17 February 2017
After months of investment firms touting Northern Dynasty Minerals (NDM) stock as a good buy, Kerrisdale Capital Management bucked the trend with an in-your-face slam of Pebble stock as “worthless.” The small New York investment firm got quite a bit of attention for its report, which caused shares to fall dramatically on Tuesday before they began to move back upward. (NAK stock was around $3.29 per share on Monday morning before the report and ended Friday at $2.27, as shown in this graphic from Yahoo Finance).
Two events today might affect the stock further: NDM published a rebuttal to the article on its site, and Congress confirmed the appointment of Scott Pruitt as head of the EPA.
Pebble developers have been in litigation with EPA since 2014, after the EPA initiated a process to restrict certain mining activities at the Pebble deposit. Developers believe that administrative changes at the agency will remove these obstacles, allowing it to attract an investor and move into a permitting phase this year.
KDLG radio interviewed Kerrisdale Capital’s Sahm Adrangi, who explained that the company’s model is to find companies they believe are “overhyped or overly promotional about their prospects,” to research them and then present “contrarian views.” In doing so, their goal is to make money as the stock price dips. According to the interview, Kerrisdale Capital became interested in researching the Pebble project when NDM stock started seeing quick gains after the November 2016 election.
Allegations in the Kerrisdale report – that NDM states are unfounded – include that the company is hiding a negative project assessment that reveals the project isn’t economically viable. Since these allegations, four different law firms have filed class-action lawsuits against NDM on behalf of investors, seeking recovery of damages for alleged violations of federal securities laws. Two other firms, on behalf of NDM shareholders, are investigating whether the company adequately disclosed the commercial sustainability of the deposit.
For its part, NDM says it will do what it needs to protect the interests of its shareholders, including regulatory and legal action related to the accusations in the Kerrisdale report.
Northern Dynasty slams short-seller report as class-suit looms – Mining.com, February 17, 2017
Northern Dynasty Minerals mulls legal action against short-seller who called company ‘worthless’ – FinancialPost.com, February 17, 2017
New York Hedge Fund Slams Northern Dynasty, Pebble Mine in investor report – KDLG radio, February 16, 2017
Report: Pebble shares are ‘worthless’ – Alaskajournal.com, February 15, 2017