Last week, at the annual meeting of a Canadian silicon-processing company, the chief executive said that the company has already sued someone for spreading dangerous rumors. Or maybe he said that it was going to sue someone.
It is, sadly, less than clear what Heinz Schimmelbusch was saying during the shareholdersâ€™ meeting for Timminco Ltd., in Toronto, Thursday afternoon. These were his words: â€śThere are a few short sellers here, running up and down the streets here, making idiotic, bizarre … statements on the company … The matter is, by the way, before courts. If somebody oversteps a certain line, if he’s over the line, it’s straight going to the courts.â€ť
Note the switch from present tense to future tense there. The matter â€śisâ€ť before some unspecified courts â€¦ it is â€śgoing toâ€ť the courts. Which is it? And which court(s)?
On Saturday, writing in the Toronto Globe & Mail, Derek DeCloet reviewed some of the reasons for scepticism about Timminco, a company that claims to have achieved a technological breakthrough in the purification of metallurgical silicon for use in solar energy panels. Obviously, that is the type of breakthrough that is much in demand just now; the type of breakthrough in which people badly want to believe; the kind of breakthrough that, for just the same reason, most deserves and requires careful inquiry.
I gave some of the particulars of the dispute in the context of the Sprott IPO last month.
There is of course always a â€ścertain lineâ€ť beyond which critique becomes defamation. The line is set by the law, differing somewhat from one country to another even within the English common-law tradition. But which is the more serious problem in the business and financial world these days? too much defamation? or too little scepticism? I opt for the latter. The problem isn’t that the CEOs of North America are too reluctant to threaten critics. Itâ€™s that they do so rather too easily, with the result that investors donâ€™t hear words of caution.
Mr. DeCloet is aware (as am I) of the investigations ongoing into the rumors that preceded the downfall of Bear Stearns. But Timminco has a more tangible product than does any investment bank. Itâ€™s a factory. It produces this high-grade silicon itâ€™s been telling the world about. So, as Mr. DeCloet puts the matter, â€śif â€¦ the critics are dead wrong, why make threats? Just let the results speak and let the shorts eat losses.â€ť