Canadian ‘Penny Stocks’ Draw Concern as $750 Million Deal Fails
On October 5, West High Yield (W.H.Y.) Resources Ltd. spiked from C$0.36 to as high as C$3.80 on news that a buyer was prepared to pay $750 million for West High Yield’s main magnesium assets in British Columbia when the whole company was worth only $16 million.
The buyer, Gryphon Enterprises LLC, had no website, its CEO used an AOL email address, and its head quarters was a residential house in Swanton, Maryland.
While many investors had hoped that Canadian regulators would reverse trades made in the company following the news, last week, regulators revealed that trades made in the stock will not be reversed.
Investment Industry Regulatory Organization of Canada said in a letter sent this week to an investor in the company that the news “while highly conditional on a number of factors, did not contain information which was either misstated or inaccurate.” Bloomberg obtained a copy of letter and confirmed with an IIROC spokesman in a telephone interview.
West High Yield’s shares have been halted since Oct. 6. Last week Tuesday, West High Yield said in a statement that Gryphon had not come up with the $500,000 deposit and the deal was terminated.
Many investors are disappointed that Canadian regulators will not reverse the trades.
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