repaid within one year (2020 – one year). The liquidity risk related to these liabilities is managed by
maintaining a portfolio of liquid investment assets.
Capital risk management
The Company’s objective when managing its capital is to maintain a solid capital structure appropriate for the
nature of its business. The Company considers its capital to be its equity. The Company manages its capital
structure in light of changes in economic conditions. To maintain or adjust its capital structure, the Company
initiates normal course issuer bids or adjusts the amount of dividends paid. The Company monitors capital on
the basis of its net debt-to-capital ratio. Net liabilities used in the net debt-to-capital ratio is calculated by
subtracting the due from broker balances from total liabilities. The net debt-to-capital ratio is as follows:
Net total liabilities
Total equity
Debt-to-capital ratio
2021
2020
4,678,916
1,815,653
2.58
$2,893,682
$1,146,114
2.52
The Company’s objective is to maintain a debt-to-capital ratio below 3.0; (2020-2.0). The Company believes
that limiting its debt-to-capital ratio in this manner is the best way to monitor risk. The Company’s debt-to-
capital ratio was at 2.58 at the end of December 31, 2021 from 2.52 at the end of 2020. In the past, the
Company’s objective was to maintain a debt to capital ratio below 2.0, however the Company is cognizant of the
fact that the largest liability on its financial statements, the “Liability for redeemable units” is considered
“equity” and not a liability in the individual financial statements of the underlying funds that it consolidates. As
a result, the debt-to-equity ratio of the individual funds is lower than that of the parent company. The Company
has concluded that it has been too conservative in limiting its net liabilities to capital ratio at 2.0 and believes
that the higher ratio of 3.0 is more appropriate. The Company does not have any externally imposed restrictive
covenants or capital requirements, other than those included in the credit facilities (note 5).
59
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Fair value estimation
The tables below analyze financial instruments carried at fair value by the inputs used in the valuation method.
The different levels have been defined as follows:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability
either directly (that is, as prices) or indirectly (that is, derived from prices); and
Level 3 – Inputs that are not based on observable market data.
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is
determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a
fair value measurement uses observable inputs that require significant adjustment based on unobservable
inputs, that measurement is a Level 3. Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgment, considering factors specific to the asset or liability.
The determination of what constitutes “observable” requires significant judgment by the Company. The
Company considers observable data to be that market data that is readily available, regularly distributed or
updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved
in the relevant market.
60
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
The following tables analyze within the fair value hierarchy the Company’s financial assets and financial
liabilities measured at fair value as at December 31, 2021 and 2020:
Assets
Financial assets at fair value through profit or
loss
Held for trading
Equity securities
Debt securities
Derivative financial assets
Other
Equity securities
Debt securities
Derivatives
Real estate investments
Liabilities
Financial liabilities
Held for trading
Equity holdings sold short
Derivative liabilities
Assets
Financial assets at fair value through profit or
loss
Held for trading
Equity securities
Debt securities
Derivative financial assets
Other
Equity securities
Debt securities
Derivatives
Real estate investments
Liabilities
Financial liabilities
Held for trading
Equity holdings sold short
Derivative liabilities
Level 1
$
Level 2
$
Level 3
$
2021
Total
$
5,537,707
-
-
132,336
57,142
211,428
-
-
-
5,670,043
57,142
211,428
40,079
-
-
-
3,583
2,601
-
-
225,248
56,214
6,499
50,765
268,910
58,815
6,499
50,765
5,577,786
407,090
338,726
6,323,602
883,880
-
883,880
-
4,374
4,374
-
-
-
Level 1
$
Level 2
$
Level 3
$
883,880
4,374
888,254
2020
Total
$
3,502,703
-
-
4,388
-
-
-
22,991
53,088
66,638
11,102
3,581
-
-
-
-
-
3,525,694
53,088
66,638
193,941
20,962
623
46,684
209,431
24,543
623
46,684
3,507,091
157,400
262,210
3,926,701
301,644
-
301,644
-
17,409
17,409
-
-
-
301,644
17,409
319,053
61
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Financial instruments in Level 1
The fair value of financial assets and financial liabilities traded in active markets are based on quoted market
prices at the close of trading on the year-end date. The quoted market price used for financial assets and
financial liabilities held by the Company is the close price. Investments classified in Level 1 include active listed
equities and derivatives traded on an exchange.
Financial instruments in Level 2
Financial instruments classified with Level 2 trade in markets that are not considered to be active but are
valued based on quoted market prices, broker quotations or valuation techniques such as financial models that
use market data. These valuation techniques maximize the use of observable market data where available and
rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument
are observable, the instrument is included in Level 2. These include corporate bonds, thinly traded listed
equities and derivatives, over-the-counter derivatives and private equities.
The Company uses a variety of methods and makes assumptions that are based on market conditions existing at
each year-end date. Valuation techniques used for non-standardized financial instruments such as options and
other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to
other instruments that are substantially the same, discounted cash flow analyses, option-pricing models and
other valuation techniques commonly used by market participants, making maximum use of market inputs and
relying as little as possible on entity-specific inputs:
Description
Equity securities
Private equities
Debt securities
Derivatives
Valuation technique
Quoted market prices or broker quotes for similar instruments
Valuation techniques or net asset value
based on observable inputs
Quoted market prices or broker quotes for similar instruments
Quoted market prices or broker quotes for similar instruments
Financial instruments in Level 3
Investments classified in Level 3 have significant unobservable inputs, as they trade infrequently. Level 3
instruments consist of unlisted equity investments, debt securities and real estate investments. As observable
prices are not available for these securities, the Company has used valuation techniques to derive the fair value.
Level 3 valuations are reviewed by the Company’s chief financial officer (CFO), who reports directly to the
Board on a quarterly basis in line with the Company’s reporting dates. The Board considers the appropriateness
of the valuation models and inputs used. On an annual basis, close to the year-end date, the Company obtains
independent, third party appraisals to determine the fair value of the Company’s most significant Level 3
holdings. The Company’s CFO reviews the results of the independent valuations. Emphasis is placed on the
valuation model used to determine its appropriateness, the assumptions made to determine whether it is
consistent with the nature of the investment, and market conditions and inputs such as cash flow and discount
rates to determine reasonableness.
62
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
As at December 31, 2021 and 2020, Level 3 instruments are in various entities and industries.
Real estate investments are disclosed in more detail in note 8, comprising investments in private real estate
companies and in real estate income trusts and partnerships. The real estate companies are involved with
various types of buildings in different geographical locations. For the main Level 3 instruments, the Company
relied on appraisals carried out by independent third party valuators. There was no established market for any
of these investments, so the most likely scenario is a disposal of the underlying assets. For the investments in
real estate income trusts and partnerships, the Company relied mainly on audited financial statements, valuing
the assets at fair value. The most likely scenario is an eventual sale of the underlying properties and the
subsequent distribution to the holders.
The following tables present the changes in Level 3 instruments:
As at December 31, 2020
Transferred out of Level 3 (i)
Purchases (ii)
Distributions
Gains recognized in net income
On financial instruments held at end of year
Currency translation adjustments
As at December 31, 2021
As at December 31, 2019
Transferred out of Level 3 (i)
Purchases (ii)
Distributions
Gains (losses) recognized in net income
On financial instruments held at end of year
Currency translation adjustments
As at December 31, 2020
Real estate
investments
$
Unlisted
securities
$
2021
Total
$
46,684
215,526
262,210
-
2,421
(4,700)
6,510
(150)
(135,895)
140,689
(3,489)
(135,895)
143,110
(8,189)
71,230
(100)
77,740
(250)
50,765
287,961
338,726
Real estate
investments
$
Unlisted
securities
$
2020
Total
$
51,328
124,059
175,387
-
1,533
(3,738)
(1,622)
(817)
(20,520)
102,979
(4,986)
21,456
(7,462)
(20,520)
104,512
(8,724)
19,834
(8,279)
46,684
215,526
262,210
63
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
i.
ii.
During the years ended December 31, 2021 and 2020, the Company transferred private holdings in
equity securities in the information technology, pharmaceuticals and food and beverage industries out
of level 3 pursuant to public offerings. The fair value of these investments became available through
quotes prices from the active markets however due to restrictions on trading they have been classified
as level 2.
