Canadian bank headquarters stand on Bay Street in Toronto. With no explanation about the stock sale, waves of shareholders hit the exits last week.Brent Lewin/Bloomberg
A week after a violent selloff that confused and angered investors, Patient Home Monitoring Corp. has released details on why two former high-ranking members of its management team liquidated a huge portion of their holdings with little warning.
Michael Dalsin and Roger Greene "transferred shares to the Healthcare Special Opportunities Fund" and "sold shares to satisfy a tax liability" the company said in a press release on Wednesday. Mr. Dalsin and Mr. Greene also "elected to retain shares in their personal names."
Last week, panicked investors dumped millions of shares in the formerly high-flying health care services company, when an insider trading report surfaced showing that Mr. Greene and Mr. Dalsin had liquidated their entire holdings of 13.4 million shares and handed over management of the firm to a new team.
Adding to the chaos, investors were under the impression that Mr. Dalsin and Mr. Greene had actually sold 26.8 million shares, or more than 10 per cent of the entire float in one shot. But, according to Pat McCarthy with Mackie Research Capital Corp., who is the company's underwriter, Mr. Dalsin and Mr. Greene mistakenly "double-filed" the stock sale with the System for Electronic Disclosure by Insiders (SEDI).
Other than a brief conference call, which Mr. McCarthy said "backfired" because it raised more questions than it answered, Mr. Dalsin and Mr. Greene were unreachable for most of last week, as they were vacationing on a boat in Europe.
With little public information available on the motives for the insider stock sale, the shares gyrated wildly, reaching a low of 78 cents a share in frenzied early morning trading on July 29, down from a $1.26 close just two days prior. Trading stabilized later on July 29 with the firm issuing a press release saying that it was "unaware of any material change" that would account for the decrease in the stock price.
Late last week, Michael Decter, CEO of LDIC Inc., confirmed to The Globe and Mail that Mr. Greene and Mr. Dalsin "exchanged" five million shares in Patient Home Monitoring (PHM) for units in Healthcare Special Opportunities Fund.
"They could have put cash in. But we were quite happy to take the PHM shares," Mr. Decter said.
Patient Home Monitoring is one of about 20 stocks in the newly created closed end fund. Mr. Greene and Mr. Dalsin are also advisers on the fund.
"I knew that they were discussing with LDIC ... But I didn't anticipate that they would use their shares to fund their investment. I don't think anybody did," Mr. McCarthy said.
An updated SEDI filing on July 28 showed Mr. Greene and Mr. Dalsin owned four million shares in Patient Home Monitoring, giving them a stake of approximately 1.4 per cent in the firm.
"They remain active non-executive board members and advisers to the company, as well as significant shareholders," the company said Wednesday in a release.
Still the stock sale, even if it was a lot less than originally thought, didn't go down well with some investors. Optically, it didn't look good that management, which had been extremely bullish on the company's prospects just two months prior after raising $67-million from investors at $1.50 a share, was taking a significant amount of money off the table.
"There is a legitimate concern that they've reduced their interest in the company," said Peter Hodson, CEO of 5i Research Inc., an independent research firm.
Patient Home Monitoring did not respond to requests for comment from The Globe and Mail.