The following post comes to us from Douglass B. Maynard
, partner and co-head of the New York litigation section of Akin Gump Strauss Hauer & Feld LLP. This post is based on an Akin Gump memorandum.
On August 16, 2012, New York Supreme Court Justice Carol R. Edmead dismissed a defamation action brought by Silvercorp Metals Inc. (“Silvercorp”), a publicly-traded company, against a hedge fund and a group of other defendants who issued negative reports opining that Silvercorp might be engaging in fraud. This decision has important ramifications for professional investors and analysts who are considering publicizing their opinions regarding companies such as Silvercorp, who may retaliate with the threat of litigation.
Silvercorp, a Canadian based company, is reported to be one of the largest silver producers in China and mines other minerals in both China and Canada. Its securities are traded on both the New York and Toronto Stock Exchanges.
The reports in question, which were issued in August 2011 and September 2011, were prepared by hedge funds and investors looking into the accuracy and integrity of Silvercorp’s financials and statements concerning the quality of its mineral reserves. According to the filings in the case, the reports were disseminated anonymously through the Internet and mailings to Canadian securities regulators. The reports were issued by two different groups of defendants who were acting independently of one another. In essence, the reports reached the same conclusion: that Silvercorp was engaged in fraud. The reports were based on documents, both publicly available and privately obtained, which were disclosed with the reports. Among the documents relied on were Chinese news articles regarding an auction of a minority interest in one of Silvercorp’s most important mines, reports compiling financial data that was represented as being copied from Chinese regulatory filings, and an analysis of samples of ore that the authors believed came from a Silvercorp mine.
…continue reading: Lawsuit Against Short Sellers Dismissed on Constitutional Grounds