Short seller Kerrisdale Capital Management has argued Uranium Energy’s market value is the result of the miner’s ‘‘prolific use’’ of paid stock promotion and claimed the company’s uranium deposits cannot be mined profitably.
In a short report Thursday, Kerrisdale said that Uranium Energy has seen a ‘‘blistering growth’’ in its share capital since entering the uranium business in 2005, with most of the issued stock and raised capital being used on acquiring uranium deposits.
However, the Uranium Energy resource ‘‘edifice is just a façade’’ because none of the company’s estimated resources in the U.S. and Canada can be mined profitably at current uranium prices, wrote Kerrisdale.
Of the company’s Canadian assets, the short seller said the resource estimate is overstated by 50% to 100% in two of them, one is too small to mine conventionally unless uranium prices triple, while another was acquired for $150 million last year after the seller marked it down to zero.
Kerrisdale also accused Uranium Energy of spending vast amounts of capital on media campaigns aimed at promoting its stock to retail investors, adding that some of the firms engaged in the scheme have ties to CEO Amir Adnani, and that the stock promotion was exposed in a 2015 class action lawsuit.
‘‘In our opinion, Uranium Energy Corp isn’t really a company designed to mine and deliver uranium energy; rather, it’s a vehicle built to fool unscrupulous investors into buying massively overvalued shares of a stock promotion principally intended to enrich Adnani and insiders,’’ the report stated.
Uranium Energy shares were down 12% at $2.81 each as of 12:30 p.m. EDT Thursday, giving the company a market value of $1.05 billion. Kerrisdale said it believed the company is worth about $364 million, or $0.96 per share.