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Alberta regulator dismisses Badger Daylighting bid for order against U.S. short-seller

Short-seller Marc Cohodes is free to trade shares of Badger Daylighting Inc. after Alberta regulators on Wednesday dismissed an application for a cease-trade order against the prominent U.S. investor.

The decision is a blow to Badger and could intensify a long-running feud between the Calgary-based company and Mr. Cohodes, a pugnacious investor known for previous bets against mortgage lender Home Capital Group Corp. and Valeant Pharmaceuticals International Inc.

Staff at the Alberta Securities Commission (ASC) sought the interim order against Mr. Cohodes on grounds he misrepresented Badger’s business to support his short position in the stock.

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They also asked to prohibit Mr. Cohodes from making false or misleading statements about the company after Mr. Cohodes accused Badger of illegally dumping toxic waste – a charge the company has strenuously denied – in a Twitter post earlier this year.

ASC vice-chair Tom Cotter, who sat on the commission’s panel that heard the case, said on Wednesday there are insufficient grounds for the order. Indeed, shares of the company are up roughly 20 per cent since May, 2017, when Mr. Cohodes first disclosed his Badger position. The Toronto Stock Exchange energy subindex has slipped about 2.2 per cent over the same period.

“We are not persuaded that staff have established … contraventions by the respondent,” Mr. Cotter said. “… We dismiss the application.”

Badger operates a fleet of vacuum trucks that service government and oil-industry clients across Canada and the United States. The company employs about 1,800 people and has a market capitalization of roughly $1.1-billion.

Mr. Cohodes has also flagged purported accounting issues and executive departures and says the allegations of illegal dumping have been brought to him by company whistle-blowers. He did not attend Wednesday’s hearing and was not immediately available for comment.

The ASC staff that sought the order relied on a Twitter post by Mr. Cohodes from June 27, 2018, in which they said he misrepresented an image of a Badger truck to support his allegation of “illegal toxic dumping” of hazardous waste.

A lawyer representing the California-based short-seller accused the ASC of trying to muzzle legitimate criticism of a public company by a known short-seller and overplaying the impact of Mr. Cohodes’s statements.

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“With all due respect to him, the market doesn’t care. And the share price shows that,” Andrew Wilson at JSS Barristers told the hearing.

ASC lawyer Don Young called that a “red herring” and argued the Twitter post misled current and prospective new investors in the company. “That’s a common-sense determination. It doesn’t require market analysis,” he said.

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