January 17, 2018 / 8:59 PM / 10 months ago

Home Capital faces C$4 million lawsuit from short seller Cohodes

FILE PHOTO - The entry to the Home Capital Group's headquarters is seen at an office tower in the financial district of Toronto, Ontario, Canada on May 1, 2017. REUTERS/Chris Helgren/File Photo

TORONTO (Reuters) - Home Capital Group Inc (HCG.TO), Canada’s biggest alternative lender, said on Wednesday it had received a statement of claim from short seller Marc Cohodes, who is seeking C$4 million ($3.2 million) in damages.

Home Capital said the claim is based on allegations of misrepresentation and oppressive conduct.

“The company believes it has valid defenses to these claims and fully intends to defend its conduct. The company looks forward to examining the conduct of Mr. Cohodes,” Home Capital said in a statement.

Home Capital agreed on a settlement with the Ontario Securities Commission last June, and accepted responsibility for misleading investors about problems with its mortgage underwriting procedures. As part of that agreement, Home Capital said it would pay C$29.5 million to settle a class action lawsuit.

The company said on Wednesday that Cohodes had opted out of that settlement. Cohodes had bet against Home Capital shares since 2014 but covered part of his short position between March and June of 2015, Home Capital said.

U.S. billionaire Warren Buffett took a 20 percent stake in Home Capital last year and provided a C$2 billion credit facility after investors withdrew more than 90 percent of funds from its high-interest savings accounts.

Reporting by Matt Scuffham; Editing by Jonathan Oatis and Richard Chang

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