Investors are fuming over the collapse of a $750 million mining deal that sent a tiny magnesium explorer soaring, sparking criticism that Canada’s light-handed approach to regulating its venture market needs to get heavier.
Canada’s investment regulator won’t be reversing the trades on West High Yield (W.H.Y.) Resources Ltd. from Oct. 5, when the Calgary-based penny stock surged almost 1,000 percent on a deal to sell its main assets to an unknown buyer.
The announcement “did not contain information which was either misstated or inaccurate,” according to a letter obtained by Bloomberg News that the Investment Industry Regulatory Organization of Canada sent to an investor in the company.
Perhaps not, but the deal certainly raised some red flags. West High Yield filed a purchase and sale agreement that showed Gryphon Enterprises LLC as the buyer prepared to pay $750 million for West High Yield’s main magnesium assets in British Columbia when the whole company was worth only $16 million.
That price tag would have made the deal the fourth-biggest mining-asset sale this year globally — underpinned by a company with no website, whose chief executive officer uses an AOL email address, and is based at a residential house built in 1992 in Swanton, Maryland.
For the rest of this article: https://www.bloomberg.com/news/articles/2017-11-08/canada-s-light-touch-on-penny-stocks-draws-ire-as-deal-fails