An investigation by German regulators into possible market manipulation has prompted the BC Securities Commission (BCSC) to issue an investor caution against Vancouver junior exploration company Goldex Resources Corp. (TSX-V:GDX).
Goldex is an exploration company with prospective properties in Mali and Guatemala.
On February 26, Goldex’s shares spiked 77%, from $0.70 per share to $1.24, and another 8% on February 27 to $1.34. Two days later, on February 28, they dropped 33.58%.
The same day the company’s shares spiked 77%, the company had issued a press release announcing a joint venture with Geo-Sys-Tech S.A.R.L. and RexMetal S.A.R.L. related to a gold property in Mali. But the nature of the announcement appears not to have warranted such a dramatic share spike.
Goldex is co-listed on both the TSX Venture exchange and Germany’s Frankfurt exchange.
According to BaFin, Germany’s Federal Financial Supervisory Authority, a newsletter had circulated with a buy recommendation for Goldex that may have contained false or misleading information, and launched an investigation.
“BaFin has evidence indicating that these buy recommendations contain false or misleading information and/or that existing conflicts of interest are wrongfully concealed,” A BaFin alert states. “It has initiated an investigation into suspected market manipulation in the shares.”
Asked if the BCSC has also launched an investigation, a BCSC spokesperson said the commission cannot disclose to the public whether or not a company is being investigated. However, the company’s shares continued to be traded and have not been subject to any halts.
Goldex’s president, Charles Ross, says the company was unaware of the newsletter or who circulated it.
“Prior to it being brought to the company's attention, it was not aware of the notice and not aware of the e-mail market letters referred to in the notice,” Ross said in a post on Stockwatch. “The company is also not aware of who issued the market letters.”
The BaFin investigation appears not to have deterred investors, as Goldex’s shares once again spiked on March 2. Goldex’s stock was up 18% to $1.09 in mid-day trading today.
According to Goldex’s most recent financial filings, the company had $4,724 in cash as of September 2017, a working capital deficit of $985,888 and an accumulated deficit of $23 million.
In February 2016, the company executed a 10-1 share rollback. Share rollbacks can be a red flag for investors. Companies will do share conversions to essentially inflate the value of shares by reducing their number. Sometimes this is done in order to meet continued listing requirements on stock exchanges.
