Skip to main content

Newly formed activist firm Smoothwater intends to file a dissident proxy circular with the aim of electing a new slate of directors at Calgary-based Genesis Land Development.Jupiterimages

In a rare Canadian decision, Alberta's superior court has ruled that an activist investor failed to disclose that it collaborated with others to launch a proxy battle against a Calgary-based real estate development company.

In July, Smoothwater Capital Corp., a new activist firm founded by Stephen Griggs, the former head of the Ontario government's employee pension fund, filed for a proxy battle against Genesis Land Development Corp., hoping to take control of the board of directors.

From the get-go, Genesis argued that Smoothwater wasn't acting alone because one of its board nominees was not independent from the fund. Mark Mitchell is the brother of Garfield Mitchell, Smoothwater's chairman, and he owns 9.5 per cent of the company's shares. (Two other nominees were co-investors in another business venture.) Yet Smoothwater said they were true independents.

While disclosing such connections may not seem like that big of a deal, Canadian rules dictate that activists must say if they are working in concert with other parties. That's because, theoretically, two different groups could each quietly build 19.99 per cent stakes in a company that would not trigger disclosure rules, and then launch a takeover proxy battle without having ever paid a premium to shareholders.

What's interesting about this case is that while companies being attacked by activists typically argue that the connections between the activists and its directors weren't disclosed, such arguments normally fall on deaf ears. This time the Alberta court listened and ruled in favour of the company.

Now Smoothwater must restart the process with proper disclosure, possibly delaying things by over a month.

(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)

Return to Streetwise home page.

The Globe has launched a Streetwise and ROB Insight newsletter, with content available exclusively to Globe Unlimited subscribers. Get the best of our exclusive insight and analysis delivered straight to your inbox in a daily e-mail curated by our editors. Sign up for it and other newsletters on our newsletters and alerts page.

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 10:12am EDT.

SymbolName% changeLast
GDC-T
Genesis Land J
-0.37%2.72

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe