SENVEST
Annual Report
2022
S
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
2022
$
2021
$
2020
$
2019
$
2018
$
(730,345)
2,482,176
739,405
426,150
(316,619)
(326,083)
(130.98)
732,988
289.32
211,717
80.66
104,794
39.16
(140,086)
(51.72)
5,653,153
1,593,771
6,563,902
1,815,653
4,065,992
1,146,114
2,884,999
942,655
2,756,970
969,421
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
2022
$
2021
$
High
415.00
404.00
362.08
344.99
Low
361.00
340.00
306.25
279.00
High
317.00
388.88
400.00
415.00
Low
174.00
308.00
370.00
359.00
Total Assets ($ Thousands)
Total Equity ($ Thousands)
Book Value per Share
6,563,902
5,653,153
1,815,653
1,593,771
721
636
4,065,992
1,146,114
969,421
942,655
2,756,970
2,884,999
423
322
347
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
1
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
OVERALL PERFORMANCE
Senvest Capital (“Senvest” or the “Company”) recorded a net loss attributable to common shareholders of
($326.1) million or ($130.98) per basic and diluted common share for the year ended December 31, 2022. This
compares to a net income attributable to common shareholders of $733.0 million or $289.32 per basic and diluted
common share for the 2021 year. For the current year, the US dollar strengthened against the Canadian dollar
and the result was a currency translation gain of about $106.7 million. This amount is not reported in the
Company’s statement of income (loss) rather it’s reflected in its statement of comprehensive income. As a result,
the comprehensive income (loss) attributable to common shareholders was ($219.4) million for the year.
The Company’s income (loss) from equity investments was the biggest contributor to the results. The net change
in fair value of equity investments and other holdings including securities sold short and derivative liabilities
totaled ($810) million in the year versus $2,423.8 million in 2021. Most of the Company’s equity investments
are held by two funds, Senvest Master Fund, L.P. and Senvest Technology Partners Master Fund, L.P., which
are consolidated into the accounts of the Company. A more detailed discussion of the net change in fair value
from equity investments can be found in the year end investment letters for each of the two funds which are
disclosed near the end of this letter.
Financial markets continued their tremendous volatility in the fourth quarter as widespread inflation plus the
rapid tightening imposed by central banks all over the world weighed on all the indices. Investors continued to
focus on the aggressive interest rate hikes and an end to the extended period of tapering by central banks. US
stocks suffered their worst annual performance since 2008. The small cap Russell 2000 was down 21.6% for the
year while the S&P 500 and the NASDAQ were down 19.4% and 33.1% respectively.
On a consolidated basis across the different funds, the largest holdings as at December 31, 2022 were Paramount
Resources (POU), Capri Holdings (CPRI), Marriot Vacations (VAC), Tower Semiconductors (TSEM),
QuidelOrtho (QDEL), Ebay (EBAY) and SolarEdge Technologies Inc.
The Senvest Master Fund (Senvest Partners Fund) is focused primarily on small and mid-cap companies. The
fund recorded a return of 16.8% net of fees in the fourth quarter and a return of (19.8%) for the year. With most
of the long portfolio invested in small and mid-cap stocks, the fund outperformed its most relevant benchmark,
the Russell 2000 both for the quarter and for the year. The fund also outperformed the S&P 500 index for the
quarter and was roughly even with 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 positive performance of this
fund in 2020 and 2021 there have been significant redemptions over the last two years as certain investors looked
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
2 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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 4.2% net of fees for the
fourth quarter and a return of (32.5%) for the year (monthly results of the two funds can be found on the
Company’s website). As stated above 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, 2022. One part of this amount
represents investments in different US real estate income trusts (REIT) 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 income or loss.
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 $17.5 million as at December 31, 2022 from $11 million as
at December 31, 2021.
At the end of December 31, 2022, Senvest had total consolidated assets of $5,653.2 million versus $6,563.9
million at the end of 2021. Equity investments and other holdings totaled $5,280.9 million from $6,272.8 million
in December 2021. The Company purchased $5,475.1 million of investment holdings in the year and sold
$5,667.2 million of such holdings. The Company’s liabilities decreased to $4,059.4 million this year versus
$4,748.2 million in 2021. The biggest difference between the two years was a significant decrease in the liability
for redeemable units. The proceeds of securities sold short were $6,953.3 million and the amount of shorts
covered was $6,663.8 million in the year. Overall, the trading figures were less 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.
3 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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 (loss) 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 of
Directors.
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 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, 2022, 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
4 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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 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 securities sold short and derivatives. The
Company closely monitors both its equity investments and other holdings and its equities sold short and
derivatives.
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, 2022 would be as
follows (in thousands):
Fair value
Estimated fair value
30% price increase
Estimated fair value
30% price decrease
Equity investments and other holdings
Listed equity securities and derivatives
Securities sold short and derivative
liabilities
4,929,114
6,407,848
3,450,380
(858,733)
(1,116,353)
(601,113)
Pre-tax impact on net earnings
1,221,114
(1,221,114)
5 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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.
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,
6 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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, 2022
December 31, 2021
$3,895.8
$1,593.8
2.44
$4,678.9
$1,815.7
2.58
The Company’s objective is to maintain a debt-to-capital ratio below 3.0. 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 2.44 at the end
of the 2022 year from 2.58 at the end of 2021.
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.
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
7 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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, 2022, approximately 88.5% of the Company’s portfolio was invested
in Level 1 securities. The Company monitors its Level 1 securities as a 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 refers 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.
Consolidation of entities in which the Company holds less than 50% of the voting rights.
8 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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 of Senvest Master fund LP and Senvest Technology Partners GP LLC is
the General Partner of Senvest Technology Partners Master Fund LP. As compensation for its sub-advisory
services, the Company is entitled to receive 60% of the net management fees through RIMA and incentive
allocation earned through the General Partners each fiscal year.
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 88.5% of the total financial assets.
9 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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
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 5.8%
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 5.7% 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 of Directors 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, 2022, 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.
10 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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 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.
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.
11 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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
467,665
(265,349)
(956,862)
24,201
232,882
(76,453)
440,016
1,885,731
153,795
(118,477)
(356,091)
(5,310)
58,954
(51,179)
150,715
574,498
61.58
(47.72)
(142.71)
(2.13)
24.03
(19.27)
60.29
224.27
Year
2022-4
2022-3
2022-2
2022-1
2021-4
2021-3
2021-2
2021-1
SELECTED ANNUAL INFORMATION
(In thousands except for earnings per share information)
Total revenue and net investment
gains (losses)
Net income (loss) – common
shareholders
Earnings (loss) per share-diluted
2022
2021
2020
(730,345)
2,482,176
739,405
(326,083)
(130.98)
732,988
289.32
211,717
80.66
Total assets
5,653,153
6,563,902
4,065,992
The Company has equity investment capital commitments of $12,596 and has real estate equity investment
capital commitments of $11,979.
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. 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.
12 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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, 2022, Senvest commenced a new normal course issuer bid to purchase a maximum of 100,000 of
its own common shares until August 15, 2023. There have been 24,400 shares repurchased in 2022 under both
the old and new bid. The number of common shares outstanding as at December 31, 2022 was 2,478,624 and as
at March 31, 2023 was 2,475,524. There were no stock options outstanding as at December 31, 2022 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 year, 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 consolidated statement of financial position. This non-controlling interest is owned by an executive of the
Company and was $17.5 million as at December 31, 2022 from $11 million on December 31, 2021.
Significant Equity Investments
For information on a summary of financial information from certain significant investees please refer to the 2022
audited consolidated financial statements. The accounts of Senvest Partners, Senvest Technology Partners and
Senvest Cyprus Recovery Investment Fund are consolidated with the Company’s accounts.
Geopolitical events
The ongoing military conflict between Ukraine and Russia and the imposition of economic sanctions by Western
countries continue to cause 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. 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.
13 Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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 31, 2023 and will not be updated or
revised except as required by applicable securities law.
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.
14 Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 8, 2023
Q4
Nov
Dec
Q4
2022
YTD
2022
Annualized
Since
Inception
Cumulative
Since
Inception
Oct
4.77%
5.67%
-5.88%
4.20%
-32.53%
17.00%
2,120.97%
Senvest
Technology
Partners
NASDAQ
3.94%
4.51%
-8.66%
-0.78%
-32.51%
12.16%
864.90%
Russell 2000
11.01%
2.31%
-6.49%
6.20%
-20.46%
9.71%
523.83%
Dear Partners,
Financial markets rallied in the fourth quarter of 2022 after posting losses in the previous three quarters.
Stocks responded positively to the Fed signaling a more measured approach to raising interest rates. In Q4
2022, Senvest Technology Partners was up +4.20% on a gross basis (before fees and expenses) 1 ,
outperforming the NASDAQ, which was down -0.78%, but slightly underperforming the Russell 2000, which
gained +6.20%. The month of December, however, saw a bout of year-end tax loss selling in which many
small cap stocks hit new lows. We took advantage of the December pullback and increased our exposure as
many stocks fell into deep value territory.
TECHNOLOGY MARKET COMMENTARY:
In the fourth quarter, we saw the beginning of a semiconductor inventory correction cycle. Supply shortages
abated as investments in elevated buffer inventory levels and new capacity expansion alleviated the ongoing
“golden screw” component shortage. Concurrently, demand from several large end markets slowed as
increased interest rates curbed consumer and enterprise spending. Commodity semiconductor markets
such as DRAM and NAND memory felt the pain. DRAM prices declined around 20-25% quarter-over-quarter,
with pricing expected to take another leg down in Q1 2023. Still, even as PCs and smartphones slowed into
a more cautious economic backdrop, other end-markets remained healthy. The electrification of the car
continued to gain momentum, driving unprecedented demand for high-performance analog components.
Clean energy continued to see robust demand, as energy assurance and rising grid prices offset headwinds
from higher financing rates and a slowing housing market.
Cloud computing saw mixed demand as cryptocurrency, gaming AR/VR, and IOT trends paused. While
enterprise cloud migration cycles have elongated given softening economic conditions, companies are still
increasingly turning to run their infrastructure in the cloud over private data centers. We continue to see an
emerging era of cloud-based artificial intelligence is bringing new capabilities transforming diverse
industries, from internet search and advertising to biotechnology and application development. Chat GPT is
a recent high-profile example that has captured the consumer in its ability to mimic long prose responses
1 To address the SEC's new Marketing Rule, we have modified the format of our performance presentations to show net
performance alongside gross performance, even for industry-level performance. Net performance for certain subsets of
data presented throughout this letter will be calculated using the ratio between the Fund’s overall net and gross return.
The Fund’s quarterly net returns broken out by long positions, short positions and currency are as follows: +4.16%,
+0.11%, and -0.07%, respectively.
15 Senvest Technology Partners Master Fund, LP
that seem less automated and more human. In short, while the cloud computing demand environment has
clearly decelerated, several markets remain resilient and provide us with confidence that we can perhaps
avoid the much debated “hard landing” in 2023.
OUTPERFORMERS:
The two largest contributors in the fourth quarter were Axcelis Technologies [NASDAQ: ACLS] and SolarEdge
Technologies [NASDAQ: SEDG].
ACLS
Axcelis Technologies’, a semiconductor capital equipment company, stock price increased +31.04% in the
fourth quarter as the company continues to leverage its market leading position in the compound
semiconductor market. ACLS’ ion implant technology addresses a secular growth driver in semiconductors,
Silicon Carbide (“SiC”), a key component in the electric vehicle (“EV”) supply chain. In early October, we
added to our ACLS position as the stock fell to near-term trough-level valuations despite design-in activity
indicating further market share gains. While historically strong in other parts of the analog and memory
semiconductor end-markets, we believe the company has begun to penetrate the leading-edge foundry
market as well. The ion implant market, after years of low growth, is experiencing a resurgence given the
need for more ion implant steps in semiconductor manufacturing processes. Over the past cycle, ACLS has
grown its market share from 5% to over 35%. We anticipate that ACLS can achieve over 50% market share
over the next three years as they have dominant market share in the power semiconductor end-market for
SiC devices used in EV motors, charging stations, and solar inverters. These markets are expected to
experience secular growth over the next decade.
In its February earnings report, ACLS posted better-than-expected revenue and EPS numbers comfortably
exceeding consensus expectations while also providing a stronger than anticipated outlook for 2023. For
2023, the company now expects revenue to exceed $1 billion with gross margins of 44% equating to EPS of
approximately $6.00. The company also provided a new long-term model that includes revenue targets
exceeding $1.3 billion with EPS approaching $10.00/share.
SEDG
SolarEdge, a provider of module-level power electronics for solar and energy storage solutions, had a stock
price gain of +22.38% in the quarter after reporting a better-than-expected Q3 2022 earnings. SEDG is a
leading provider of solar technology that includes inverters and optimizers attached to rooftop and ground-
mount solar systems as well as an emerging provider of lithium-based battery systems for residential and
commercial use. SEDG stands to benefit from multiple long-term tailwinds including: 1) the expansion of
residential, commercial, and utility solar markets, 2) higher attach rates of battery storage solutions, and 3)
the decentralization of energy production.
