Here is the story to match the URL I posted yesterday (for posterity):
TSE may delist YBM
Fund managers slash share value as FBI hauls off firm's financial records and files
By SANDRA RUBIN
The Financial Post
The Toronto Stock Exchange served notice Friday it has put battered YBM Magnex International Inc. under review, with an eye to yanking its listing.
The move came as many Canadian mutual funds knocked 65% off the value of the TSE 300 company's shares over troubling questions about when - and whether - the stock will trade again.
The U.S.-based magnet manufacturer will be given a chance to make submissions about why it should be allowed to keep its listing. The shares were hit with a cease-trading order this week.
"If we announce a review, clearly we believe there are grounds for making the case that they do not meet the standards for continued listing," said John Carson, the exchange's senior vice-president of market regulation.
"We're not going to make such an announcement unless we believe that is the situation."
At the same time, details began to emerge about what the Federal Bureau of Investigation was looking for when U.S. agents moved in on YBM's Philadelphia-area headquarters on Wednesday.
According to the search warrant, the FBI was empowered to take bank statements, cancelled cheques, money orders, safety deposit box records and keys, tax information and anything relating to YBM stock, records of inventory, expense-account receipts, customer files, shipping records and trip summaries.
It also permitted agents to seize samples of YBM's products and copies of all its audits, both by Deloitte & Touche LLP and Parente, Randolph Orlando & Carey Associates dating back to 1993.
YBM chief financial officer Daniel Gatti was the audit manager with Parente from 1990 to 1995. The search warrant was accompanied by a 70-page affidavit stating reasons for the request, which will remain sealed at the request of the U.S. Attorney's Office.
YBM was spawned from Arigon Co. Ltd., a company with links to Sergei Mikhailov, who has been in detention in Switzerland since 1996 on charges of money laundering and being a member of a criminal organization.
U.S. enforcement officials were not commenting Friday on specifics.
"All I can really say is the raid was in connection with an ongoing criminal investigation," said Robert Courtney, chief of the organized crime division at the Philadelphia office.
The warrant covers not just YBM Magnex International but subsidiaries United Trade Ltd., YBM Magnex Inc., YBM Technologies Inc., Crumax Magnetics Inc. and Magnex Rt., and their predecessors "including Arigon Co. Ltd."
According to one YBM source, city police were on hand at 10:30 a.m. while dozens of FBI agents entered the building accompanied by the Internal Revenue Service, the U.S. Customs Service and the U.S. Immigration & Naturalization Service.
They backed a large rented Ryder truck into the loading bay and hauled out bundles of flattened cardboard boxes that they later assembled, filled and carted away. They also questioned many employees.
"They were very polite," said the source, who spoke on condition of anonymity. "They asked people to identify themselves and they interviewed various people."
He said it's "business as usual" at the company, which does most of its sales in Russia and the Ukraine. But he acknowledged workers were "really, really shocked" at the week's events.
"This is a very, very big surprise. But there have been employee meetings and everyone's taking it quite well. They're just hoping it will all be cleared up soon."
Fund managers weren't taking any chances on a quick resolution.
In a rare 30-minute conference call, managers from about 25 mutual fund companies agreed late Thursday to value YBM shares at between $5 and $7.
The stock was trading at $14.35 when the Ontario Securities Commission imposed the cease-trading order Wednesday on news of the FBI investigation. It had reached a 52-week high of $20.15 on March 10.
The conference call was arranged by the Investment Funds Institute of Canada, which has done it only once before - for Bre-X Minerals Ltd.
"Given developments with YBM, there was concern that the closing price of $14.35 may not be relevant," said IFIC research director John Kaszel. "All organizations have to value their portfolio each day, so each security in their portfolio has to be valued.
"The consensus was that the $5 to $7 a share would be fair."
YBM shot from the ranks of the junior capital pool corporations on the Alberta Stock Exchange to a TSE 300 company with a market cap of almost $1 billion in less than four years.
It is held by some of the country's biggest fund companies and has been a darling of some money managers because of its spectacular rise.
Many people were furious at Deloitte & Touche for signing off on a special audit in November, held at the request of securities regulators, and also at the TSE for allowing the original listing without more checks, despite YBM's limited track record.
But Carson, defending the exchange, said all officers and directors of a company wanting a listing have to clear an investigative check, which includes a central police check, and disclose all the firm's financial information before it starts trading.
"It is a vetting process," he said. "What it is not is a criminal investigation. There seems to be some kind of suggestion around situations such as YBM that the fraud squad should be on the case in order to be listed here or on another exchange.
"But the fraud squad is a police matter and we don't believe it's necessary to carry out a criminal investigation to determine whether a company can be listed."
YBM reported unaudited 1997 earnings of US$25.6 million on sales of US$137.8 million. It had a market value of about $635 million when trading was halted. |
