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Investors fail to appreciate Maple Leaf Foods Inc.’s potential liability from a federal investigation into price-fixing in the bread industry and are overvaluing the company’s prospects in the meat-substitute business, argued the co-founders of Vancouver-based alternative investment firm White Crane Capital Corp. on Thursday.

The views expressed by White Crane’s CEO Emil Khimji, and its chief investment officer, Yu-Jia Zhu, were made at the Capitalize for Kids conference in Toronto. The short recommendation from White Crane sparked a more than 4 per cent fall in Maple Leaf stock Thursday afternoon, its biggest move in a year, before recovering modestly to close down 2.5 per cent.

Maple Leaf owned 90 per cent of Canada Bread during the time of alleged price-fixing in the bread industry and the two companies shared multiple executives, according to the White Crane officials. Maple Leaf sold Canada Bread to Grupo Bimbo in 2014, and the Mexican baker paid a purchase price based on earnings from the period where the Canadian government alleges the bread industry fixed prices.

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Maple Leaf has previously stated it has no knowledge of any activities taken by Canada Bread that would have contravened competition rules.

Investors have bid up Maple Leaf in part on expectations that it will compete in the emerging segment of meat substitutes, where recent IPO Beyond Meat has skyrocketed. But Maple Leaf’s success is far from certain, White Crane said.

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