During the quarter, SEDG benefitted from continued strong demand for solar and battery storage solutions
that drove revenue upside. While rooftop solar adoption has steadily increased in the US over the past
several years, we have seen an explosion in Europe, particularly in Germany, driven by the relatively quick
2–3 year average payback period which compensates for the increase in utility rates in Europe. SEDG has
16 Senvest Technology Partners Master Fund, LP
managed through a challenging environment the past several quarters that included supply chain issues,
increased logistic costs, and FX headwinds given its geographic diversity. In 2023, we expect multiple
catalysts to drive the stock higher including 1) continued share gains in both international and commercial
markets, 2) a ramp up of a new production facility in Mexico, 3) the buildout of a new production facility in
the US that will be partially financed through government incentives related to the Inflation Reduction Act,
and 4) the initial entrance into the utility solar market. SEDG currently trades at a 37x P/E on consensus
2023 EPS estimates, however this implies a PEG of 0.5x and the company trades at a discount to its main
competitor Enphase (“ENPH”), which trades at a 42x P/E on consensus 2023 EPS estimates.
UNDERPERFORMERS
The two largest detractors in the fourth quarter were Kornit Digital [NASDAQ: KRNT] and Radware [NASDAQ:
RDWR].
KRNT
Kornit Digital, a leading supplier of digital textile printing technology solutions, declined -13.68% in the fourth
quarter, despite reporting better-than-expected Q3 2022 earnings. KRNT develops and manufactures
industrial printing solutions, including large printing systems, proprietary inks, and printing software,
primarily for t-shirts and fabrics. KRNT’s technology addresses the global apparel retail market with the
company estimating that its customers print 200 million garments annually, which roughly equates to around
5% of the total market being addressed by digital printing technologies. The growth of digital printing is an
important contributor to the fast fashion trend and specifically helps with large brands reorienting supply
chains and fulfillment networks, largely part of a broader strategy of carrying leaner inventory. Notably, KRNT
has a strategic relationship with Amazon whereby it supplies the company with much of the technology it
uses to run its print-on-demand platform. Amazon has been KRNT’s largest customer representing between
25-30% of revenue for the past several years.
KRNT’s stock has been under pressure for the past year with shares declining -85% in 2022. We had decided
to reinitiate a position in the company after the stock had come under pressure. The company has contended
with demand pull-forward during the COVID pandemic and a broad slowdown given tightening financial
conditions, resulting in a significant decline in KRNT's business in 2022 and early 2023. Although KRNT’s
customers are going through a digestion period, we expect system sales to accelerate in 2H 2023.
Additionally, KRNT will also be launching its new high-end Apollo platform in June 2023. This platform will
open up a significant portion of KRNT’s addressable market as it will allow more traditional screen printers
to adopt digital printing technology. The Apollo platform will have significantly higher throughput and a
declining cost-per-print, which in turn should create an inflection in consumable demand. Although
fundamentals are soft near-term and we attribute the end-of-year weakness in KRNT’s stock to tax-loss
selling, we believe that at 2x EV/2023 consensus revenue, KRNT shares trade at a meaningful discount to
historical levels, which have been closer to 5x EV/Revenue.
RDWR
Radware, a cyber security infrastructure provider, declined -9.36% in the fourth quarter as the company
missed its Q3 2022 expectations with both revenue and EPS coming in below consensus. RDWR noted that
in the final weeks of the quarter, customers chose to tighten their budgets with additional scrutiny around
17 Senvest Technology Partners Master Fund, LP
spending plans across its enterprise and service provider customers. Annual Recurring Revenue (“ARR”)
grew 5% year-over-year in Q3 to $195 million, although it was flat quarter-over-quarter. Within the ARR figure,
the Cloud Services & Product Subscription ARR grew 12% year-over-year decelerating from 18% year-over-
year growth in Q2. RDWR continues to invest aggressively in its cloud business and we expect the company
to invest in multiple new data center sites in 2023, while this is ultimately an investment ahead of future
growth, it may limit margin expansion near-term.
RDWR continues its transition towards a SaaS and cloud delivered subscription-based cyber security
platform, which finally contributes a meaningful portion of the company’s recurring revenue. RDWR’s
business continues to benefit from several underlying secular trends, including DDoS cyberattacks as well
as cloud-based application workload protection. RDWR is a radically different company today than it was five
years ago as it is a well-positioned cyber security vendor growing double-digits. RDWR’s growing subscription
revenue streams based on software-as-a-service and security-as-a-service models should accelerate top line
meaningfully over the coming years. We believe that RDWR’s stock will re-rate and trade in-line with its
security infrastructure peer group. As mentioned in a prior letter, with a new Board of Directors, RDWR is re-
investing in its go-to-market channels and this should yield faster revenue growth in time. At just 2.0x 2023
EV/Revenue, RDWR trades a significant discount to cyber security infrastructure peers that trade between
5x-9x EV/Revenue and we see that valuation gap shrinking over time.
INDUSTRY ATTRIBUTION
Below and on the following page, we show the Fund’s industry attribution. Given the strong performance
from ACLS and SEDG during the quarter, the Semiconductor sector contributed +5.67% gross and
outperformed along with the Internet sector at +1.27% gross, driven by eBay’s solid performance. By
industry, the most significant weakness was felt in Machinery and Healthcare sectors.
INDUSTRY
Aerospace & Defense
Banks
Comm. Equipment
Electronic Equip. & Components
Entertainment & Media
Health Care Equip & Supplies/Tech
Internet & Direct Marketing Retail
Machinery
Semiconductor & Equipment
Software
IT Hardware
Index/ETF
Other
GROSS EXPOSURE
(AS OF 12/31)
GROSS
ATTRIBUTION
(Q4 2022)
NET ATTRIBUTION
(Q4 2022)
GROSS
ATTRIBUTION
(2022)
NET ATTRIBUTION
(2022)
11%
0%
16%
8%
3%
4%
11%
12%
47%
18%
1%
0%
4 %
-0.47%
-0.50%
-3.91%
-4.05%
-0.10%
0.04%
-0.08%
-0.11%
-0.66%
1.27%
-1.78%
5.67%
0.48%
-0.11%
0.04%
-0.14%
-0.12%
-0.69%
1.21%
-1.88%
5.36%
0.45%
-0.02%
-0.02%
0.00%
0.71%
0.00%
0.67%
-2.33%
-6.60%
-3.66%
-0.49%
-3.35%
-2.07%
-5.45%
4.83%
-6.14%
-3.36%
0.71%
0.76%
-2.42%
-6.85%
-3.80%
-0.51%
-3.47%
-2.15%
-5.65%
4.65%
-6.37%
-3.49%
0.69%
0.74%
18 Senvest Technology Partners Master Fund, LP
Totals
Long
Short
Totals
135%
132%
--3%
135%
4.95%
4.82%
0.13%
4.95%
4.27%
4.16%
0.11%
4.27%
-31.06%
-32.68%
-35.98%
-37.41%
4.92%
4.73%
-31.06%
-32.68%
PORTFOLIO CHARACTERISTICS
In Q4, we increased the Fund’s exposure levels after reducing our exposure in September 2022 when we
began to enact a year-end tax-loss harvesting program to offset realized gains. We focused on harvesting tax
losses in investments we felt were more structurally challenged and reinvested those proceeds into
investments with higher conviction of near-term trends and appreciation. As a result, we ended the year with
a net exposure of 129%, up significantly from 117% in the third quarter and 113% exiting 2021. Our gross
exposure also increased to 135%, up from 125% at the end of September with our short exposure ending
the year at -3% given our optimistic view of markets heading into 2023.
PORTFOLIO VALUATION
As of December 31st, 2022, the Fund’s top ten investments represented 72% of gross exposure and 98% of
equity. This includes our remaining investment in TSEM, roughly 16% of equity. The Fund’s top ten positions
traded with a portfolio-weighted average valuation of 2.00x EV/sales. Of our top investments, seven have a
portfolio-weighted average net cash of 21.7% of their market capitalization, and another three companies
have net debt and trade at 9.1x EV/EBITDA (per Bloomberg). As we maintain our core transformative value
lens on investing through a market downturn, we actively manage the portfolio and deploy capital into new
investments as markets test new lows.
CONCLUSION
Even though 2022 marked as one of the worst years for the Fund, we are encouraged by the Fund’s value
position. Several of our investments trade near historical trough cycle valuations and show a significant
percentage of market capitalization in net cash. More importantly, we are encouraged by the secular growth
trends supporting our investments and providing substantial growth prospects and potential for meaningful
re-rating. In the near term, we see continued economic uncertainty around macroeconomic and geopolitical
tensions as central banks battle inflation with elevated interest rates and tensions with China and Russia
continue to simmer.
As we have written in past letters, our longer investment horizon paired with an eye on value investing in
transformative technologies and secular growth industries has been the foundation of the Fund’s investment
strategy since inception. Senvest’s contrarian investment philosophy, our strong internal capital base, and a
deep understanding of the technology landscape positions us to take advantage of these market drawdowns.
When uncertainty and fear are peaking, we typically find the best investment opportunities.
19 Senvest Technology Partners Master Fund, LP
As always, please do not hesitate to reach out to us should you have any questions or wish to discuss
anything in further detail. We look forward to speaking with you and reporting on our progress in future
quarters.
Best regards,
Robert Katz
Richard Mashaal
20 Senvest Technology Partners Master Fund, LP
IMPORTANT DISCLAIMER: This letter is an informational document and does not constitute an offer to sell or a solicitation to purchase any securities in any
entity organized, controlled, or managed by Senvest Management, LLC ("Senvest") or in (i) Senvest Technology Partners LP, a Delaware limited partnership, (ii)
Senvest Technology Partners Ltd., a Cayman Islands exempted company (both Senvest Technology Partners LP and Senvest Technology Partners Ltd. invest
substantially all of their assets in Senvest Technology Master Fund, L.P.), or any other partnership interests described herein (collectively, the "Funds"), and
may not be relied upon in connection with any offer or sale of securities. Any offer or solicitation may only be made pursuant to a Confidential Private Offering
Memorandum (or similar document) which will only be provided to qualified offerees and should be reviewed carefully by any such offerees prior to investing.
The Funds previously operated under the name of “Senvest Israel Partners Master Fund, LP”, and invested primarily in U.S. listed, Israeli-related and local
Israel-listed companies of all market capitalization sizes. Effective January 1, 2019, the Fund’s investment focus has been broadened to include global
technology (and technology-related), media and telecom investments, which may not include Israeli-related investments. Performance information of the Funds
prior to January 1,2019 reflects the performance of the Fund’s prior investment strategy. While we believe that the investment strategy and process utilized
prior to January 1, 2019 is similar to the current investment strategy and process, there is no historical performance available for the Fund’s current investment
strategy. There can be no assurance that the future performance of the Funds will be the same as the historical performance of the Funds.
An investment in a Fund involves risk and volatility. Because this communication is only a high-level summary it does not contain all material terms pertinent
to an investment decision, including important disclosures of conflicts and risk factors associated with an investment in a Fund. This document in and of itself
should not form the basis for any investment decision. An investment in a Fund is speculative and entails substantial risks, including the fact that such an
investment would be illiquid and be subject to significant restrictions on transferability. No market is expected to develop for interests in any Fund. Financial
instruments and investment opportunities discussed or referenced herein may not be suitable for all investors, and potential investors must make an
independent assessment of the appropriateness of any transaction in light of their own objectives and circumstances, including the possible risk and benefits
of entering into such a transaction.
An investor in a Fund could lose all or a substantial amount of his or her investment. Returns generated from an investment in a Fund may not adequately
compensate investors for the business and financial risks assumed. While the Funds are subject to market risks common to other types of investments,
including market volatility, the Funds employ certain trading techniques such as the use of leverage and other speculative investment practices that may
increase the risk of investment loss. The products and strategies in which the Funds expect to invest may involve above-average risk. Please see the Risk
Factors section of the applicable Confidential Private Offering Memorandum (or similar document) for certain risks associated with an investment in a Fund.
Certain information contained in this Presentation constitutes "forward-looking statements," which can be identified by the use of forward-looking terminology
such as "may", "will", "should", "expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe" or the negatives thereof or other variations
thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual policies, procedures and processes of the
Investment Manager and the performance of the Funds may differ materially from those reflected or contemplated in such forward-looking statements and no
undue reliance should be placed on these forward-looking statements, nor should the inclusion of these statements be regarded as the Investment Manager's
representation that the Funds will achieve any strategy, objectives or other plans. The stated gross returns are calculated before deducting incentive fees,
management fees and other expenses of the Fund, which would reduce returns. Net performance figures are not included for individual investments because
individual investment level net performance cannot be calculated without making arbitrary assumptions related to the allocation of fees and expenses. Please
refer to Page 1 for the net performance results of the Fund.”
This document should be read in conjunction with, and is qualified in its entirety by, information appearing in the Confidential Private Offering Memorandum
(or similar document) for each Fund and the organizational documents for such fund (e.g. limited partnership agreements, articles of association, etc.), which
should be carefully reviewed prior to investing. Potential investors should consult a professional adviser regarding the possible economic, tax, legal or other
consequences of entering into any investments or transactions described herein. Investment allocations and ownership percentages are subject to change
without notice. The information contained herein is confidential and cannot be reproduced, shared or published in any manner without the prior written consent
of Senvest.