During the years ended December 31, 2021 and 2020, the company made investments in private
holdings in the information technology, healthcare, pharmaceutical, industries, communication
services and financial industries totaling $140,689; (2020 – $102,979). There is no established market
for these holdings. The most likely disposal of these investments is through a disposition or a listing of
these holdings on a public stock exchange.
64
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
The table below presents the investments whose fair values are measured using valuation techniques classified as
Level 3 as at December 31, 2021.
Fair value
(rounded)
2021
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Description
Unlisted private equity
holdings
Industrials
Unlisted private equity
holdings
Financial services
-Equity securities
Unlisted private equity
holdings
Financial services
-Equity securities
Unlisted private equity
holdings
Financial services
-Equity securities
Unlisted private equity
holdings
Healthcare
-Convertible Prefs
54,600
Recent
transaction
47,000
Recent
transaction
Comparable
company
approach
Comparable
company
approach
19,000
9,000
none
none
-
-
-
-
-
-
LTM P/BV
4.00
10%
+/-1,900
EV/Revenue
7.5
10%
+/-600
-Convertible bonds
21,000
Unlisted private equity
holdings
Healthcare
-Convertible bonds
9,600
Recent
transaction
Mark-to-Model
Comparable
Bond
Methodologies
none
-
Discount rate
Probability of default
24%
65%
-
5%
5%
-
+/-400
+/-900
Unlisted private equity
holdings
Healthcare
-Equity securities
Unlisted private equity
holdings
Healthcare
-Equity securities
Unlisted private equity
holdings
Healthcare
-Warrants
Unlisted private equity
holdings
Food and beverages
-Equity securities
Unlisted private equity
holdings
Food and beverages
-Convertible bonds
7,900
Recent
transaction
11,000
Finnerty
Approach
none
-
-
-
DLOM
13.12%
20%
+/-300
Black-Scholes
6,000
OPM Standard deviation
44.16%
10%
+/-600
Comparable
company
approach
23,700
Revenue multiple
EBITA multiple
2.34
19.17
10%
10%
+/-1,000
+/-1,400
2,500
Recent
transaction
none
-
-
-
65
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Fair value
(rounded)
2021
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Backsolve
option pricing
model
18,200
6,300
Recent
transaction
16,000
Recent
transaction
Backsolve
option pricing
model
5,500
17,700
Recent
transaction
Comparable
company
approach
4,800
Expected volatility
90%
10%
+/-150
none
none
-
-
-
-
-
-
Expected volatility
70%
10%
+/-400
none
-
-
-
Revenue multiple
2.10
10%
+/-300
Description
Unlisted private equity
holdings
Pharmaceuticals
-Convertible prefs
Unlisted private equity
holdings
Pharmaceuticals
-Convertible bonds
Unlisted private equity
holdings
Information technology
-Convertible bonds
Unlisted private equity
holdings
Information technology
-Equity securities
Unlisted private equity
holdings
Communication
services
-Equity securities
Unlisted private equity
holdings
Other
-Equity securities
Unlisted private equity
holdings
Other
-Equity securities
4,200
Recent
transaction
Unlisted private equity
holdings
Other
-Corporate bonds
4,000
Recent
transaction
REITs and partnerships
38,000
Discounted
cash flows
none
none
-
-
-
-
-
-
Discount rate 5.5%-10.8% The inputs disclosed cover the range
used for all the real estate holdings in
the REITs and partnerships
Cash flow term 5-10 years
3.8%-7.2%
Capitalization rate
Real estate investments in
private entities
12,800
Capitalization
model
Rate of return
4%
1.0%
+4,000
-2,000
66
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
The table below presents the investments whose fair values are measured using valuation techniques classified
as Level 3 as at December 31, 2020.
