Arctic Glacier's slippery sale

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Phil Hossack / Winnipeg Free Press Archives Arctic Glacier headquarters.

Arctic Glacier investors have been kicked around pretty badly over the past few years.

But last week was particularly raw and some investors are concerned that privileged information was used to reap fat profits.

Unitholders heard on June 8 that Miami-based private equity firm H.I.G. Capital would be the buyer of the assets of the company through a court-sanctioned investor solicitation process that was part of Arctic's bankruptcy protection.

But that's all they heard. There was no price disclosure to the owners of the company, something that one U.S. banker said was unheard of.

Early Thursday evening, June 28, the company issued a press release disclosing the price -- $434.5 million -- noting "Arctic Glacier expects that the net proceeds of the sale will be sufficient to pay all of its remaining known creditors and may be sufficient to permit a distribution to its unitholders after all creditor claims have been proven and satisfied pursuant to a court-ordered claims process."

Even though that unquantifiable but hopeful message came out after the close of trading Thursday, by late Wednesday afternoon the trading volume and price on Arctic units on the CNSX had already shot up dramatically -- as if some knew something before everyone else.

The closing price Wednesday more than quadrupled to 17 cents from four cents, with 12.7 million units trading, up from a daily average of just more than one million.

One unitholder who was watching the price wrote on a message board late Wednesday afternoon, "What"s going on!? Up 300%. Anyone hear anything?"

But there was no press release after close of trading Wednesday and still nothing all day Thursday.

Very heavy trading continued Thursday with more than 14 million units trading, with the price remaining up near the 20-cent mark, a level the units had not seen in more than a year.

It wasn't until early evening Thursday after markets closed that Arctic issued its Market Update Regarding Its Proposed Sale Transaction disclosing the price.

There are still plenty of unknowns, according to one sophisticated banker who knows how to crunch these kinds of number and who spoke on condition his name not be used.

But he said depending on how certain liabilities of the estate are dealt with, the distribution to unitholders could possibly be more than 25 cents.

Is that what some had already figured out on Wednesday afternoon? Who were they and how did they know, because there was no way for the general public to have known any of that.

"It looks like an example of the Canadian retail investor getting screwed by sophisticated U.S. investors sitting in meetings, getting information they can trade on and the information not getting shared with the Canadian retail base," said the U.S. banker.

Greg Klassen, a broker with National Bank Financial in Winnipeg who has followed Arctic Glacier for years, said, "I am surprised no one has been called to the carpet. I can't believe they didn't halt the stock and ask the company to make an announcement."

In Canada, it is the Investment Industry Regulatory Organization of Canada (IIROC) that monitors unusual trading activity with sophisticated technology that can identify possible violations of its Universal Market Integrity Rules.

But an IIROC official said Tuesday, "We would not be able to confirm or deny any actual investigation."

The U.S. banker said in fairness to the company, in a bankruptcy process the company may not know all of the answers and might be reticent about saying something that proves later to be incorrect.

"But Arctic has done a terrible job of informing the market," he said. "How do you sell something and not say what you sold it for?"

Arctic units closed at 20 cents on Tuesday with another 3.7 million units traded, making it the most active on the CNSX exchange once again.

Arctic's new owners say they believe the Winnipeg-based company now has a great future with a cleaned-up balance sheet.

Unfortunately, it looks like the punters who backed the company through the tough times are still getting preyed upon.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition July 4, 2012 B3