Unless otherwise indicated, the information contained in this document is current as of the date indicated on its cover. Such information is believed to be
reliable and has been obtained from sources believed to be reliable, but no representation or warranty is made, expressed or implied, with respect to the
fairness, correctness, accuracy, reasonableness or completeness of the information and opinions. Additionally, there is no obligation to update, modify or
amend this document or to otherwise notify a reader in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein,
changes or subsequently becomes inaccurate.
The Investment Manager is not acting and does not purport to act in any way as an advisor or in a fiduciary capacity vis-a-vis any investor in the Funds. Therefore,
it is strongly suggested that any prospective investor obtain independent advice in relation to any investment, financial, legal, tax, accounting or regulatory
issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed.
Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate or other
market or economic measure.
Certain performance information is provided for the Funds. Performance numbers are net of all fees and expenses unless noted otherwise. Past
performance is not necessarily indicative of or a guarantee of future results.
Gross and Net Attribution Figures: Attributions of sector-level performance are shown on a gross basis unless otherwise noted herein ("Gross Attributions").
Gross Attributions reflect the return contribution by the aggregate investments in each Sector for the period indicated (calculated by dividing the gains/losses
of the indicated Sector over the portfolio, as applicable), but is calculated prior to the deduction of management fees, expenses and incentive compensation
paid to Senvest, which will reduce performance. Net sector attributions ("Net Attributions") reflect Gross Attributions, reduced by a percentage equal to the
quotient of the the applicable Fund's net return divided by the applicable Fund's gross returnin order to approximate a pro forma “net” return. This pro forma
return should not be relied upon as a precise metric of the impact of fees and expenses on the performance of each Sector, for the reasons detailed below.
Net Attributions are presented pro forma because, although such figures reflect actual performance, these calculations apply management fees, expenses and
incentive compensation to each Sector's Gross Attributions, even though each Fund's fees, expenses and incentive compensation are only calculated for the
applicable Fund as a whole. Correspondingly, this approximation does not precisely reflect the impact such fees and expenses actually had on the performance
21 Senvest Technology Partners Master Fund, LP
of positions included in each Sector. Net Attributions do not take into account the specific impact of leverage and other costs on specific Sectors' performance,
nor do they incorporate the differing impact that each investor’s or Fund's high water mark has on specific Sectors. For example, if the Fund as a whole accrued
incentive compensation for a given period, the Net Attributions methodology would result in the reduction of Gross Attributions,, on a percentage basis, of an
amount incorporating that accrued incentive compensation from each Sector's performance, even where a Sector experienced negative performance (and
therefore, viewed in isolation, would not have accrued incentive allocation). In addition, expenses are not tracked on a Sector-by-Sector basis, and therefore
the Net Attributions shown herein do not reflect an approximation of the precise impact of expenses on specific Sectors' performance—many expenses are
incurred on a fund-wide level and do not relate to any specific portion of the investment program. Pro forma performance of this nature is subject to inherent
limitations and should not form the basis for an investment decision. Additional information on the risks and limitations of pro forma performance is available
upon request.
Unless otherwise noted, all calculations in this report are made by Senvest. All profit and loss, or other performance information is unaudited and is net of fees
and expenses based on an investment made at inception. Total returns reflect compounded monthly returns. The distribution of this document in certain
jurisdictions may be prohibited or restricted by law; therefore, people in whose possession this document comes should inform themselves about and observe
such restrictions. Any such distribution could result in a violation of the law of such jurisdictions.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which is made up of 3,000 of the largest U.S.
stocks by market capitalization. The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000 Index. The Nasdaq
Composite Index is a market-capitalization-weighted index of all the stocks traded on the Nasdaq stock exchange. This index includes some companies that
are not based in the United States.
22 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
Senvest Master Fund, LP (“Senvest Partners”)
May 2017 Investor Letter: June XX, 2017
Q4 2022
2022
Cumulative Since
Inception
Annualized Since
Inception
Senvest Master Fund, LP
16.78%
-19.76%
5804.94%
Russell 2000
6.20%
-20.46%
627.32%
7.56%
-18.13%
736.47%
4.17%
-10.21%
539.82%
S&P 500
HFRI
Dear Partners:
Review of Q4 2022
17.16%
8.01%
8.60%
7.47%
Equity markets staged a comeback in the fourth quarter after posting three consecutive quarters of losses. Even
so, US indices ended the year largely in bear market territory. In the quarter, Senvest Partners outperformed
US indices, with long positions contributing +19.52% on a gross basis (before fees and expenses) while short
positions cost the Fund -1.73% and currency -0.08%1. Equity markets don’t always go up every year and we
accept that fact as long-term investors. In the context of overall equity market performance, coupled with our
net long exposure, we are pleased with the Fund’s performance.
The following page shows the Fund’s sector attribution along with the average gross, long, and short exposure
for last quarter2.
1 To address the SEC's new Marketing Rule, we have modified the format of our performance presentations to show net
performance alongside gross performance, even for sector-level performance. Net performance for certain subsets of data
presented throughout this letter will be calculated using the ratio between the Fund’s overall net and gross return. The
Fund’s quarterly net returns broken out by long positions, short positions and currency are as follows: +18.67%, -1.80%, and
-0.09%, respectively.
2 Attribution percentages are before fees and expenses.
23 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
Sector Attribution3 and Average Exposures for Q4 2022
Below and on the following page, we show the top 10 winning and losing investments (in rank order) for the
Fund in Q4 of 20224:
Top 10 Contributors
Company
CAPRI HOLDINGS
PARAMOUNT RESOURCE
SOLAREDGE TECHNOLOGIES
QUIDELORTHO
PENNYMAC FINANCIAL SERVICES
MARRIOTT VACATIONS WORLDWIDE
AXCELIS TECHNOLOGIES
EBAY
Ticker
CPRI
POU
SEDG
QDEL
PFSI
VAC
ACLS
EBAY
Long/Short
Long
Long
Long
Long
Long
Long
Long
Long
9/30/2022
Stock Price
38.44
24.40
231.46
71.48
42.90
121.86
60.56
36.81
12/31/2022
Stock Price
57.32
28.64
283.27
85.67
56.66
134.59
79.36
41.47
% Price
Change5
49.12%
17.38%
22.38%
19.85%
32.07%
10.45%
31.04%
12.66%
3 Net Attribution Figures have been prepared on a pro forma basis and provided above, consistent with note in footnote 1.
Important considerations regarding Senvest's calculation methodology for the Net Sector attributions should be reviewed
under the Important Disclosures on page 15—these figures are not properly understood without reference to these
disclosures.
4 Short investments are labeled by GICS Sector and the price changes are rounded to the nearest tenth.
5 Price changes simply reflect the change in the stock price from the end of Q3 2022 until the end of Q4 2022. This figure is
not reflective of Senvest's performance in any investment, and is not an indication that Senvest (i) has attained any
performance metrics in these investments or (ii) has held these positions during the entire quarter.
SectorLongShortTotal GrossTotal NetLongShortGrossNetCommunication Services0.84%0.01%0.85%0.82%4%0%4%4%Consumer Discretionary9.69%-1.24%8.45%8.11%44%-14%58%30%Consumer Staples-0.52%0.00%-0.52%-0.54%2%0%2%2%Energy4.31%0.00%4.31%4.14%23%0%23%23%Financials2.75%0.01%2.76%2.65%13%0%13%13%Health Care0.63%0.07%0.70%0.67%19%-1%20%18%Industrials-1.06%-0.43%-1.49%-1.55%11%-6%17%5%Information Technology3.32%0.03%3.35%3.22%39%-1%40%38%Materials-0.05%0.00%-0.05%-0.05%2%0%2%2%Real Estate-0.37%-0.27%-0.64%-0.67%5%-3%8%2%Utilities0.00%0.09%0.09%0.09%0%0%0%0%Index/ETF-0.02%0.00%-0.02%-0.02%0%0%0%0%Total19.52%-1.73%17.79%16.87%162%-25%187%137%Attribution Q4Average Exposure Q424 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
ARX
HB
Long
Long
16.59
0.92
18.25
1.45
10.01%
57.27%
ARC RESOURCES
HELLENIC BANK
Top 10 Detractors
Company
IANTHUS CAPITAL
CONSUMER DISCRETIONARY CO
KORNIT DIGITAL
AMERICAN WELL
INDUSTRIALS CO
MARKFORGED HOLDING
BEAUTY HEALTH COMPANY
RADWARE
WM TECHNOLOGY
DR. MARTENS
Ticker
ITHUF
N/A
KRNT
AMWL
N/A
MKFG
SKIN
RDWR
MAPS
DOCS
Long/Short
Long
Short
Long
Long
Short
Long
Long
Long
Long
Long
9/30/2022
Stock Price
N/A
N/A
26.61
3.59
N/A
1.98
11.79
21.79
1.61
222.80
12/31/2022
Stock Price
N/A
N/A
22.97
2.83
N/A
1.16
9.10
19.75
1.01
190.60
% Price
Change
N/A
20.00%
-13.68%
-21.17%
10.00%
-41.41%
-22.82%
-9.36%
-37.27%
-14.45%
Top Five Contributors and Detractors Commentary
Capri Holdings (“CPRI”)
Apparel, footwear, and accessories designer Capri Holdings’ (“CPRI”), owner of the Michael Kors, Versace, and
Jimmy Choo brands, stock price rose +49.12% in the quarter.
CPRI reported strong fiscal Q2 earnings. Revenue growth of 8.6% slightly beat consensus, while gross margins
were much better than expected at -50bps year over year vs. -160bps consensus. Better gross margins coupled
with disciplined expense management drove EBIT margins of 19.8% vs. 18.1% consensus and EPS of $1.79 vs.
$1.54 consensus. CPRI aggressively bought back its shares in the quarter, repurchasing 7.1M shares or 4.9% of
its shares outstanding in fiscal Q2 alone, with another 2.2M or 1.6% of shares repurchased after fiscal Q3.
Despite a turbulent year in its share price (high of roughly $71, low of roughly $37), CPRI’s fundamentals were
remarkably consistent. In early February 2022, CPRI outlined FY2023 (March 2023) EPS guidance of $6.60. As of
a month ago, that guidance was, and remains $6.85.
As we look to 2023, the macro outlook remains uncertain, but CPRI will likely benefit from various headwinds
that should turn into tailwinds, primarily FX, China exposure, and lower freight costs. Our thesis on CPRI remains
the same. Michael Kors is a high margin, stable cash cow providing capital to grow luxury brands Versace and
Jimmy Choo into much larger businesses, driving double digit sales and earnings growth for years to come.
Versace and Jimmy Choo combined will likely comprise 25% of CPRI earnings for the first-time next year, and
25 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
that profile should not trade at the single digit P/E multiple where CPRI trades at today. We expect both EPS
growth and multiple expansion from CPRI in 2023.
Paramount Resources (“POU”)
Paramount Resources’ (“POU”) stock rose +17.38% in the quarter, outperforming XEG (+14.16%), the
benchmark ETF for Canadian E&P companies. Expectations for West Texas Intermediate crude pricing in 2023
and 2024 similarly increased, +9.99% to $79/bbl and +10.88% to $74/bbl, respectively. The improved outlook
was driven by a combination of newly announced OPEC+ production cuts starting in November 2022 and
anticipation of China reopening. Futures for Henry Hub natural gas pricing in 2023 and 2024 decreased, -16.39%
to $4.33/MMBtu and -8.56% to $4.28/MMBtu, respectively. A mild start to winter in Europe allowed the
continent to fill storage and reduced expectations for out-year imports. Additionally, the seven-month-long
outage at the Texas-based Freeport Liquified Natural Gas (“LNG”) plant, which accounts for 20%6 of US LNG
exports, continues.
POU’s outperformance in the quarter was due to continued accretive M&A and a more aggressive return of
capital to shareholders, offset somewhat by operational challenges related to third-party infrastructure and
extreme weather. After completing the second acquisition in the Willesden Green Duvernay area in the third
quarter, the company surprised us in December by announcing the sale of around 64,600 net acres in the Kaybob
Smoky area for a price of C$375M. In our Q3 2022 letter, we remarked that POU had assembled the Willesden
Green inventory at a highly attractive valuation and financed it by selling non-core infrastructure. Given the sale
of the non-core Smoky assets, this statement is worth revisiting. In 2022, POU purchased around 151,000 net
acres in the Willesden Green Duvernay for C$109M, sold C$64.2M of non-core infrastructure in the Kaybob
region, and has now sold around 64,600 net acres for C$375M in the Kaybob Smoky region. While there are
nuances, it is fair to say that the company was paid a net C$331M to for the privilege of owning roughly 86,400
acres in a region that is not a focus for other operators. These transactions showcase management’s track record
of creating value through well-timed and clever M&A.
The company used the net proceeds to declare a C$1/share special dividend (~C$140M) and allocated the
remainder to paying down debt. The special dividend is in addition to the +25% increase to the monthly dividend
the company announced concurrent with third quarter earnings in November. Over the last 12 months, POU
has paid dividends totaling C$2.07; not bad for a company that traded at around C$0.75 during March of 2020.
Consensus expectations currently call for POU to earn C$9.55 per share in cash from operations in 2024,
implying a yield of 36% after adjusting for C$4.61 per share of net cash and investments. When we see initial
well results from Willesden Green in late 2023, we expect that this will be a catalyst for the sell side to raise
estimates further. Additionally, with C$700M in net cash and investments, and C$1B in debt capacity, we expect
6 https://www.reuters.com/business/energy/freeport-lng-may-extend-texas-plant-restart-february-sources-2023-01-11/
26 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
POU will continue to be active in M&A. In terms of relative valuation, the XEG trades at a yield of 25%, while
large-cap leader Tourmaline (“TOU”) trades at a 20% yield. Given the combination of growth, capital returns,
and sensible M&A, we believe POU should trade at least in-line with the index, if not at a premium similar to
TOU.
SolarEdge (“SEDG”)
SolarEdge (“SEDG”), a provider of module-level power electronics for solar and energy storage solutions, had a
stock price gain of +22.38% in the quarter after reporting a better-than-expected Q3 2022 earnings. SEDG is a
leading provider of solar technology that includes inverters and optimizers attached to rooftop and ground-
mount solar systems as well as an emerging provider of lithium-based battery systems for residential and
commercial use. SEDG stands to benefit from multiple long-term tailwinds including: 1) the expansion of
residential, commercial, and utility solar markets, 2) higher attach rates of battery storage solutions, and 3) the
decentralization of energy production.
During the quarter, SEDG benefitted from continued strong demand for solar and battery storage solutions that
drove revenue upside. While rooftop solar adoption has steadily increased in the US over the past several years,
we have seen an explosion in Europe, particularly in Germany, driven by the relatively quick 2–3-year average
payback period which compensates for the increase in utility rates in Europe. SEDG has managed through a
challenging environment the past several quarters that included supply chain issues, increased logistic costs,
and FX headwinds given its geographic diversity. In 2023, we expect multiple catalysts to drive the stock higher
including 1) continued share gains in international and commercial markets, 2) a ramp up of a new production
facility in Mexico, 3) the buildout of a new production facility in the US that will be partially financed through
government incentives related to the Inflation Reduction Act, and 4) the initial entrance into the utility solar
market. SEDG currently trades at a 35x P/E on consensus 2023 EPS estimates, however this implies a PEG of 0.5x
and the company trades at a discount to its main competitor Enphase (“ENPH”), which trades at a 43x P/E on
consensus 2023 EPS estimates.
QuidelOrtho (“QDEL”)
QuidelOrtho’s ("QDEL"), a diagnostics healthcare company, stock rebounded +19.85% in the fourth quarter,
partially recovering after a -26.45% drop in the third quarter. The company's stock appreciated following the
release of third quarter numbers that vastly exceeded guidance and consensus expectations with a $130M
revenue beat and a 600bp beat on EBITDA margins. On the negative side, though to a smaller extent, the
company's legacy Ortho business revenues were impacted by what we view as transient macro factors including
foreign exchange, supply chain dynamics, and China lockdowns. Additionally, US approval for their new Savanna
molecular platform continued to face delays. During the quarter, the stock also rose due to the early and severe
flu season which returned after a two-year absence. As a reminder, QDEL's point of care diagnostics business
12 5
27 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
unit is highly exposed to both flu and COVID testing. Subsequently, in mid-December, the company held its first
investor day since the merger between Quidel and Ortho Diagnostics and released a three-year financial outlook
that was disappointing compared to Senvest and Wall Street expectations, leading to a sharp sell-off in shares.
We believe management wanted to reset expectations in light of the above-mentioned macro factors but failed
in their communication and delivery. Management is embedding foreign exchange and inflation impacts that
we think are overly conservative and which resulted in long-term EBITDA margin guidance of 27-29%, whereas
consensus was estimating 29%. At the beginning of January, QDEL pre-announced fourth quarter revenue
numbers that again beat street estimates by $109 million, due to respiratory (flu and COVID) testing. We believe
the strong pull-through on flu testing highlights the sustainability of the company's share gains made during the
pandemic. With the stock currently trading at 10.5x consensus adjusted EBITDA, a nine-turn discount to peers,
we think investors are waiting for a couple more solid quarters under their belt as a combined entity, an
improvement of macro headwinds impacting the Ortho side of the business and finally, FDA approval of the
Savanna system. Senvest 2023 estimates are higher than consensus and we expect the company to continue to
beat numbers leading to multiple expansion.
PennyMac Financial Services (“PFSI”)
Residential mortgage originator and servicer PennyMac Financial Services’ (“PFSI”) stock rose +32.07% in the
quarter.
PFSI reported Q4 GAAP earnings of $2.46 and core earnings ex-hedging gains of $1.50, well ahead of consensus
of $1.20. PFSI generated a 16% ROE and grew book value to $68.26, as expense discipline and rising interest
income from its servicing business offset lower production.
As a shareholder of PFSI since its IPO in 2013, we have seen firsthand the ability of the company to generate
profitable growth in any interest rate environment. 2022 was no exception. In a year where mortgage rates
doubled from 3.3% to 6.6% and industry originations were almost cut in half, PFSI used its balanced business
model to grow book value by 13.5% by the end of 2022.
As the mortgage market finds a bottom, 2023 is likely to be another challenging year for the industry. This suits
PFSI just fine, as the lack of industry profitability drives out smaller competitors, paving the way for a more
profitable business coming out of the trough. We expect PFSI to continue generating high single digit ROEs in
this environment before returning to its historical average of 20%+ thereafter. PFSI ended the year trading at
just 0.8x 2022 book value, well below its historical average of 1.1x and far too low for a company of PFSI’s
pedigree and track record. We see compelling value in PFSI shares.
28 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
iAnthus (“ITHUF”)
iAnthus traded down in Q4, along with the entire US cannabis industry, due to federal legislation not passing
through the US Congress. Since Biden became President, and Democrats controlled the House and Senate, the
industry expected some form of federal legalization to pass, most likely through the “SAFE” act, which would
increase access to capital, and potentially allow US Cannabis companies which trade on Canadian exchanges to
‘uplist’ on a US stock exchange. This federal legislation did not go through, and the market traded down in
sympathy. Given that Republicans now control the House, expectations have been reset to not expect
legalization for at least this congressional session.
Short Automobile Company
A short position in an automobile company rose approximately +20.00%. Shares rose as COVID gains proved
stickier than market expectations in the quarter.
Kornit Digital (“KRNT”)
Kornit Digital (“KRNT”), a leading supplier of digital textile printing technology solutions, declined -13.68% in the
fourth quarter, despite reporting better-than-expected Q3 2022 earnings. KRNT develops and manufactures
industrial printing solutions, including large printing systems, proprietary inks, and printing software primarily
for tee-shirts and fabrics. KRNT’s technology addresses the global apparel retail market with the company
estimating that its customers print 200 million garments annually, which roughly equates to around 5% of the
total market being addressed by digital printing technologies. The growth of digital printing is an important
contributor to the fast fashion trend and specifically helps with large brands reorienting supply chains and
fulfillment networks, largely part of a broader strategy of carrying leaner inventory. Notably, KRNT has a
strategic relationship with Amazon whereby it supplies the company with much of the technology it uses to run
its print-on-demand platform. Amazon has been KRNT’s largest customer representing between 25-30% of
revenue for the past several years.
KRNT’s stock has been under pressure for the past year with shares declining -85% in 2022. We had decided to
reinitiate a position in the company after the stock had come under pressure. The company has contended
with demand pull-forward during the COVID pandemic and a broad slowdown given tightening financial
conditions, resulting in a significant decline in KRNT’s business in 2022 and early 2023. Although KRNT’s
customers are going through a digestion period, we expect system sales to accelerate in the 2H of 2023.
Additionally, KRNT will also be launching its new high-end Apollo platform in June 2023 – this platform will
open up a significant portion of KRNT’s addressable market as it will allow more traditional screen printers to
adopt digital printing technology. The Apollo platform will have significantly higher throughput and a declining
cost-per-print, which in turn should create an inflection in consumable demand. Although fundamentals are
29 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
soft near-term and we attribute the end-of-year weakness in KRNT’s stock to tax-loss selling, we believe that
at 2x EV-to-2023 consensus revenue, KRNT shares trade at a meaningful discount to historical levels, which
have been closer to 5x EV-to-Revenue. Kornit’s revenue also includes about 40% from high margin recurring
proprietary inks that we estimate provide the company with at least about half of its operating profit. Kornit
also exited its most recent quarter with about $14 per share in net cash, equating to approximately 60% of its
current market capitalization.
American Well (“AMWL”)
Shares of American Well ("AMWL"), a telehealth company better known as Amwell, retreated -21.17% in the
fourth quarter. While the company did not report any negative updates in the quarter, we believe several broad
investor themes continued to weigh on the stock. As an unprofitable digital health company with a high cash
burn, shares sit squarely in the "out of favor" category among investors. Further, a sizeable portion of AMWL's
customer base consists of health systems that have had to contend with dramatically constrained budgets after
two years flush with COVID funding. The company has been undergoing a complete overhaul of its telehealth
software and has spent the better part of last year building its new “Converge” platform and migrating existing
customers. With migrations continuing into 2023 and uncertainty on the timing of revenue reacceleration,
investors seem to have preferred to take a wait and see approach. Lastly, year-end tax loss selling could have
been responsible for the stock's particularly dismal performance in December and subsequent rebound in
January. Contrary to prevailing street sentiment, Senvest is willing to take a longer-term view and is bullish on
the company's prospects. AMWL currently counts most of the largest payors and 150 health systems, including
over two thousand hospitals, as clients and has recently announced a new deal with CVS and a renewal of their
contract with their largest customer, Elevance (formerly Anthem).7 Further, the company boasts a solid balance
sheet with more than sufficient cash to reach cash flow breakeven. As a white label technology and services
provider, AMWL is positioning itself as an invaluable enabler of digital care with industry-leading integration
and customizable workflow capabilities that we think will lead the company to become a partner of choice in
the space, greatly increasing the company's strategic value.
Short Industrial Tool and Equipment Provider
A short position in an industrial tool and equipment provider rose approximately +10.00% as the end market for
the company’s products remained more resilient than the market expected.
Portfolio Activity
Notable moves in the quarter included additions to core holdings on stock price weakness including EBAY and
QDEL. We ramped up our investment in a relatively recent core holding, Boston Properties (“BXP”), a super-
7 https://seekingalpha.com/news/3868379-cvs-stock-price-in-focus-as-retailer-picks-american-well-for-virtual-care
30 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
premium commercial property owner and developer which we have owned in the past, as well as SEDG and
KRNT. We exited our investments in Billtrust (“BTRS”), which was acquired; casino operator MGM Resorts
International (“MGM”); mobile gaming company Playtika (“PLTK”); and crypto-focused bank Silvergate Capital
(“SI”). Concerned about the industry dynamics and SI, we had decided to exit the position, which was before
the stock had suffered a serious decline. We modestly trimmed certain core holdings that had stock price gains
during the quarter and/or for portfolio management reasons. We added to a short position in an industrial REIT
and initiated short positions in a consumer and industrial services company and a healthcare tech provider. We
covered a short position in a branded apparel company, among other short positions covered.
Review of 2022
See below for the Fund’s sector attribution for 2022 along with average gross long and short exposure for the
year:
Sector Exposure and Average Exposures for 20228
The following page shows a list of the top 10 winning and losing investments (in rank order) for the Fund in
2022:
8 Net Attribution Figures have been prepared on a pro forma basis and provided above, consistent with note in footnote 1.
Important considerations regarding Senvest's calculation methodology for the Net Sector attributions should be reviewed
under the Important Disclosures on page 15—these figures are not properly understood without reference to these
disclosures.
SectorLongShortTotal GrossTotal NetLongShortGrossNetLongShortGrossNetCommunication Services-1.47%0.35%-1.12%-1.19%5%0%5%5%3%0%3%3%Consumer Discretionary-7.10%3.91%-3.19%-3.41%41%-13%54%28%46%-14%60%32%Consumer Staples-1.27%-0.13%-1.40%-1.50%2%0%2%2%2%0%2%2%Energy6.76%-0.06%6.70%6.23%27%-1%28%26%23%0%23%23%Financials-2.36%1.73%-0.63%-0.67%15%-1%16%14%13%0%13%13%Health Care-11.63%0.80%-10.83%-11.58%19%-1%20%18%18%-2%20%16%Industrials-4.88%-0.29%-5.17%-5.53%8%-3%11%5%10%-7%17%3%Information Technology-3.75%1.29%-2.46%-2.63%40%-3%43%37%39%0%39%39%Materials-0.70%0.00%-0.70%-0.75%3%0%3%3%2%0%2%2%Real Estate-1.48%1.40%-0.08%-0.09%2%-2%4%0%7%-3%10%4%Utilities0.00%0.23%0.23%0.21%0%0%0%0%0%0%0%0%Index/ETF-0.02%1.05%1.03%0.96%0%-2%2%-2%1%0%1%1%Total-27.90%10.28%-17.62%-19.95%162%-26%188%136%164%-26%190%138%Exposure 12/31/2022Average Exposure 2022Attribution 202231 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
Top 10 Contributors in 2022
Company
ARC RESOURCES
PARAMOUNT RESOURCE
BTRS HOLDINGS
FINANCIALS CO
SOLAREDGE TECHNOLOGIES
REAL ESTATE CO
TOWER SEMICONDUCTOR
PING IDENTITY HOLDING
AXCELIS TECHNOLOGIES
CONSUMER DISCRETIONARY CO
Top 10 Detractors in 2022
Company
QUIDELORTHO
EBAY
RADWARE
AYR WELLNESS
LUMIRADX
FINANCIALS CO
WW INTERNATIONAL
VERINT SYSTEMS
VERANO HOLDINGS
COGNYTE SOFTWARE
Ticker
ARX
POU
N/A
N/A
SEDG
N/A
TSEM
N/A
ACLS
N/A
Ticker
QDEL
EBAY
RDWR
AYR/A
LMDX
N/A
WW
VRNT
VRNO
CGNT
Long/Short
Long
Long
Long
Short
Long
Short
Long
Long
Long
Short
Long/Short
Long
Long
Long
Long
Long
Short
Long
Long
Long
Long
12/31/2021
Stock Price
11.50
24.59
7.82
N/A
280.57
N/A
39.68
22.88
74.56
N/A
12/31/2022
Stock Price
18.25
28.64
9.50
N/A
283.27
N/A
43.20
28.50
79.36
N/A
12/31/2021
Stock Price
134.99
66.50
41.64
19.14
8.91
N/A
16.13
52.51
15.95
15.67
12/31/2022
Stock Price
85.67
41.47
19.75
1.68
0.90
N/A
3.86
36.28
4.30
3.11
% Price
Change9
58.70%
16.47%
21.48%
-90.00%
0.96%
-60.00%
8.87%
24.56%
6.44%
-20.00%
% Price
Change
-36.54%
-37.64%
-52.57%
-91.22%
-89.90%
-60.00%
-76.07%
-30.91%
-73.04%
-80.15%
Outlook and Positioning for 2023
In 2022, virtually all asset classes posted negative returns, with the MSCI All-Country World Index dropping
-19.46%. US equity markets experienced similar declines of -18.13% for the S&P 500 and -20.46% for the Russell
2000. Ned Davis Research (“NDR”) notes it was the seventh-worst year for the S&P 500 since 1926. Bonds also
had a difficult 2022. NDR further notes “Last year was the worst on record for the Bloomberg Barclays U.S.
