Cantor Fitzgerald Canada analyst Ralph Garcea says the insider trading charges dogging Amaya (TSX:AYA) will have no hasty resolution and likely no real impact on the company’s day to day business.
Early this week, news broke that the The Autorité des marchés financiers (“AMF”) had filed 23 charges against David Baazov, Benjamin Ahdoot, Yoel Altman, Diocles Capital, Sababa Consulting, and 2375879 Ontario Inc., in relation to insider trading allegations.
Amaya CEO David Baazov faces five charges; for aiding with trades while in possession of privileged information, influencing or attempting to influence the market price of the securities of Amaya, and communicating privileged information.
In December 2014, the AMF raided the offices of Amaya, Canaccord, and Manulife Financial because of alleged action related to trading activities in its shares around the acquisition of Oldford Group, which owned the Poker Stars and Full Tilt Poker brands.
In a press release issued yesterday, Amaya backed its boss.
“David Baazov has the full support of the independent members of the board,” said Dave Gadhia, Amaya’s lead director and independent board member. “As noted previously, Amaya conducted an external internal review, supervised by its independent board members with the assistance of external legal counsel from Osler, Hoskin & Harcourt LLP in Canada and Greenberg Traurig LLP in the United States, which thoroughly reviewed the relevant internal activities surrounding the Oldford Group acquisition. This review found no evidence of any violations of Canadian securities laws or regulations. The independent members of the board received and reviewed the information and concluded that no action should be taken. We have not been provided with any new information upon which the AMF’s allegations of infractions are based.”
Garcea says there will be no swift resolution to the issue and reminds that Amaya’s recent fourth quarter outperformance is evidence that the company’s core business is stable and growing.
“Mr. Baazov issued a statement indicating he will defend himself against the false allegations, he is still committed to working with his investor group and AYA to consummate a deal, noting there is no expectation of material impact on the business,” says Garcea. “While the charges are serious (could carry fines and/or prison terms), this could be in the courts for a while before anything gets resolved.”
In a research uodate to clients today, Garcea maintained his “Buy” rating and one-year price target of (C) $45.00 on Amaya, implying a return of 205 per cent at the time of publication.