Investors in L.A. water company Cadiz Inc. were jolted last week as a short-seller and self-described Wall Street crusader posted a massive blog entry sharply critical of the company’s plan to sell water from its desert aquifer to local water agencies.
The short-seller, who posts anonymously under the pseudonym “Pump Stopper,” alleged last week that Cadiz is headed for bankruptcy because its plan won’t clear key remaining hurdles and, even if it did, wouldn’t be financially viable. The blogger further alleged the company’s management has failed to disclose this to investors.
The blog, posted midday April 21, was quickly picked up by social media and within hours Cadiz shares had tumbled 10 percent.
Cadiz responded the next day, rebutting several of the allegations made by Pump Stopper and indicating the company might take legal action against the blogger. While the response stabilized the share price, Cadiz stock still lost 11 percent for the week ended April 22, closing at $8.65. The company was the second-biggest loser on the LABJ Stock Index. (See Page 32.)
Cadiz has been trying for nearly 25 years to develop a water storage and sales project for an aquifer under its 45,000-acre holdings in the Cadiz Valley, east of the Twentynine Palms Marine Corps Air Station. The company has signed agreements with six water agencies to pump water out of the aquifer and send it via pipeline to the Metropolitan Water District-operated Colorado River Aqueduct and then on to the water agencies. That plan received environmental approvals three years ago and survived numerous legal challenges from environmental groups.
But Cadiz is still awaiting a decision from the federal Bureau of Land Management on whether a full environmental review will be needed for a pipeline the company wants to build.
In a 54-page blog entry, Pump Stopper referenced public documents indicating the BLM is prepared to require a full environmental review, which could prove costly and further delay the project. Furthermore, the blogger referenced documents indicating that the MWD had previously said the Cadiz project could not be integrated into their aqueduct.
The Business Journal emailed Pump Stopper for comment but did not receive a reply.
In its rebuttal, Cadiz said it expects a decision from the Bureau of Land Management this year and that the company had no indication of which way the decision would go. The company said it has not yet even entered discussions with the MWD over water conveyance rights and pricing.
L.A. economic development consultant Larry Kosmont, who served on the MWD board as the Cadiz project was being debated in 2000-01 (but whose term ended before the board vote) said he believes the company will be able to negotiate water conveyance rights through the MWD’s Colorado River Aqueduct.
“The MWD transfer negotiations are likely to be challenging, but I view them ultimately achievable,” he said.
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