Shares in clearing, settlement and technology service provider Penson Worldwide have lost more than 39% after the company reported today that it has $25 million in exposure to Evergreen Capital Partners Inc., which has ceased operations.
The receivable is the result of a number of transactions by Evergreen on behalf of itself and/or its customers in listed Canadian equities for which they have been unable to post requested margin. The Investment Industry Regulatory Organization of Canada and Penson were recently informed by Evergreen that Evergreen has ceased operations.
Penson says it is in the process of taking all appropriate action and pursuing all available remedies to recover some or all of the money. If it can't do so, the company says it will likely incur an after-tax loss of around US$15.5 million.
Penson said no other correspondent or end client positions or funds are affected, and that its capital position and liquidity remain strong. It has commenced an investigation of the circumstances surrounding this matter, and is working with the Canadian regulatory authorities.
"We deeply regret this development, which is unprecedented in our history," said Philip A. Pendergraft, Chief Executive Officer. "We are doing everything possible to learn all the facts surrounding this issue, in order to maximise the possibility of recovery, and to prevent any such issue from ever again happening."
Evergreen was an employee-owned, boutique brokerage firm with offices in Toronto and Calgary that focused on mining and metals and oil and gas. It claimed in interviews with local press earlier this week that it is winding up because business in these sectors has declined dramatically with falling commodity prices.