9 Price changes simply reflect the change in the stock price from the end of Q3 2022 until the end of Q4 2022. This figure is
not reflective of Senvest's performance in any investment, and is not an indication that Senvest (i) has attained any
performance metrics in these investments or (ii) has held these positions during the entire quarter.
32 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
Aggregate Index, at -13.0%. It was only the fifth time since 1926 that both stocks and bonds declined in the
same year, and the first time they both fell by over 10%.”10 Bank of America research further shows the historic
context of the US Treasury market drubbing, “…US Treasuries 17% loss in ’22 was worst since 1788 and 2nd
straight annual loss; last time 2 straight years of UST losses…1958-59, last time >5% UST loss followed by -ve
return…1861; last time 3 straight years of US government bond Treasuries…never; 250 years of history say US
Treasury returns up in 2023.”11
Even after such an awful year with relatively historic losses, Wall Street strategists, financial media outlets and
investors remain firmly downbeat in sentiment going into 2023. A sample of recent headlines reflects the dour
mood:
“Big Banks Predict Recession…more than two-thirds of economists at 23 major financial institutions
expect the U.S. to have a downturn this year. (WSJ Jan 2, 2023)”
“Morgan Stanley Warns US stocks Risk 22% Slump. (Bloomberg Jan 9, 2023)”
“JP Morgan, Goldman Sachs Say Stocks Recovery Won’t Be Easy in 2023 (Bloomberg Dec 20, 2022)”
“After $18 Trillion Rout, Global Stocks Face More Hurdles in 2023 (Bloomberg Dec 29, 2022)”
“Smart Money Is Still Wary of the Equity Rally (FT January 27, 2023)”
The Bank of America global fund manager survey further confirms the skepticism and reports “Asset allocators
are the most underweight US stocks since Oct 2005.”12
As contrarians, we take comfort in the rampant negativity. If a recession is all but certain, wouldn’t that get
reflected in stock prices?
In our third quarter letter, we expressed our view that dramatic Fed tightening measures were succeeding in
reining inflation and that inflation expectations were well contained. This helped support our relatively bullish
net long position in the fourth quarter. As we start the year, it appears that the equity markets could be coming
around to this view and we aren’t surprised to see the pundits proven wrong, with equity markets performing
strongly in January. The Fund has outperformed, posting an estimated net return of approximately 15.59% in
January. We have taken the opportunity to trim longs, add modestly to short positions and reduce our gross
10 Ned Davis Research (2023, January 3)
11 BofA Global Research (2023, January 17). ChatFMS: We Are Less Bearish
12 BofA Global Research (2023, January 17). ChatFMS: We Are Less Bearish
33 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
and net long exposures to approximately 185% and 123%, respectively, down from 190% and 138% at the end
of December. A noticeable divergence between Fed targeted rates and market projected rates has many
commentators expecting the Fed to maintain strong, hawkish language in order to keep “financial conditions”
tight. In other words, the Fed is expected to stymie the market rally. In this event, we believe the Fund is well
positioned to add to longs and cover shorts if the market pulls back.
On a final note, we think it’s worthwhile to take a deeper look at last year’s performance of the underlying
portfolio excluding major contributors in 1) energy (primarily POU, ARX) provided +6.70% on a gross basis
(+6.23% on a net basis); 2) Tower Semiconductor (which is in the process of being acquired) provided +1.20%
on a gross basis (+1.13% on a net basis); and the short portfolio provided +10.28% on a gross basis (+9.65% on
a net basis). Excluding these contributors, the Fund declined approximately -33% on a net basis, suggesting a
serious hit to core holdings in which we have high conviction. In essence, much of the Fund is on sale. We
continue to have meaningful exposure to the energy sector with the Fund’s two core holdings in Canadian E&P
players POU and ARX, at approximately 17% and 6% of equity at the end of the year, as we have net sold the
strength. In addition to their intrinsic appeal, we believe this exposure can provide some protection if inflation
remains stubborn, given historical correlations of energy commodities with inflation, and as a hedge against
geopolitical strife.
In the attached Appendix, we show the Fund’s top 15 long positions and the market valuations. In general, the
bulk of the portfolio consists of relatively low P/E stocks of companies generating free cash flow, most of which
they use to buy back stock at what we think are attractive valuations, thereby further enhancing shareholder
value.
We thank our partners for your support and continued confidence in Senvest by entrusting us with your capital.
As always, feel free to reach out to us with any questions.
Very truly yours,
Richard Mashaal
Brian Gonick
34 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
Appendix A – Senvest Master Fund Top 15 Long Positions
Senvest Master Fund Top 15 Long PositionsPrice52 Wk HighLTM2023EV / RevEV / EBITDA(3)P / Adj. EPS(4)P / TBVEV / RevEV / EBITDA(3)P / Adj. EPS(4)Market CapParamount Resources (POU CN)$29.35(27%)10%2%2.2x4.5x4.3x1.4x2.7x3.5x3.5x$4,312Capri Holdings (CPRI US)$67.96(4%)4%19%1.8x8.3x10.4xNM1.8x8.5x9.5x$9,314Marriott Vacations (VAC US)$161.85(6%)1%20%2.1x10.0x16.2xNM1.9x9.3x13.8x$7,024eBay (EBAY US) (5)$50.66(16%)(15%)22%2.9x8.1x12.2x36.0x2.9x8.6x11.8x$28,606Quidel (QDEL US) (6)$89.70(24%)(9%)5%2.0x4.6x5.3x3.9x3.0x10.5x17.3x$6,055Solaredge (SEDG US)$316.00(14%)33%12%6.7x45.9xNM9.4x4.6x26.3x36.2x$18,812PennyMac Financial Services (PFSI US)$66.29(9%)12%17%NA NA 6.3x1.0xNA NA9.8x$3,644Tower Semi (TSEM US)$41.50(16%)21%(4%)2.3x7.1x16.3x2.6x2.4x7.2x14.0x$4,599Verint (VRNT US)$38.86(30%)(25%)7%3.5x13.8x16.6xNM3.3x11.7x14.5x$2,560Axcelis (ACLS US)$118.04(1%)88%49%4.2x16.7x22.7x6.3x3.8x17.2x20.0x$3,877Radware (RDWR US)$22.14(38%)(34%)12%2.6x17.0x22.3x4.0x2.6x14.9x18.8x$1,010Arc Resources (ARX CN) (7)$15.04(32%)(1%)(18%)1.4x2.9x2.9x1.6x1.8x2.7x2.8x$9,832Boston Properties (BXP US)$75.48(43%)(33%)12%9.0x16.5x10.5x1.9x8.7x14.7x15.4x$11,832Kornit (KRNT US)$27.59(74%)(72%)20%3.1xNMNM1.6x3.4xNM NM$1,375Ciena (CIEN US)$50.32(28%)(23%)(1%)2.0x14.7x26.2x3.2x1.7x11.0x17.7x$7,468Median(8)(24%)(1%)12%2.4x10.0x10.5x3.2x2.8x10.5x14.6x$6,055Russell 2000(9)(7%)(1%)13%1.7x12.7x13.5x4.7x1.7x8.3x14.0xS&P 500(9)(11%)(8%)8%2.6x11.8x20.1x13.7x2.6x12.5x18.9x(1)Trailing multiples based on last twelve months reported data for all companies.(2)Bloomberg Estimates for calendar year 2023; Adjustments exclude non-cash charges, including intangible amortization and stock-based compensation.(3)Trailing and Forward EBITDA estimates for ARX CN and POU CN represent Debt Adjusted (Unlevered) Cash Flow. (4)P / Adj. EPS based on cash adjusted stock prices for those companies with positive net cash per share (TSEM, EBAY, and RDWR).Earnings estimates for ARX CN and POU CN based on FFO. (5)Valuation of eBay includes $5.83 / share of post-tax value related to investments in Adevinta, Adyen, eBay Korea, and Kakao Bank, as well as cash proceeds to be received from the eBay Korea sale. Trailing estimates for Revenue, EBITDA, EPS and Tangible Book Value exclude Classifieds assets and eBay Korea. (6)Figures prior to 2022 reflect standalone Quidel and are not PF for acquisition of Ortho Clinical Diagnostics in 2Q22.(7)ARX CN historical financials and capital structure are pro forma for VII CN acquisition (closed 4/6/21)(8)(9)P / EPS for Russell 2000 and S&P 500 represent current Price / Adj. EPS multiples from Bloomberg excluding members with negative earnings.AUM ($ Million) - as of 12/31/2022$2,225.8Q3 2022Q4 2022ChangeQ3 2022Q4 2022ChangeGross Long161%164%3%Top 10 Longs94%102%8%Gross Short-24%-26%-2%Top 20 Longs126%134%9%Total Gross185%190%5%Largest Long Position Size16%18%1%Net137%138%1%Top 10 Shorts20%23%3%Cash & Currency-37%-38%-1%Top 20 Shorts24%26%3%% ChangeTrailing(1)1-Year Forward(2)Note: NM = Not Meaningful. NA = Not Available. Senvest Top 15 ranking as of 2/3/23. Prices, market cap and fundamentals as of 2/3/23. ARX CN and POU CN Price, Market Cap and EPS in CAD, all other positions in USD.Concentration (% of Equity)Portfolio Exposure (% of AUM)Median calculations for valuation multiples exclude TSEM due to acquisition by Intel Corporation announced on 2/15/22. Median calculations also exclude members with negative earnings.35 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
IMPORTANT DISCLOSURES
This letter is an informational document and does not constitute an offer to sell or a solicitation to purchase any securities in any entity organized, controlled, or managed by Senvest
Management, LLC ("Senvest") or in (i) Senvest Partners LP, a Delaware limited partnership, (ii) Senvest Partners Ltd., a Cayman Islands exempted company (both Senvest Partners LP and
Senvest Partners Ltd. invest substantially all of their assets in Senvest Master Fund, L.P.), or any other partnership interests described herein (collectively, the "Funds"), and may not be relied
upon in connection with any offer or sale of securities. Any offer or solicitation may only be made pursuant to a Confidential Private Offering Memorandum (or similar document) which will
only be provided to qualified offerees and should be reviewed carefully by any such offerees prior to investing.
An investment in a Fund involves risk and volatility. Because this communication is only a high-level summary it does not contain all material terms pertinent to an investment decision,
including important disclosures of conflicts and risk factors associated with an investment in a Fund. This document in and of itself should not form the basis for any investment decision. An
investment in a Fund is speculative and entails substantial risks, including the fact that such an investment would be illiquid and be subject to significant restrictions on transferability. No
market is expected to develop for interests in any Fund. Financial instruments and investment opportunities discussed or referenced herein may not be suitable for all investors, and potential
investors must make an independent assessment of the appropriateness of any transaction in light of their own objectives and circumstances, including the possible risk and benefits of entering
into such a transaction.
An investor in a Fund could lose all or a substantial amount of his or her investment. Returns generated from an investment in a Fund may not adequately compensate investors for the business
and financial risks assumed. While the Funds are subject to market risks common to other types of investments, including market volatility, the Funds employ certain trading techniques such
as the use of leverage and other speculative investment practices that may increase the risk of investment loss. The products and strategies in which the Funds expect to invest may involve
above-average risk. Please see the Risk Factors section of the applicable Confidential Private Offering Memorandum (or similar document) for certain risks associated with an investment in a
Fund.
