DH Corp. Defends Accounting Practices, Calls Hedge Fund Report 'Misleading'

By Posadzki, Alexandra | The Canadian Press, October 27, 2015 | Go to article overview

DH Corp. Defends Accounting Practices, Calls Hedge Fund Report 'Misleading'


Posadzki, Alexandra, The Canadian Press


Toronto fintech company DH on defensive

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TORONTO - Financial technology company DH Corp. is defending itself against what it calls a "false and misleading" report from a hedge fund that casts doubts on its growth prospects and past performance.

The report by Lawton Park Capital Management alleges the Toronto-based company (TSX:DH) is making "desperate" acquisitions and playing "accounting games" in order to obscure its dwindling performance.

The report takes issue with DH's approach to accounting for its revenue and alleges that "numerous" insiders of the company have been selling their shares, which could indicate trouble brewing that the public isn't aware of.

DH released its quarterly earnings report earlier than planned and bumped up its conference call to discuss its results, originally slated for Wednesday, to Tuesday morning in order to address the allegations.

The company, formerly known as Davis + Henderson in the days when it was primarily known for printing and supplying paper cheques for Canada's big banks, says investors should rely on its public filings and not the analyst report.

DH's chief financial officer Karen Weaver said the company follows "disciplined accounting practices" that are in accordance with the International Financial Reporting Standards.

Chief executive Gerrard Schmid called reports that company insiders have been dumping their shares "categorically untrue" and "highly misleading," noting that while there have been a number of "individual, one-off transactions," on a net basis insiders have accumulated more shares over the past three years.

Schmid said that during the second quarter of 2015, company insiders -- including board members and senior management -- held roughly 580,000 shares, up from 215,000 shares in the second quarter of 2012.

Lawton Park Management declined comment.

In their earnings news release issued Tuesday, DH called Lawton Park's allegations "self-interested attacks" and said it believes the hedge fund in question is engaged in short-selling its shares -- an investment technique that depends on a stock value falling rather than rising.

"We are deeply disturbed by the false and misleading allegations contained in the report, and intend to vigorously defend ourselves and D+H against these assertions," Schmid said during the company's third quarter earnings call. …

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