VANCOUVER – Silvercorp Metals has filed a lawsuit in New York against several companies and individuals for spreading lies about the Canadian mining company as part of a short-sell manipulation scheme.
The Vancouver-based miner alleges the defendants spread “false, defamatory and fraudulent” information about the company on the Internet and in letters to the media and regulators in order to drive down its stock price to make their short positions in the stock more profitable.
Short sellers profit when the price of a stock falls.
Silvercorp (TSX:SVM) said the number of its shares out on loan jumped from three per cent to 14 per cent, or 23 million shares, during the month of August.
It said the defendants began on Aug. 29 to send anonymous letters to B.C. and Ontario securities regulators and post comments on websites alleging Silvercorp overstated its financial statements and resource deposits.
Silvercorp’s shares subsequently dropped by as much as 20 per cent in a day of unusually high trading volumes.
Shares partially recovered after the company posted more than 90 pages of accounting and other financial information to disprove the allegations and said it was going ahead with an earlier plan to hold an investor tour of its Ying mine in China later this month.
Silvercorp has sued the defendants for defamation, unjust enrichment, trade libel and tortious interference, and deceptive acts and practices.
It is seeking undisclosed compensatory and punitive damages and the transfer of short-selling profits to Silvercorp or a trust.
“This is the first step on our journey to hold participants of this scheme, or those who otherwise defamed the company, harmed its shareholders and manipulated the capital markets accountable,” Silvercorp chairman Rui Feng said in a news release.
On the Toronto Stock Exchange, Silvercorp’s shares fell two cents at C$ 7.03 in morning trading.
Local news from metronews.ca/vancouver
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