Canada Jetlines Sees BCSC Allege Insider Trading, Failure To Disclose Material Information

It appears that ahead of listing on the Neo Exchange tomorrow, Canada Jetlines (NEO: CJET) has found itself in hot water, along with its predecessor, Global Crossing Airlines (TSXV: JET). The trouble relates to a former version of Jetlines, prior to its transition to Global Crossing and its eventual spin-out onto the Neo.

On Friday, the BC Securities Commission issued a notice, alleging that the ultra low cost airline “failed to disclose material information and that its director committed insider trading.” The material information that was not disclosed pertains to a letter of intent entered into in September 2017, which we wrote about and highlighted as a major issue all the way back in March 2018.

The letter of intent itself related to an agreement the company had entered into for the lease of two aircraft, with delivery targeted for April 2018. As we correctly estimated months later, the company had seen the LOI terminated in December 2017 after the company had failed to change payment terms of the agreement (we had estimated this based on no signs of the required payments being made).

The terms of the lease term sheet.

However, despite the LOI ending in December, and flights planned to start as early as June, the company failed to disclose this material change to investors. The notice wasn’t made by the company until the evening after we publicized the major issue at the firm on March 13, 2018.

Further complicating the issue is that the chairman at the time, Mark Morabito, transferred shares to his wife, with the BCSC alleging that this was, “with the knowledge that his spouse would sell the shares.” Given that this was ahead of material news being released, the BCSC points to these actions as being insider trading.

It’s currently unclear what impact the allegations will have against Global Crossing, whom later merged with Jetlines as announced in December 2019, or for Jetlines, whom is expected to begin trading tomorrow on the Neo. It should also be noted that Morabito stepped down from his role with the company in connection with the firms merger with Global Crossing Airlines.

Information for this briefing was found via Sedar, Canada Jetlines and the BC Securities Commission. The author has no affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply