Water Controversy Leaves Shares in Cadiz Out to Dry
Wall Street West
by Benjamin Mark Cole
Shares in Santa Monica-based Cadiz Inc. barely had a chance to come up for air recently, before heading below sea level again.
The stock received a favorable mention in Fortune magazine back in June, when it was trading for $9 a share, around midway through its recent historical price-range of $8 to $10.
But it plunged to the $4 to $5 range in early July on news that Sen. Dianne Feinstein, D-Calif., added language to a federal appropriations bill that would bar use of federal money for a Mojave Desert aquifer on land owned by Cadiz.
The stock reached $5 in late August, after the project passed its final federal environmental reviews. Under the plan, the Metropolitan Water District would pay Cadiz to store extra water from the Colorado River during rainy periods. In drier times, it would pump out native water from the aquifer.
The dry-season part of the plan has environmentalists and politicians such as Feinstein concerned and threatening to continue fighting the project every step of the way.
Feinstein “continues to have serious concerns about the project,” said Howard Gantman, a Feinstein spokesman.
Since the August rally, Cadiz’s stock faltered again, to $4 in trading last week. On Sept. 3, the stock fell 17 percent in a single day’s trading.
The appeal of Cadiz’s stock has always rested on the idea that the agricultural concern would become a large supplier of Southern California’s water needs. But investors appear more spooked than ever.
The MWD board will discuss the project at a meeting Sept. 17, said MWD spokeswoman Lynn Lipinski.
All signs point to MWD approval by the end of the year, according to Michael Crawford, an analyst with Westside-based brokerage B. Riley & Co. who owns Cadiz stock. Indeed, the MWD has devoted an entire section of its Web site to publicize the Cadiz aquifer, which it describes as “ideally suited for underground water storage.”
And a vote last year indicated two-thirds of the 37-member board are inclined to support a contract between MWD and Cadiz. A simple majority is needed to approve the contract.
Crawford, for his part, believes the aquifer will provide Cadiz with a good source of income for the next 50 years. He said there doesn’t seem to be a strong fundamental reason for the recent sell-off.
But the wheels of government grind slowly the Mojave aquifer story has been around for years, and never seems to bear fruit.
Environmentalists maintain the Cadiz plan will dry out the Mojave too much. With the specter of home-state opposition in the Senate, plus environmentalist lawsuits to boot, the Cadiz project could end up greatly diminished if and when it goes forward.
While it waits, Cadiz can sell off some agricultural subsidiaries to raise cash, and its burn rate is not bad, said Crawford. “I liked this stock at $9, so you know I like it now,” he said.
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Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at