Callidus Capital (CBL.TO) – Why is the borrow expensive?

(*Disclosure: I have no position in Callidus Capital.)

Callidus is currently suing West Face Capital (a hedge fund) and Veritas Investment Research (an independent research firm) for defamation… and I want no part in being sued.  So I will try to be neutral as I talk about my speculation as to why the borrow is expensive.  The first thing that comes to mind is the defamation lawsuit against Veritas, a firm that does not do activist shorting.  Some short sellers really pay attention when companies sue their critics- more so when the criticism was private rather than public.  I’m not saying that short sellers are necessarily right or wrong to bet against such companies- the counterexample would be Fairfax Financial (Fairfax’s stock has done quite well since launching its lawsuits).  But it is certainly something that (in my opinion) attracts short sellers.

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