Description
Unlisted private equity
holdings
Pharmaceuticals
-Convertible Prefs
Unlisted private equity
holdings
Pharmaceuticals
-Equity securities
Unlisted private equity
holdings
Pharmaceuticals
-Convertible Prefs
Unlisted private equity
holdings –
Financial services
Unlisted private equity
holdings –
Food and beverage
-Equity securities
Unlisted private equity
holdings –
Food and beverage
-Convertible bonds
Unlisted private equity
holdings –
Food and beverage
-Convertible bonds
Unlisted private equity
holdings –
Information technology
-Equity securities
Unlisted private equity
holdings –
Information technology
Unlisted private equity
holdings –
Other
Unlisted private equity
holdings –
Other
Fair value
(rounded)
2020
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Backsolve
option pricing
model
Backsolve
option pricing
model
Recent
transaction
Recent
transaction
Expected volatility
40%
10%
+/-14,000
Expected volatility
80%
10%
+/-1,000
none
none
-
-
-
-
-
-
Comparable
company
approach
Revenue estimate
Revenue multiple
EBITA multiple
49,370
2.15
16.52
$1M
10%
10%
+/-400
+/-800
+/-900
67,000
19,000
2,000
20,000
16,000
15,000
Recent
transaction
none
-
-
-
6,000
56,000
3,000
8,000
3,000
Mark-to-Model
Comparable
Bond
Methodologies
Comparable
company
approach
Recent
transaction
Recent
transaction
Comparable
company
approach
Discounted
cash flows
Capitalization
model
Discount rate
Probability of default
24%
65%
5%
5%
+/-400
+/-900
EBITA estimate
EBITA multiple
143,400
10.25
$5M
10%
+/-6,000
+/-13,600
none
none
-
-
-
-
-
-
Revenue estimate
Revenue multiple
31,000
3.0
$1M
10%
+/-120
+/-300
Discount rate
Cash flow term
Capitalization rate
6%-11.7% The inputs disclosed cover the range
used for all the real estate holdings in
the REITs and partnerships.
10 years
0% -7.9%
Rate of return
4.0%
1.0%
+4,000
-3,200
67
REITs and partnerships
33,000
Real estate investments in
private entities
14,000
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Financial assets and financial liabilities not carried at fair value but for which fair value is
disclosed
The carrying amount of cash and cash equivalents, restricted short-term investments, due from brokers, bank
advances, credit facilities, trade and other payables, due to brokers, redemptions payable, and subscriptions
received in advance represent a reasonable approximation of their respective fair value due to their short-term
nature.
17 Disclosure of the composition of the Company
Principal subsidiaries and structured entities
The consolidated financial statements include the accounts of the Company and all of its subsidiaries and
structured entities as at December 31, 2021 and 2020. The principal operating subsidiaries and structured
entities and their activities are as follows.
Name
Country of
incorporation
Senvest Global (KY) L.P.
Senvest Global L.P.
RIMA Senvest Master Fund GP, L.L.C.
Cayman Islands
United States
United States
Senvest Technology Partners GP,
United States
L.L.C.
Argentina Capital Inc.
Pennsylvania Properties Inc.
Senvest Management L.L.C.
Senvest Master Fund, L.P.
Senvest Technology Partners Master
Fund, L.P.
Senvest Cyprus Recovery
Investment Fund, L.P.
Coldstream SL
Canada
United States
United States
Cayman Islands
Cayman Islands
Cayman Islands
Spain
% Interest held
2021
2020
Nature of
business
100
100
-
-
100
100
-
39
49
73
100
100
100
-
-
100
100
-
35
49
73
100
Investment company
Investment company
General partner of Senvest
Master Fund, L.P.
General partner of
Senvest Technology Partners
Master Fund L.P.
Real estate
Real estate
Investment manager
of the Funds
Investment fund
Investment fund
Investment fund
Real estate
The total non-controlling interest for the year is a $2,843; (2020 – $24,795), which is mostly attributed to
Senvest Management L.L.C. The change in redemption amount of liability for redeemable units for the year is
$1,437,498; (2020 – $364,825), all of which is attributed to the Funds.
68
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
Set out below is the summarized financial information for each subsidiary that has non-controlling interest
(NCI) that is material to the group. The amounts disclosed are before inter-company eliminations.
Summarized balance sheets
Senvest Management L.L.C.
Assets
Liabilities
Net assets
Accumulated NCI
2021
$
12,338
11,740
598
598
The participation owned by the parent company is reflected as a liability in the subsidiary’s financial
statements.
