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Ned Goodman, who founded Dundee Corp. in 1957, seen in his Toronto office on June 1, 2015.

Kevin Van Paassen/The Globe and Mail

With a deadline to repurchase some preferred equity looming, one of Dundee Corp.'s largest shareholders is turning vocal, setting the stage for a public spat between the company and its investors.

On Tuesday, Maryland-based Roumell Asset Management, which says it holds 3.6 million shares, or 6.4 per cent of Dundee, released a public letter to the company's board of directors asking for Dundee's preferred shares that come due in 2019 to be extended and given a new, discounted price.

The letter follows the revelation in August that Dundee is weighing whether to repurchase the shares in June, 2019, or to exchange them for common equity at a minimum price of $2 a common share. The $2 price adds a wrinkle to the decision-making process, because Dundee's common shares currently trade for $1.46 – and the exchange price cannot be changed because it was determined as part of a 2016 restructuring.

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Roumell is lobbying for a third option: To extend the preferred shares, and to also amend their terms. "Dundee's financial position has deteriorated significantly since January 2016 and the discount offered to the Series 5 preferred shareholders must reflect this new reality," the asset manager wrote.

The class of preferred shares that come due in 2019 is valued at $83-million and, as of June 30, Dundee had $31-million in cash sitting on its corporate books.

While the company still has time to negotiate, the brewing conflict extends a tumultuous era at Dundee. Founded by Ned Goodman in 1957, the company's profit has been closely tied to natural resources, and it now has a market capitalization of $82-million after being valued at $1.2-billion in 2013.

The past two years have been particularly bruising for Dundee, with its share price sliding to $1.46 from $8 in June, 2016 – a drop of 82 per cent. Lately, Dundee has been losing money, reporting a net loss of $104-million in the first half of the current fiscal year after losing $221-million in the two prior fiscal years combined. As of January, 2018, the company is being run by new management after former chief executive David Goodman, who is one of Ned's sons, took a medical leave because of postconcussion syndrome. His brother, Jonathan, is now leading the company.

Dundee declined to comment Tuesday, but on an August conference call, executive chairman Jonathan Goodman addressed the complexity of the matter. "We're in the very unique position that the preferred shareholders don't want us to give them stock and neither do a lot of the common shareholders. But I think we have to be pragmatic," he said, alluding to the company's cash levels.

Dundee's preferred shareholders have yet to weigh in publicly, but Roumell has suggested a back-up plan should they refuse amended terms on their securities. In its letter, Roumell argued for Dundee to issue common stock if necessary, suggesting the last thing that Dundee should do is drain its cash reserves.

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