In a bid to counter a deluge of criticism following news of a key adverse ruling this week, Los Angeles water marketer Cadiz Inc. issued a statement Friday morning attempting to get its side of the story out.
But the statement had the opposite effect: shares tumbled another 16 percent Friday to close at $3.01. Cadiz shares were down a whopping 62 percent for the week.
The bad news first hit on Monday as a decision by the federal Bureau of Land Management became public. The agency’s California director ruled last week that Cadiz would not be able to exploit a loophole to avoid full environmental review of its proposed pipeline to transport water from its desert aquifer to the regional water grid. Cadiz had sought to have the pipeline declared essential for the operation of an adjacent railroad, thereby invoking a 19th century provision allowing the pipeline to be placed under the railroad operator’s discretion.
A full environmental review will not only add at least a year and millions of dollars to Cadiz’s plan to bring its aquifer water to market, but also gives opponents another shot at stopping the project. Over the last three years, Cadiz had successfully defended against several lawsuits from environmental groups.
Cadiz shares instantly fell 40 percent on the news. Then, on Thursday, GeoInvesting issued a short-sell recommendation, arguing that after the BLM decision, Cadiz’ stock was essentially worthless. GeoInvesting’s recommendation also said that Cadiz had major debt payments coming due and an insufficient revenue stream to make those payments.
In response to this and other negative media coverage, Cadiz issued a statement Friday morning. In the statement, the company referenced its formal letter of response to the BLM decision. That letter gave several reasons why the company believed the BLM decision was wrong and urged the agency to rescind the decision; otherwise, the letter warned, Cadiz might seek redress in federal court.
Cadiz’ Friday statement also defended the company’s water transfer plan, saying that plan has cleared all environmental hurdles up to this point.
But the statement did not mollify investors, who sent Cadiz shares down another 16 percent.