Certain information contained in this Presentation constitutes "forward-looking statements," which can be identified by the use of forward-looking terminology such as "may", "will", "should",
"expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe" or the negatives thereof or other variations thereon or comparable terminology. Due to various risks
and uncertainties, actual events or results or the actual policies, procedures and processes of the Investment Manager and the performance of the Funds may differ materially from those
reflected or contemplated in such forward-looking statements and no undue reliance should be placed on these forward-looking statements, nor should the inclusion of these statements be
regarded as the Investment Manager's representation that the Funds will achieve any strategy, objectives or other plans.
This document should be read in conjunction with, and is qualified in its entirety by, information appearing in the Confidential Private Offering Memorandum (or similar document) for each
Fund and the organizational documents for such fund (e.g. limited partnership agreements, articles of association, etc.), which should be carefully reviewed prior to investing. Potential investors
should consult a professional adviser regarding the possible economic, tax, legal or other consequences of entering into any investments or transactions described herein. Investment
allocations and ownership percentages are subject to change without notice. The information contained herein is confidential and cannot be reproduced, shared or published in any manner
without the prior written consent of Senvest.
Unless otherwise indicated, the information contained in this document is current as of the date indicated on its cover. Such information is believed to be reliable and has been obtained from
sources believed to be reliable, but no representation or warranty is made, expressed or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of the
information and opinions. Additionally, there is no obligation to update, modify or amend this document or to otherwise notify a reader in the event that any matter stated herein, or any
opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
The Investment Manager is not acting and does not purport to act in any way as an advisor or in a fiduciary capacity vis-a-vis any investor in the Funds. Therefore, it is strongly suggested that
any prospective investor obtain independent advice in relation to any investment, financial, legal, tax, accounting or regulatory issues discussed herein. Analyses and opinions contained herein
may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance
of any financial instrument, credit, currency rate or other market or economic measure.
Certain performance information is provided for the Funds. Performance numbers are net of all fees and expenses unless noted otherwise. Past performance is not necessarily indicative of
or a guarantee of future results. Short position percentage of price change is rounded to maintain the anonymity of the security. Unless otherwise noted, all calculations in this report are
made by Senvest. All profit and loss, or other performance information is unaudited and is net of fees and expenses based on an investment made at inception. Total returns reflect
compounded monthly returns. The distribution of this document in certain jurisdictions may be prohibited or restricted by law; therefore, people in whose possession this document comes
should inform themselves about and observe such restrictions. Any such distribution could result in a violation of the law of such jurisdictions.
Gross and Net Attribution Figures: Attributions of sector-level performance are shown on a gross basis unless otherwise noted herein ("Gross Attributions"). Gross Attributions reflect
the return contribution by the aggregate investments in each Sector for the period indicated (calculated by dividing the gains/losses of the indicated Sector over the portfolio, as applicable),
but is calculated prior to the deduction of management fees, expenses and incentive compensation paid to Senvest, which will reduce performance.
Net sector attributions ("Net Attributions") reflect Gross Attributions, reduced by a percentage equal to the quotient of the the applicable Fund's net return divided by the applicable Fund's
gross returnin order to approximate a pro forma “net” return. This pro forma return should not be relied upon as a precise metric of the impact of fees and expenses on the performance of
each Sector, for the reasons detailed below.
Net Attributions are presented pro forma because, although such figures reflect actual performance, these calculations apply management fees, expenses and incentive compensation to
each Sector's Gross Attributions, even though each Fund's fees, expenses and incentive compensation are only calculated for the applicable Fund as a whole. Correspondingly, this
approximation does not precisely reflect the impact such fees and expenses actually had on the performance of positions included in each Sector. Net Attributions do not take into account
the specific impact of leverage and other costs on specific Sectors' performance, nor do they incorporate the differing impact that each investor’s or Fund's high water mark has on specific
Sectors. For example, if the Fund as a whole accrued incentive compensation for a given period, the Net Attributions methodology would result in the reduction of Gross Attributions,, on a
percentage basis, of an amount incorporating that accrued incentive compensation from each Sector's performance, even where a Sector experienced negative performance (and therefore,
viewed in isolation, would not have accrued incentive allocation). In addition, expenses are not tracked on a Sector-by-Sector basis, and therefore the Net Attributions shown herein do not
reflect an approximation of the precise impact of expenses on specific Sectors' performance—many expenses are incurred on a fund-wide level and do not relate to any specific portion of
the investment program. Pro forma performance of this nature is subject to inherent limitations and should not form the basis for an investment decision. Additional information on the
risks and limitations of pro forma performance is available upon request.
Senvest Master Fund, L.P. performance returns presented in certain tables reflect those Funds' historical performance during the time periods indicated.
The S&P 500 Index, HFRI Equity Hedge Total Index, and Russell 2000 Index (collectively, the "Indices") are included for informational purposes only. All index returns include
dividend reinvestment. The Funds' portfolios will not replicate any of these indices and no guarantee is given that performance will match any of the indices; it is not possible to invest in any
index. There are significant differences between the Funds' investments and the Indices (for instance, the Funds will use short sales and leverage and may invest in securities that have a
greater degree of risk and volatility, as well as less liquidity, than those securities contained in the Indices). Moreover, the Indices are not subject to any of the fees or expenses that the
Funds must pay. It should not be assumed that the Funds will invest in any specific securities that comprise the Indices, nor should it be understood to mean that there is a correlation
between the Funds' returns and the Indices' performance. Additional information on each index follows:
36 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2022 & 2023 Outlook: February 6, 2023
The S&P 500 index is one of the most commonly used benchmarks for the overall U.S. stock market. This index is a broad based measurement of changes in stock market conditions based on
the average performance of 500 widely held stocks including industrial, transportation, financial, and utility stocks. The composition of the 500 stocks is flexible and the number of issues in
each sector varies over time.
The HFRX Equity Hedge Total Index is calculated by Hedge Fund Research, Inc. and is a benchmark of hedge fund industry performance that is engineered to achieve representative performance
of equity hedge fund managers that would typically maintain at least 50%, and may in some cases be substantially entirely invested, in equities, both long and short. In order to be considered
for inclusion in the HFRX Equity Hedge Index, a hedge fund must be currently open to new transparent investment, maintain a minimum asset size and meet the duration requirement
(generally, a 24 month track record). Because the HFR Indices are calculated based on information that is voluntarily provided, actual returns may be higher or lower than those reported.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which is made up of 3,000 of the largest U.S. stocks by market capitalization. The
Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000 Index.
37 Senvest Capital Inc.
Management’s Report
December 31, 2022
INTERNAL CONTROLS
Disclosure controls and procedures
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2022
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, 2022, 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, 2022.
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, 2022, 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, 2022. There have been no
changes during the year ended December 31, 2022 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
Senvest Capital Inc.
March 31, 2023
(Management Discussion and Analysis (“MD&A”) provides a review of Senvest Capital Inc.’s operations, performance and financial condition for the
year ended December 31, 2022, and should be read in conjunction with the 2022 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.)
38 Senvest Capital Inc.
Management’s Report
December 31, 2022
The Consolidated financial statements for the fiscal year ended December 31, 2022 and December 31, 2021,
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 31, 2023
39 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, 2022 and 2021, 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, 2022 and 2021;
the consolidated statements of income (loss) for the years then ended;
the consolidated statements of comprehensive income (loss) 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, including material accounting policy 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
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, an Ontario limited liability partnership.
40 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, 2022. 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
Refer to note 2 – Material accounting policy
information, note 3 – Critical accounting estimates
and judgments and note 16 – Financial risks and
fair value to the consolidated financial statements.
Our approach to addressing the matter included the
following procedures, among others:
Tested how management determined the fair
value estimates for a sample of the Securities,
which included the following:
As at December 31, 2022, the Company’s
investment portfolio included $5,280,915,000 of
equity investments and other holdings measured at
fair value through profit or loss, which included
$253,677,000 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, comparable bond
methodologies, Black-Scholes option pricing
models, index performance method, and recent
transactions to determine the fair value of the
Securities. In the determination of the fair value of
these Securities, management applies significant
judgment which includes the selection of
appropriate valuation techniques and the use of
significant unobservable inputs in those techniques,
such as:
a) earnings before interest, tax and amortization
(EBITA) multiples, revenue multiples, EBITA
estimates, revenue estimates, average change
in market capitalization, index weighting and
price to book value (P/BV) multiples for
Securities valued using the comparable
company approach;
– 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 of the
underlying companies.
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, 2022 and, if
applicable, the reasonableness of the
discount for lack of marketability applied.
– Assessed the reasonableness of significant
unobservable inputs by considering
comparable companies for expected
volatilities, average change in market
capitalization, index weighting and
P/BV multiples.
41 Key audit matter
How our audit addressed the key audit matter
– Professionals with specialized skill and
knowledge in the field of valuation were
used to further assist in evaluating the
reasonableness of management’s valuation
techniques and significant unobservable
inputs, by considering comparable
companies for the EBITA multiples,
revenue multiples, P/BV multiples, discount
rates, YTM rates, index weighting, average
change in market capitalization and
expected volatilities.
–
Tested the underlying data used in the
valuation techniques.
b) discount rates and yield to maturity (YTM) rates
for Securities valued using comparable bond
methodologies;
c) expected volatilities for Securities valued using
the Black-Scholes option pricing models;
d)
index weighting for Securities valued using the
index performance method; and
e) discount for lack of marketability for Securities
valued using the recent transactions.
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
Refer to note 2 – Material accounting policy
information, note 3 – Critical accounting estimates
and judgments and note 9 – Investment properties
to the consolidated financial statements.
Our approach to addressing the matter included the
following procedures, among others:
Tested how management determined the fair
value of a sample of investment properties,
which included the following:
As at December 31, 2022, the Company held
investment properties amounting to $56,318,000,
which are measured at fair value. Management
uses valuation techniques, including the
comparable sales 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.
– 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.
42 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 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.
43 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.
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.
44 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 31, 2023
1 CPA auditor, public accountancy permit No. A117693
45 Senvest Capital Inc.
Consolidated Statements of Financial Position
As at December 31, 2022 and 2021
Note
4
5(b)
6
7
8
9
12(b)
11(b)
5(a)
11
5(b)
6
12(b)
12(b)
10
(in thousands of Canadian dollars)
2022
$
2021
$
42,531
477
163,579
5,280,915
29,563
47,763
56,318
14,871
17,136
52,189
475
69,333
6,272,837
25,360
50,765
54,349
22,865
15,729
5,653,153
6,563,902
532
29,694
1,058,328
858,733
34,006
703
4,797
90,606
1,981,983
253
96,847
998,409
888,254
187,130
1,411
2,727
143,545
2,429,673
4,059,382
4,748,249
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
20,657
234,254
1,321,347
20,853
127,620
1,656,171
Total equity attributable to common shareholders
1,576,258
1,804,644
Non-controlling interest
Total equity
Total liabilities and equity
Approved by the Board of Directors
17
17,513
11,009
1,593,771
1,815,653
5,653,153
6,563,902
__________________________________
Victor Mashaal
Director
_________________________________
Frank Daniel
Director
The accompanying notes are an integral part of these consolidated financial statements.
46
Senvest Capital Inc.
Consolidated Statements of Income (Loss)
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except per share data)
Note
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
7
Total revenue and net investment gains (losses)
Operating costs and other expenses
Employee benefit expense
Interest expense
Transaction costs
Other operating expenses
2022
$
28,232
42,292
6,583
77,107
2021
$
9,208
29,419
6,079
44,706
(810,022)
(17,315)
10,587
4,511
(86)
4,873
2,423,815
(4,265)
6,510
5,052
682
5,676
(807,452)
2,437,470
(730,345)
2,482,176
40,953
51,780
18,097
29,085
139,915
156,403
15,552
21,005
21,377
214,337
Change in redemption amount of redeemable units
(502,428)
1,431,017
Income (loss) before income tax
(367,832)
Income tax expense (recovery)
12(a)
(40,507)
836,822
100,950
735,872
732,988
2,884
(327,325)
(326,083)
(1,242)
14
(130.98)
289.32
Net income (loss) for the year
Net income (loss) attributable to:
Common shareholders
Non-controlling interest
Earnings (loss) per share
Basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
47
Senvest Capital Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31, 2022 and 2021
Net income (loss) for the year
Other comprehensive income
Currency translation differences
Comprehensive income (loss) for the year
Comprehensive income (loss) attributable to:
Common shareholders
Non-controlling interest
(in thousands of Canadian dollars)
2022
$
2021
$
(327,325)
735,872
107,279
1,562
(220,046)
737,434
(219,449)
(597)
734,591
2,843
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.
48 Senvest Capital Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars)
Equity attributable to owners of the parent
Note
Share
capital
$
Accumulated
other
comprehensive
income
$
Retained
earnings
$
Non-
controlling
interests
$
Total
$
Total
equity
$
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
Net loss for the year
Other comprehensive income
Comprehensive income (loss)
for the year
Repurchase of common shares
Contribution from non-controlling interest
-
-
-
-
106,634
(326,083)
-
(326,083)
106,634
(1,242)
645
(327,325)
107,279
106,634
(326,083)
(219,449)
(597)
(220,046)
13
(196)
-
(8,741)
(8,937)
-
7,101
(8,937)
7,101
Balance – December 31, 2022
20,657
234,254
1,321,347 1,576,258
17,513
1,593,771
The accompanying notes are an integral part of these consolidated financial statements.
