Badger Daylighting Inc. missed analyst expectations when it issued first-quarter results on May 12, 2017, sending its share price tumbling. But that wasn’t the biggest thing that happened to the company that day.
Aggressive U.S. short seller Marc Cohodes, already engaged in a noisy battle with Canadian mortgage lender Home Capital Corp., announced that he was also targeting Badger, an environmental company that specializes in soil extraction for governments and oil companies.
Badger has been taking a public beating from him ever since, with Mr. Cohodes citing accounting issues, executive departures and a pattern of illegal dumping of toxic waste, an allegation he said has been brought to him by company whistle-blowers.
However, in May of this year, Badger took the unusual step of announcing that the Alberta Securities Commission (ASC) had concluded an investigation “into allegations by short sellers” with no enforcement action taken against the company. Badger said it was “pursuing all avenues to bring parties engaged in abusive [short-selling] practices to account.” The shares have since completely recovered from their May, 2017, declines.
Now it seems Badger has persuaded the regulators to pursue its accusers, as the ASC said Thursday that it has applied for a cease-trade order against Mr. Cohodes related to his Badger position. Badger CEO Paul Vanderberg testified under oath to the ASC, laying out a case against Mr. Cohodes, and provided supporting e-mails from shareholders that encouraged the regulator to go after the short seller. The application is set to be heard next week in Calgary.
Ramandeep Grewal, a corporate lawyer at Stikeman Elliott LLP, says it’s fairly new territory for securities regulators to pursue actions against short sellers.
“It’s rare and it’s interesting that they’re starting to go after these short sellers, because historically you didn’t see any repercussions at all,” Ms. Grewal said.
If it were Badger’s desire to silence Mr. Cohodes, the opposite has occurred. The Californian has launched a fresh attack, alleging the ASC is protecting the company while suppressing legitimate criticism. The ASC, his attorneys say, never asked Mr. Cohodes for evidence supporting his allegations about Badger.
“It’s a constitutional issue. They can’t tell me to shut up. That’s for sure. That will never happen,” Mr. Cohodes said Friday.
Spokespeople for Badger and the ASC both declined to comment Friday, citing the ongoing proceedings.