Regulators to take steps against short selling – by Kelsey Rolfe (CIM Magazine – April 23, 2021)

Canada is making changes to curb the practice of predatory short selling, a thorn in the side of junior mining companies

In the wake of growing concern from public companies, Canadian regulators have turned their attention to tightening the rules that govern short selling.

Short sellers – investors who bet against public companies by borrowing shares and immediately selling them with the expectation the price will drop so they can repurchase at a lower value – serve an important price-discovery role in the public market and have even unearthed cases of fraud and corporate malfeasance.

But experts say Canada’s lax regulations around the practice have allowed “short and distort” campaigns (spreading negative rumours about a company to artificially drive its value down) and other abusive forms of short selling to flourish in the country.

Mining companies have been frequent targets. In the past decade, Silvercorp Metals, Pretium Resources, Asanko Gold and Northern Dynasty Minerals have been caught in particularly high-profile campaigns.

Most recently, Novagold Resources sued J Capital Research for defamation in a New York court over the firm’s May 2020 report that questioned the viability of the company’s Donlin gold project in Alaska, a joint venture with Barrick Gold.

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