49 Senvest Capital Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars)
Note
2022
$
2021
$
Cash flows provided by (used in)
Operating activities
Net income (loss) 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)
(327,325)
232,974
(5,472,576)
(6,663,804)
5,667,239
6,953,279
20,824
(153,303)
735,872
(918,161)
(5,189,492)
(6,941,058)
5,323,891
7,547,723
4,700
26,826
Net cash provided by operating activities
257,308
590,301
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
Proceeds from sale of investment properties
Net cash used in investing activities
Financing activities
Increase (decrease) in bank advances
Payment of lease liability
Contributions from non-controlling interest
Repurchase of common shares
Proceeds from issuance of redeemable units
Amounts paid on redemption of redeemable units
29
(4,019)
(2,639)
(448)
(5)
(2,421)
(4,599)
(9,290)
(20,668)
(140,796)
1,869
1,075
5,617
5,273
577
-
(19,184)
(151,261)
11(b)
265
(1,236)
7,101
(8,937)
29,187
(276,760)
(432)
(1,190)
-
(28,001)
16,591
(385,185)
Net cash used in financing activities
(250,380)
(398,217)
Increase (decrease) in cash and cash equivalents during the year
(12,256)
40,823
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
2,598
52,189
42,531
47,951
15,937
24,414
41,879
12,067
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.
50
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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 Material accounting policy information
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 30, 2023.
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.
(1)
51
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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
Participations in associates are initially recorded at cost plus transaction costs. Subsequent to the acquisition
date, the Company’s share of profits or losses of associates is recognized in the consolidated statements of loss.
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 loss.
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 (loss). 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.
52 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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 (loss) and comprehensive income (loss) 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 (loss).
All foreign exchange gains and losses are presented in the consolidated statement of income (loss) in foreign
exchange gain (loss).
53 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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 loss 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 (loss). 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
Recognition, derecognition and offsetting
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.
54 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
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).
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, including hybrid contracts, are classified as either amortized cost 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.
Financial assets with cash flows that are SPPI but are not held within the “Hold to collect” business model are
measured at FVTPL.
Financial assets with cash flows that do not meet the SPPI conditions are measured at FVTPL.
Financial assets held for trading are classified as FVTPL.
Financial liabilities are measured at amortized cost unless they must be measured at FVTPL (such as
instruments held for trading or derivatives) or if the Company elects to measure them at FVTPL. The Company
has not made such elections.
Financial assets at FVTPL
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 instruments that are managed together and for which there
is evidence of a recent actual pattern of short-term profit taking.
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.
Derivatives are also classified as held for trading. The Company does not classify any derivatives as
hedges in a hedging relationship.
55 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
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 FVTPL are initially recognized at fair value. Transaction costs are
expensed as incurred in the consolidated statement of income (loss).
Subsequent to initial recognition, all financial assets and financial liabilities at FVTPL are measured at 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.
Gains and losses arising from changes in the fair value of financial assets or financial liabilities at FVTPL
are presented in the consolidated statement of income (loss) 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.
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.
Dividend income from financial assets at fair value through profit or loss is recognized in the consolidated
statement of income (loss) 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 (loss) 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 (loss) 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 SPPI and that are
managed under a “hold to collect” business model.
The Company’s financial assets at amortized cost consist of cash and cash equivalents, due from brokers, as
well as loans to employees and restricted short-term investment, which are included in other assets.
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
56 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
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.
Impairment
Substantially all of the Company’s financial assets at amortized cost are short-term assets and due by
counterparties with low credit risk. The Company monitors its financial assets measured at amortized cost and
counterparty risk.
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.
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.
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 (loss) as part of net change in fair value of investment
properties in the period in which they arise.
57 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
Transaction costs
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of an
investment.
Income tax
Income tax comprises current and deferred tax. Income tax is recognized in the consolidated statement of
income (loss) 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.
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.
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.
58 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
Earnings per share
Basic earnings per share is calculated by dividing the net loss 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.
New accounting standards adopted
The Company has early adopted the following IFRS amendments. The adoption of those amendments had no
significant effect on the Company’s consolidated financial statements.
IAS 1, ‘Presentation of Financial Statements’ and IFRS Practice Statement 2 ‘Making Materiality
Judgements’. The IASB amended IAS 1 to assist entities in determining which material accounting policies
are required to be disclosed. To support the IAS 1 amendment, guidance to demonstrate the application of
materiality in a 'four-step materiality process' is provided in IFRS Practice Statement 2 to accounting policy
disclosures.
IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’. The IASB amended IAS 8 to
help entities distinguish between changes in accounting policies and accounting estimates.
Accounting standards and amendments issued but not yet adopted
The IASB has issued a new standard and various amendment to existing standards that are not mandatory for
the December 31, 2022, reporting period and which were not early adopted by the Company. Neither the new
standard nor the amendments are relevant to the Company’s current activities and transactions.
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.
59 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
Changes in assumptions about these factors could affect the reported fair value of financial instruments.
(in thousands of Canadian dollars unless otherwise stated)
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.
Geopolitical events
The ongoing military conflict between Ukraine and Russia and the imposition of economic sanctions by
Western countries continue to cause concern in financial markets. It is difficult to predict the impact of this
conflict on the value of the financial assets held by the Company. Although the risk of recession is increased by
this conflict and the increased levels of interest rates, inflationary pressures remain present. However, the
Company does not hold any assets in or financial instruments issued by entities from Ukraine, Russia and
Belarus which reduces the extent of possible variations in the value of its financial assets.
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 of Senvest Master fund LP and Senvest Technology Partners GP LLC is
the General Partner of Senvest Technology Partners Master Fund LP. As compensation for its sub-advisory
60 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
services, the Company is entitled to receive 60% of the net management fees through RIMA and incentive
allocation earned through the General Partners 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.
4 Cash and cash equivalents
Cash on hand and on deposit
Short-term investments
2022
$
42,309
222
42,531
2021
$
52,056
133
52,189
5 Credit facility and due from and due to brokers
a) Credit facility
Bank advances
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, 2022, $532 was outstanding (2021 – $253). 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%. All of the
credit facility available is also available by way of term SOFR loans or banker’s acceptance at varying rates
depending on the length of term plus 1.75% per annum, or by US dollar advances.
A first-ranking movable hypothec in the amount of $30,000 on all of the Company’s assets has been
granted as collateral for the credit facility. According to the terms of the facility, the Company is required
to comply with certain financial covenants. As at December 31, 2022 and 2021, 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, 2022 and 2021, 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, 2022, listed equity
securities and due from brokers amounting to $4,890,741 have been pledged as collateral (2021 –
$5,781,724). The fair value of the collateral-listed equity securities is calculated daily and compared to the
61 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
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.
(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
$
2022
Net
amount
$
Due from brokers
Due to brokers
520,503
108,687
356,924
1,167,015
163,579
(1,058,328)
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
69,787
355,210
454
1,353,619
2021
Net
amount
$
69,333
(998,409)
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
2022
$
2021
$
4,695,370
82,651
214,865
6(a)
5,670,043
57,142
211,428
4,992,886
5,938,613
233,233
54,741
55
268,910
58,815
6,499
5,280,915
6,272,837
4,992,886
288,029
5,938,613
334,224
62 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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 $914,461;
2021 – $900,914)
Derivative financial liabilities (proceeds of $3,084;
2021 – $697)
Note
2022
$
2021
$
810,045
6(a)
48,688
858,733
883,880
4,374
888,254
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
$
201,572
241
13,107
Notional
value
$
392,067
3,251
124,110
Notional
value
$
-
92,482
-
As at
December 31,
2022
Fair value
of derivative
financial
liabilities
$
(47,029)
(1,659)
-
For the
year ended
December 31,
2022
Net
change in
fair value
$
11,648
5,524
(29,338)
519,428
214,920
92,482
(48,688)
(12,166)
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
Equity swaps
Equity options
Warrants and rights
Equity swaps
Equity options
Warrants and rights
63
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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 income (loss) and comprehensive income (loss)
Grant and Geary Partners LP(i)
Other associates
2022
$
13,144
16,419
29,563
(1,478)
1,392
(86)
2021
$
13,924
11,436
25,360
(227)
910
682
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 $56,310 (2021 – $60,232) and
$10,190 (2021 – $11,375), 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
Note
8(a)
8(b)
2022
$
12,759
35,004
47,763
2021
$
12,765
38,000
50,765
Non-current portion
47,763
50,765
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-
64 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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
Proceeds from dispositions
Capitalized subsequent expenditure
Net gain from dispositions
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 gain from dispositions
Net change in fair value of investment properties
b)
Investment properties are commercial properties situated in Spain.
c)
Contractual obligations
2022
$
54,349
2,200
(5,617)
439
2,068
2,443
436
56,318
56,318
2022
$
6,004
3,586
953
2,068
2,443
2021
$
49,134
3,042
-
872
-
5,052
(3,751)
54,349
54,349
2021
$
5,596
3,519
794
-
5,052
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 were no
transfers between levels for recurring fair value measurements of investment properties during the years
ended December 31, 2022 and 2021.
65 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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 market 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
2022
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Leased buildings and
46,569
Comparable
sales approach
Value/m2
$1,182
10% +/-4,642
land
–Storage facilities
9,749
Recent
Transaction
Value/m2
$651
-
-
Description
Fair value
2021
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
$
Reasonably
possible
shifts +/−
Change
in value
$
Leased buildings and
land
–Storage facilities
44,196
Comparable
sales approach
10,153
Recent
Transaction
Value/m2
$1,139
10%
+/-4,411
Value/m2
$799
-
-
66 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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
$
-
-
-
4,992,886
-
-
-
-
-
(858,733)
-
-
-
Other
$
-
-
-
288,029
47,763
-
-
-
-
-
-
-
-
Financial
Assets at
amortized
cost
$
Financial
liabilities at
amortized
cost
$
2022
Total
$
42,531
477
163,579
-
-
11,392
-
-
-
-
-
-
-
-
-
(532)
(29,694)
(1,058,328)
42,531
477
163,579
5,280,915
47,763
11,392
(532)
(29,694)
(1,058,328)
-
-
-
-
-
(34,006)
703
(1,981,983)
(858,733)
(34,006)
703
(1,981,983)
4,134,153
335,792
217,979
(3,103,840)
1,584,084
(705,696)
24,859
22,067
(93,739)
2
2,910
(658,770)
(90,827)
-
244
-
244
-
(48,662)
-
(799,435)
(23,557)
24,977
(48,662)
(798,015)
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 (loss)
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.
67 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
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)
-
(10,805)
2,430,325
(6,344)
25,154
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 (loss)
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.
68 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
11 Trade and other payables
Trade and interest payable
Employee benefits accrued
Mortgages
Lease Liability
Other
2022
$
5,264
9,546
5,878
2,768
6,238
29,694
a)
b)
2021
$
1,171
80,942
7,132
3,707
3,895
96,847
a) Mortgages of $5,878 (2021 – $7,132) are on investment properties. The terms of the mortgages range
from one to eleven years and bear interest rates of 0.76% to 2.24%. Investment properties of $31,680
(2021 – $34,805) are pledged as collateral against the mortgages.
b) Lease liabilities of $2,768 (2021 - $3,707) represent future lease payments for the Company's office
spaces. Total lease payments during the year totaled $1,236 (2021 - $1,190) including interest of $123
(2021 - $164). The right-of-use asset resulting from the Company's leases is valued at $2,845 (2021 -
$3,890), which is net of accumulated amortization of $3,794 (2021 - $2,674). The right-of-use asset is
grouped with other assets in the consolidated statements of financial position.
12 Income taxes
a)
Income tax expense (recovery)
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
2022
$
19,665
130
19,795
-
(60,302)
(60,302)
(40,507)
2021
$
15,241
(329)
14,912
(2,480)
88,518
86,038
100,950
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 2022 was 26.5% (2021 –26.5%). The difference between the Company’s income tax
and theoretical tax is as follows:
69 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
2022
$
2021
$
Income (loss) before income tax
(367,832)
836,822
Income tax expense (recover) based on statutory rate
of 26.5% (2021 – 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 loss (gains)
Non-deductible expenses
Foreign exchange
Other
(97,475)
130
-
5,556
(2,217)
(348)
34,693
(2,126)
22,381
(1,101)
221,758
(329)
(2,480)
2,657
(805)
(278)
(120,334)
38
112
611
Income tax expense (recovery)
(40,507)
100,950
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
2022
$
2021
$
-
-
-
90,606
-
90,606
-
-
-
143,545
-
143,545
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.
70 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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, 2020
1,202
2,180
1,542
4,836
9,841
19,601
Credited (charged) to
consolidated statement
of income (loss)
Foreign exchange
differences
(110)
(7)
(163)
(11)
154
(5)
As at December 31, 2021
1,085
2,006
1,691
Credited (charged) to
consolidated statement
of income (loss)
Foreign exchange
differences
2,981
195
(627)
112
517
136
As at December 31, 2022
4,261
1,491
2,344
(4,762)
(9,690)
(14,571)
(74)
(151)
-
-
-
-
-
-
-
-
(248)
4,782
2,871
443
8,096
Deferred income tax
liabilities
Equity
investments
and other
holdings
$
Investments
in
associates
$
Real estate
investments
$
Investment
properties
$
Other
$
Total
$
As at December 31, 2020
4,478
66,489
4,132
777
505
76,381
Charged (credited) to
consolidated statement
of income (loss)
Foreign exchange
differences
4,899
66,000
36
461
353
(13)
357
(145)
71,464
2
(4)
356
482
148,327
As at December 31, 2021
9,413
132,950
4,472
1,136
Charged (credited) to
consolidated statement
of income (loss)
Foreign exchange
differences
(4,239)
(52,242)
(2,127)
1,180
(3)
(57,431)
471
6,965
220
125
25
7,806
As at December 31, 2022
5,645
87,673
2,565
2,441
378
98,702
Deferred income tax liabilities have not been recognized on unremitted earnings totalling $73,497 as at
December 31, 2022 (2021 – $69,365) 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 (2021 - $nil).