Summarized statements of comprehensive loss
Revenue and net investment gains
Expenses
Net loss
Other comprehensive loss
Comprehensive loss
Net loss allocated to NCI
2021
$
39,550
39,613
(63)
(12)
(75)
(63)
2020
$
14,785
14,274
511
511
2020
$
11,201
11,354
(153)
(69)
(222)
(153)
The participation allocated to the parent company is reflected as a part of the statement of income in the
subsidiary’s financial statements.
Distribution paid to NCI
Summarized statements of cash flows
Cash provided (used) in operating activities
Net increase (decrease) in cash and cash equivalents
2021
$
-
2021
$
(1,319)
(1,319)
2020
$
-
2020
$
1,778
1,778
No guarantees or collateral were provided to the subsidiaries and structured entities except for the lease
liabilities of Senvest Management L.L.C. The amounts in question have been included in trade and other
payables, note 11(b). The Company is not liable for any other contingent liabilities arising in its subsidiaries and
structured entities and will not settle any other liabilities on their behalf.
69
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
18 Related party transactions
Key management compensation
Key management includes the Board, the president and chief executive officer, the vice-president, the
secretary-treasurer and the CFO. The compensation paid or payable to key management for employee services
is as follows:
Salaries and other short-term employee benefits
Post-employment benefits – Defined contribution
Management fees
2021
$
83,101
29
83,130
2020
$
21,833
28
21,861
Certain employees and related parties that have invested in the Funds do not pay management fees that are
charged to outside investors. The amount invested by these participants in 2021 totals $622,278; (2020 –
$297,169). The amount invested in the fund by these participants is included in liability for redeemable units.
19 Commitments
As of December 31, 2021, the Company’s future commitments relating to other equity investments and
other holdings totaled $13,806 and those relating to real estate totaled $18,618.
70
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2021 and 2020
(in thousands of Canadian dollars unless otherwise stated)
20 Segmented and geographical information
The Company operates in a single reportable segment, which is the management of its own investments and
those of the Funds.
The following tables summarize the Company’s revenues by geographical area for the years ended December 31:
United
States
$
Canada
$
European
Union
$
Bermuda
$
Other
$
Revenue
Interest income
Dividend income
Other income
4,102
16,472
120
497
9,405
350
4,609
38
5,609
-
2,454
-
-
1,050
-
United
States
$
Canada
$
European
Union
$
Argentina
$
Other
$
Revenue
Interest income
Dividend income
Other income
5,084
25,121
7,200
997
2,561
919
3,646
16
2,517
-
2,808
-
-
2,414
-
2021
Total
$
9,208
29,419
6,079
2020
Total
$
9,727
32,920
10,636
71
Senvest Capital Inc.
Annual report
December 31, 2021
Board of Directors
Officers
Victor Mashaal
Chairman of the Board & President
Richard Mashaal
Vice-President
Frank Daniel
Secretary-Treasurer
George Malikotsis
Vice-President, Finance
Senvest Capital Inc.
1000 Sherbrooke street West
Suite 2400
Montréal (Québec) H3A 3G4
(514) 281-8082
Victor Mashaal
Chairman of the Board & President
Senvest Capital Inc.
Richard Mashaal
Vice-President
Senvest Capital Inc.
Frank Daniel
Secretary-Treasurer
Senvest Capital Inc.
David E. Basner*
Business Executive
Eileen Bermingham*
Business Executive
Jeffrey L. Jonas*
Partner, Brown Rudnick L.L.P.
*Member of the Audit Committee
Investor Information
AUDITORS
PricewaterhouseCoopers L.L.P.
Montréal (Canada)
LEGAL COUNSEL
Howard M. Levine
Blake, Cassels & Graydon L.L.P.
1 Place Ville-Marie
Suite 3000
Montréal (Québec) H3B 4N8
TRANSFER AGENT & REGISTRAR
Computershare Trust Company of Canada
1500 Robert-Bourassa Boulevard
7th Floor
Montréal (Québec) H3A 3S8
Computershare Trust Company of Canada
100 University Street
Toronto (Ontario) M5J 2Yl
72