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Canadian bank headquarters stand on Bay Street in Toronto. With no explanation about the stock sale, waves of shareholders hit the exits. By the end of the week, the stock price dropped 17 per cent to close at $1.07 on Friday.

Brent Lewin/Bloomberg

A high-flying junior medical company has left bruises all over Bay Street after investors reacted angrily to news that the company's top two officials quietly sold the bulk of their shares two months after promoting a $67-million stock sale.

Patient Home Monitoring Corp. saw its stock soar from a low of 33 cents a share last summer to a high in April of nearly $2 a share on the TSX Venture Exchange on promises from two Los Angeles based-promoters, Michael Dalsin and Roger Greene, that the company was poised for greatness.

In a round of media interviews and investor meetings in May, the two men predicted the small Vancouver supplier of home medical devices and supplies would be transformed by an acquisition spree that would catapult 2014 annual sales of $21-million to $175-million in 2015. A long term target of $1-billion, Mr. Greene told a Midas Letter interviewer, was "realistic."

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The rosy outlook helped a trio of Bay Street underwriters, led by Mackie Research Capital Corp., sell $67-million of stock units to a broad group of affluent and institutional investors in May. But investor enthusiasm turned to outrage last week, when a regulatory filing on corporate insider trades revealed that Mr. Dalsin and Mr. Greene sold their jointly held stake of 13.4 million shares in Patient Home Monitoring on July 14 for $18.2-million, or $1.36 a share.

Aggravating investor fury was confusion about the amount of shares sold. Initially, investors read the insider-trading reports to mean the two men had each sold 13.4 million shares, but the company's bankers later explained that the two men jointly owned the 13.4 million shares. The sale left them with no shares in the company, according to the regulatory filing. However, a more recent report indicates they jointly acquired four million Patient Home Monitoring shares on July 28.

Neither Mr. Dalsin nor Mr. Greene, who are company directors, have offered any public explanation for their abrupt stock sale. Adding to the confusion was a bizarre company conference call on Monday, during which Mr. Dalsin made a few general remarks about its new chief executive officer, took no questions and then disappeared from the call. Mr. Dalsin's remarks were prerecorded because he was vacationing on a boat near Africa, said Pat McCarthy, a managing director at Mackie Research, the company's lead underwriter

Neither Mr. Dalsin, Mr. Greene nor a spokesperson for Patient Home Monitoring replied to requests for comment.

With no explanation about the stock sale, waves of shareholders hit the exits. During three turbulent days at the beginning of last week, the stock see-sawed, dropping sharply to a low of 78 cents a share in frenzied trading on Wednesday. By the end of the week, more than 40 million Patient Home Monitoring shares were traded on the TSX Venture Exchange, driving the stock price down 17 per cent to close at $1.07 on Friday. More than $52-million was erased from the company's total market value.

"It was a complete gong show," said Peter Hodson, chief executive officer of 5i Research Inc., an independent research firm. "If you're an institutional shareholder and you come in and management owns a lot of shares, then the financing closes and management doesn't own a lot of shares, that's when you say: 'I don't want this stock and I don't want this company; I'm going to ditch whatever shares I have.'"

One investor casualty was LDIC Inc., a fund manager that recently exchanged securities in one of its new health-care funds with Mr. Dalsin and Mr. Greene for five million shares of Patient Home Monitoring.

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"We were, of course, not delighted with the volatility in the market," said Michael Decter, LDIC's CEO and a former deputy minister of Health for Ontario.

What was tough for investors was embarrassing for the underwriters, who sold $67-million of Patient Home Monitoring securities in May.

Mackie's Mr. McCarthy said he was "screaming from the rooftops" to get more information to investors about a company that has "mismanaged" its communications. Investors were so "spooked" by the insider stock sales, he said, that it became "really dramatic and very emotional for a lot of investors."

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