71 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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
2,503,024
(24,400)
2022
Amount
$
20,853
(196)
Number
of shares
2,598,524
(95,500)
2021
Amount
$
21,619
(766)
Balance – End of year
2,478,624
20,657
2,503,024
20,853
In 2022, 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 2022, the Company purchased 24,400 common shares; (2021 – 95,500) for a
total cash consideration of $8,937; (2021 – $28,001). 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 2022 and 2021.
14 Earnings per share
a) Basic
Net income (loss) attributable to common shareholders
Weighted average number of outstanding common shares
$(326,083)
2,489,652
$732,988
2,533,466
Basic earnings (loss) per share
$(130.98)
$289.32
2022
2021
b) Diluted
For the years ended December 31, 2022 and 2021, there were no dilutive instruments.
72 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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:
Note
2022
$
2021
$
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
11(b)
12(a)
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
810,022
(10,587)
(4,511)
86
694
(502,428)
(60,302)
(2,423,815)
(6,510)
(5,052)
(682)
843
1,431,017
86,038
232,974
(918,161)
2022
$
(86,027)
6,384
(1,151)
(69,157)
(7,958)
4,606
(153,303)
2021
$
(42,767)
(8,477)
6,062
54,164
15,147
2,697
26,826
73 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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 ongoing military conflict between Ukraine and Russia and the imposition of economic sanctions by
Western countries continue to cause concern in financial markets. It is difficult to predict the impact of this
conflict on the value of the financial assets held by the Company. Although the risk of recession is increased by
this conflict and the increased levels of interest rates, inflationary pressures remain present. However, the
Company does not hold any assets in or financial instruments issued by entities from Ukraine, Russia and
Belarus which reduces the extent of possible variations in the value of its financial assets.
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, 2022, the Company has listed equity
securities of $4,740,125 (2021 – $5,670,043). It can sell these securities to reduce its floating rate debt. As at
December 31, 2022, a 1% increase or decrease in interest rates, with all other variables remaining constant,
would impact interest expense by approximately $10,600 over the next 12 months (2021 – $10,000).
The Company’s exposure to interest rate risk is summarized as follows:
Cash and cash equivalents
Debt securities
Credit facilities
Canadian Bank advances
European Bank advances
Trade and other payables
Due to brokers
Mortgages
2022
2021
Between 0.00% and 2.58%
Between 0.25% and 12.5%
Between nil and 0.2%
Between 0.25% and 12.5%
Prime rate plus 0.25%
Between 2.75% and 2.97%
Non-interest bearing
0.00% to 5.6%
0.76% to 2.24%
Prime rate plus 0.25%
2.97%
Non-interest bearing
0.00% to 1.15%
0.76% to 1.47%
74 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
The Company holds held for trading financial assets in debt securities of $82,651 (2021 – $57,142).
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:
2022
2021
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
(3,218)
3,655
(2,811)
1,275
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:
Canadian dollar
Euro
British Pound
Israeli shekel
Financial
assets
$
Financial
liabilities
$
Net
exposure
$
124,870
9,813
1,068
3,248
-
(17,231)
(22,402)
(2,916)
124,870
(7,418)
(21,334)
332
138,999
(42,549)
96,450
2022
Net effect of a
10% increase
or decrease
$
12,487
(742)
(2,133)
33
9,645
75
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
Financial
assets
$
Financial
liabilities
$
Net
exposure
$
2021
Net effect of a
10% increase
or decrease
$
36,281
3,283
-
98
(556,194)
(29,062)
(6,533)
(20,044)
(519,913)
(25,779)
(6,533)
(19,946)
(51,991)
(2,578)
(653)
(1,995)
39,662
(611,833)
(572,171)
(57,217)
Canadian dollar
Euro
British Pound
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.
76 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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:
2022
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
4,929,114
(858,733)
6,407,848
(1,116,353)
3,450,380
(601,113)
Pre-tax impact on net loss
1,221,114
(1,221,114)
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)
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.
77 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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
Due from brokers
Debt securities
Debt securities
Debt securities
Debt securities
Rating
A
A
A- to AAA
B- to BBB
CCC
Unrated
2022
$
42,531
163,579
39
7,178
10,002
120,173
2021
$
52,189
69,333
1,282
4,962
-
109,713
The company estimates that the unrated investments are below investment grade.
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 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 (2021 – 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
2022
2021
$3,895,803
$1,593,771
2.44
$4,678,916
$1,815,653
2.58
The Company’s objective is to maintain a debt-to-capital ratio below 3.0; (2021 – 3.0). 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 2.44 at the end of December 31, 2022 from 2.58 at the end of 2021. The Company does not
have any externally imposed restrictive covenants or capital requirements, other than those included in the
credit facility (note 5).
78
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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.
79 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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, 2022 and 2021:
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
$
2022
Total
$
4,686,413
-
-
8,957
82,651
214,865
-
-
-
4,695,370
82,651
214,865
30,174
-
-
-
1,758
2,365
-
-
201,301
52,376
55
47,763
233,233
54,741
55
47,763
4,716,587
310,596
301,495
5,328,678
810,045
-
-
48,688
810,045
48,688
-
-
-
Level 1
$
Level 2
$
Level 3
$
810,045
48,688
858,733
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
-
-
-
883,880
4,374
888,254
80 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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.
81 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
As at December 31, 2022 and 2021, Level 3 instruments are held 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, 2021
50,765
287,961
338,726
Real estate
investments
$
Unlisted
securities
$
2022
Total
$
Purchases (ii)
Distributions
Gains (losses) recognized in net income
On financial instruments disposed of during the year
On financial instruments held at end of year
Currency translation adjustments
As at December 31, 2022
4,019
(20,824)
20,668
(3,620)
24,687
(24,444)
-
10,587
3,216
47,763
(6,785)
(68,850)
24,358
253,732
Real estate
investments
$
Unlisted
securities
$
(6,785)
(58,263)
27,574
301,495
2021
Total
$
As at December 31, 2020
46,684
215,526
262,210
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
-
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)
As at December 31, 2021
50,765
287,961
338,726
82
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
i.
ii.
During the years ended December 31, 2021, 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 quoted
prices from the active markets however due to restrictions on trading they have been classified as level
2.
During the years ended December 31, 2022 and 2021, the company made investments in private
holdings in the information technology, healthcare, pharmaceutical, industries, communication
services and financial industries totaling $18,103 (2021 – $140,689). 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.
83 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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, 2022.
Fair value
(rounded)
2022
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Description
Unlisted private equity
holdings
Industrials
-Convertible Prefs
46,000
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
Financial services
-Equity securities
Unlisted private equity
holdings
Healthcare
28,000
25,000
6,600
5,500
-Convertible bonds
21,500
Unlisted private equity
holdings
Healthcare
-Convertible bonds
17,000
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Comparable
Bond
Methodologies
Comparable
Bond
Methodologies
Average change in
market cap
21.40%
10%
+/-1,200
Price/Book Value
(P/BV) multiple
12
10%
+/-2,700
Index Weighting
Revenue multiple
33.53%
8.48
10%
10%
+/-445
Average change in
market cap
16.03%
10%
+/-114
Revenue multiple
4.5
10%
+/-390
Discount rate
10.25%
10%
+/-244
Yield to Maturity
(YTM)
8.91%
10%
+/-600
Unlisted private equity
holdings
Healthcare
-Equity securities
Unlisted private equity
holdings
Healthcare
-Equity securities
Unlisted private equity
holdings
Healthcare
-Equity securities
Unlisted private equity
holdings
Food and beverages
-Equity securities
Unlisted private equity
holdings
Food and beverages
--Equity securities
14,500
Recent
transaction
Discount for lack of
marketability
50%
10%
+/-1,460
6,000
Black-Scholes
OPM
Expected volatility
33%
10%
+/-100
2,500
Black-Scholes
OPM
Comparable
company
approach
Index
performance
method
19,500
3,500
Expected volatility
88%
10%
+/-45
Revenue multiple
EBITA multiple
2.0
17.6
10%
10%
+/-2,300
Index weighting
9.39%
10%
+/-9
84
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
Description
Unlisted private equity
holdings
Pharmaceuticals
--Convertible bonds
Unlisted private equity
holdings
Pharmaceuticals
- Convertible prefs
Unlisted private equity
holdings
Pharmaceuticals
- Convertible prefs
Unlisted private equity
holdings
Information technology
-Equity securities
Unlisted private equity
holdings
Information technology
-Equity securities
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
Unlisted private equity
holdings
Other
-Corporate bonds
Fair value
(rounded)
2022
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Comparable
Bond
Methodologies
9,500
YTM
10.16%
10%
+/-1000
11,600
Black-Scholes
OPM
Expected volatility
90%
10%
+/-145
8,500
Recent
transaction
none
-
-
-
5,000
Black-Scholes
OPM
Expected volatility
60%
10%
+/-35
3,500
Black-Scholes
OPM
Expected volatility
67%
10%
+/-25
Comparable
company
approach
Average change in
market cap
2,000
50.8%
10%
+/-140
Index
performance
method
5,000
5,700
Recent
transaction
Comparable
company
approach
3,300
Comparable
Bond
Methodologies
4,000
Index weighting
16.4%
10%
+/-92
none
-
-
-
Revenue multiple
EBITA multiple
1.50
0.83
10%
10%
+/-205
YTM
11.01%
10%
+/-100
REITs and partnerships
35,000
Discounted
cash flows
Discount rate 5.8%-10.5%
Cash flow term 5-10 years
Capitalization rate 3.8%-7.5%
The inputs disclosed cover the range
used for all the real estate holdings in
the REITs and partnerships
Real estate investments in
private entities
12,760
Capitalization
model
Rate of return
4.6%
1.0%
+3,000
-2,000
85
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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
-
-
-
-
-
-
P/BV multiple
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
7,900
Recent
transaction
none
-
-
-
-Equity securities
11,000
Finnerty
Approach
Discount for lack of
marketability
13.12%
20%
+/-300
Unlisted private equity
holdings
Healthcare
-Warrants
Unlisted private equity
holdings
Food and beverages
-Equity securities
Unlisted private equity
holdings
Food and beverages
-Convertible bonds
6,000
Black-Scholes
OPM
Comparable
company
approach
23,700
2,500
Recent
transaction
Standard deviation
44.16%
10%
+/-600
Revenue multiple
EBITA multiple
2.34
19.17
10%
10%
+/-1,000
+/-1,400
none
-
-
-
86
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(in thousands of Canadian dollars unless otherwise stated)
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
Unlisted private equity
holdings
Other
-Corporate bonds
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
4,200
Recent
transaction
4,000
Recent
transaction
Expected volatility
90%
10%
+/-150
none
none
-
-
-
-
-
-
Expected volatility
70%
10%
+/-400
none
-
-
-
Revenue multiple
2.10
10%
+/-300
none
none
-
-
-
-
-
-
REITs and partnerships
38,000
Discounted
cash flows
Discount rate 5.5%-10.8%
Cash flow term 5-10 years
Capitalization rate 3.8%-7.2%
The inputs disclosed cover the range
used for all the real estate holdings in
the REITs and partnerships
Real estate investments in
private entities
12,800
Capitalization
model
Rate of return
4%
1.0%
+4,000
-2,000
87
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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, 2022 and 2021. 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
2022
2021
100
100
100
100
-
-
100
100
-
39
49
75
100
-
-
100
100
-
39
49
73
100
Nature of
business
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 in net income (loss) for the year is mostly attributed to Senvest Management
L.L.C. The change in redemption amount of liability for redeemable units for the year is attributable to the
Funds. 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.
88
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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 employee benefits
Management fees
2022
$
19,619
19,619
2021
$
83,130
83,130
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 2022 totals $518,346 (2021 –
$622,278). The amount invested in the fund by these participants is included in liability for redeemable units.
19 Commitments
As of December 31, 2022, the Company’s future commitments relating to other equity investments and
other holdings totaled $12,596 and those relating to real estate totaled $11,979
89 Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(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:
2022
Canada
$
European
Union
$
Bermuda
$
Other
$
Total
$
940
18,754
454
4,683
35
6,020
-
289
-
342
237
-
28,232
42,292
6,583
Canada
$
European
Union
$
Bermuda
$
Other
$
497
9,405
350
4,609
38
5,609
-
2,454
-
-
1,050
-
2021
Total
$
9,208
29,419
6,079
United
States
$
22,267
22,977
109
United
States
$
4,102
16,472
120
Revenue
Interest income
Dividend income
Other income
Revenue
Interest income
Dividend income
Other income
90
Senvest Capital Inc.Se
Annual Report
December 31, 2022
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
91