Here's is p-off. February 1, 2002
CAE's wild day on the markets
Short-sellers could be to blame for negative rumours
Jason Chow
Financial Post
CAE Inc. found out yesterday just how skittish investors are in the post-Enron Corp. era.
The collapse of Enron, the U.S. energy trader surrounded by accusations of improper accounting, has created a
contagion effect where investors are wary of all companies and their accounting practices.
For Montreal-based CAE, it was a combination of two rumours, later proved false, that raised some of the same
suspicions.
Shares in the flight simulator technology company (CAE/TSE) had a wild day, dropping as much as 9% to an intraday
low of $9.62 before closing up 33¢ at $10.98.
One rumour was that Veritas Investment Research, Canada's largest independent equity research firm, known for its
forensic accounting prowess, was going to issue a negative report on the company. Veritas was quick to issue a press
release yesterday denying the rumour. "I don't know who started the rumours, but we're not working on a report on
CAE," said Veritas analyst Michael Palmer.
Another rumour swirling about CAE was that it was going to announce a resignation of one of its managers. Analyst
Benoit Chotard at National Bank Financial said that rumour was also false and there was no resignation, but rather, a
retirement of the company's executive vice-president of aviation training, Bob van Balen.
Mr. Chotard said the company was in good financial health and expects it to meet analysts' expectations when it
releases its quarterly results next week.
One analyst, who spoke on condition of anonymity, said he suspected the rumours were started by investors who
were selling the stock short.