Last September, Silvercorp Metals Inc. tried to turn the tables on short-sellers that bad-mouthed the company’s stock by teaming up with K&L Gates and filing a defamation suit. It was a response to a flurry of online reports that sent Silvercorp’s shares plummeting. But was it a mistake?
On August 16, New York State Supreme Court Justice Carol Edmead dismissed Silvercorp’s suit, finding that the researchers and anonymous investors who raised questions about the mining company’s accounting and business practices last year hadn’t crossed over the line from constitutionally protected speech to libel. And more ominously for Silvercorp and other companies targeted by muckraking short-sellers, Edmead predicted that the ruling may embolden others to follow in the defendants’ footsteps.
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