MDA Space Inc. CEO Mike Greenley addresses a news conference in Montreal in February, 2021.Paul Chiasson/The Canadian Press
Canadian satellite manufacturing company MDA Space Inc. is facing a proposed class-action lawsuit that alleges the company’s leaders made misrepresentations under Ontario’s Securities Act and engaged in insider trading related to the announcement and subsequent cancellation of a major contract last summer.
In the statement of claim for their proposed lawsuit, plaintiffs claim they are owed $340-million in damages, plus costs, according to documents filed to the Ontario Superior Court of Justice by Toronto-based law firm Sotos LLP.
MDA has yet to file its defence and the allegations have not been tested in court. The lawsuit names current MDA executives and board members, including chief executive officer Mike Greenley, chief financial officer Guillaume Lavoie and chair of the board Brendan Paddick.
“This is a case about the integrity of the capital markets and fairness between different classes of investors,” said Matthew Taylor, a lawyer for the plaintiffs.
The documents were filed in court last October and November.
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MDA disclosed the notice of the proposed class-action lawsuit in its third quarter financial release and quarterly call last November, before the plaintiffs’ statement of claim had been filed. In an e-mail Thursday, MDA spokesperson Amy MacLeod said the company finds the allegations unfounded and will defend itself in court.
“MDA Space strongly believes that all the claims that have been alleged are unfounded and without merit and intends to vigorously defend itself and the named defendants through the process. The company remains focused on its mission and ongoing operations,” she said.
In the documents, two shareholders allege that MDA failed to properly inform investors of the risks related to a $1.8-billion contract with U.S. telecom EchoStar Corp. to build satellites for a low Earth orbit constellation. Brampton, Ont.-based MDA announced the deal in early August, causing its stock price to rise 18 per cent.
But the agreement collapsed just over a month later when EchoStar pulled out on the basis that it was selling the wireless spectrum that its constellation would have relied on to SpaceX. MDA shares dropped 25 per cent on that day.
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The plaintiffs allege that MDA leaders knew, or should have known, that EchoStar was under regulatory and political pressure to sell these spectrum rights to a competitor before making its deal announcement and that EchoStar had been facing financial difficulties for months, yet the leaders made no reference to these risks.
“MDA knew, or ought to have known, that there was significant counterparty risk in the Satellite Contract,” the plaintiffs allege in the documents. “These risks, and other related risks, were material facts necessary to be disclosed.”
Furthermore, the plaintiffs say that when asked about the risks during an analyst call, Mr. Greenley downplayed the risks as “very, very small,” the documents say.
Meanwhile, the statement of claim alleges that during August, 2025, Mr. Greenley, Mr. Paddick and director John Risley became “unjustly enriched” when they collectively sold more than $85-million worth of MDA shares when the company’s share price was at a record high.
In September, The Globe and Mail reported that Mr. Greenley had profited $35.7-million by exercising options three weeks before he announced the cancellation of the deal. At the time, MDA told The Globe that the trade was completed in strict accordance with the company’s insider trading policy, as it occurred within a designated open trading window and was preceded by all required advance notifications.
The records were disclosed on SEDI, an electronic system maintained by Canadian securities regulators to track stock ownership by directors and officers of public companies.
Between Aug. 1 and Sept. 8, Mr. Risley sold about a million shares at various price points, earning total proceeds of about $48-million, according to SEDI records, although the cost base of these shares, and therefore his profit, is not clear.
Meanwhile, Mr. Paddick earned proceeds of about $4.6-million during the period, SEDI records show. His profit is also not clear.
The plaintiffs claim that those insiders were required by law not to trade when they had knowledge of material facts that had not been publicly disclosed.
The plaintiffs are seeking damages for investors who purchased shares of MDA between Aug. 1, when the contract was announced, and Sept. 8, when it was cancelled.
The representative plaintiffs are Robert Yoon and Liu Yizheng, both retail investors in Canada who purchased shares after the contract was announced but before it was cancelled. During this time, the pair purchased MDA shares for about $275 and incurred losses totalling about $91 when they sold them after the deal was cancelled.
Class-action lawsuits of this type often start with shareholders of relatively small amounts, Mr. Taylor said. In this case, there could be thousands of potential class members, including retail and institutional shareholders, given that there were millions of trades of MDA’s stock during the class-action period and that it is widely held by investors, he said. He added the firm has already been contacted by a number of other potential members.
The next step for the plaintiffs will be to seek a certification order, in which it must prove to the court that it has met the requirements for a class-action lawsuit. It must also seek an order for leave to proceed under the Securities Act, in which it needs to demonstrate a reasonable possibility of success should the lawsuit go to trial.
Meanwhile, MDA’s next step will be to file a statement of defence, which could come after the plaintiffs have sought their certification and leave to proceed.