CALGARY — An application for an order preventing American short seller Marc Cohodes from trading shares in or providing misleading information about Badger Daylighting Ltd. is “deliberately rushed” and unnecessary, his lawyer said at a hearing Wednesday.
Furthermore, the remedies being sought by Alberta Securities Commission staff are significant and broad and based on an incomplete evidence record, Andrew Wilson said at the ASC hearing into the recent actions of the trader who makes a profit when a company’s share price falls.
“Being a short seller is not unlawful. It actually does serve an important part in our capital markets,” said Wilson, a Calgary lawyer who represented Cohodes while he and two other lawyers listened in by telephone.
“The public interest is not just Badger Daylighting. It’s much broader than that. It’s people who also want to say positive or negative things about companies and it’s understanding what role regulators are going to play in the market.”
The hearing ended just before noon and the two-member ASC panel was expected to make a ruling after 4 p.m. MT.
Short sellers sell a security they don’t own in hopes its price will decline, enabling it to be bought back at a lower price to make a profit.
Last week, staff for the regulator announced they would seek the order against Cohodes, an investor who has taken short positions in many companies including Home Capital Group of Toronto, because of statements he made, including a June 27th Twitter post containing a picture of a Badger truck as support for his allegation of its illegal dumping of toxic substances.
It said Cohodes has made numerous negative public claims over a period of more than a year, coinciding with the acquisition of his short position, accusing him of trying to artificially manipulate the price of Badger securities.
Wilson said there’s no evidence that any of Cohodes’ social media statements caused Badger stock to fall in the short term and, furthermore, the stock has gained about 20 per cent since Cohodes began talking about it on Twitter in May 2017.
ASC counsel Don Young countered that the interim cease trade order was needed to prevent Cohodes from continuing his “protracted campaign” to harm Badger’s reputation for his eventual gain and actual share price erosion wasn’t important to the case.
He said the order would give the regulator time needed to complete an investigation into the short seller’s activities, pointing out that accusing Badger of illegal dumping was serious given that proper disposal of material is a vital part of the Calgary-based hydrovac excavating company’s business.
Wilson said Badger has the option of pursuing a civil case against Cohodes but hasn’t, suggesting it’s because his remarks are protected by free speech law in both Canada and the United States.
Badger CEO Paul Vanderberg, who attended the hearing, said he would not comment on the outcome or the possibility of a civil suit against Cohodes.