12 Aug 2009

Cadiz, Money, Politics and Corruption

Emily Green, an experienced investigative journalist, has been looking into Cadiz, Inc. [stock: CDZI], the company that's been trying to turn its property in the Mohave desert into a source/storage site of water to be sold to urban areas -- probably via Met's Colorado River Aqueduct (there's no connecting pipeline yet).

In this post, Emily compares Cadiz's claims to the reality in the area. My favorite? Cadiz claims a recharge (sustainable yield) of 35,000 - 50,000 af; USGS says 2,500. [See posts by aquadoc and jfleck.]

In this post, Emily gets into the money. More importantly, the connection between Cadiz and Schwarzenegger, whose chief of staff was a paid Cadiz consultant only a few years ago. The key question here is how Schwarzenegger's June 4 "endorsement" of Cadiz affected the share price of a company that's 50 percent owned by 10 companies.* Lo and behold -- the announcement sent shares up by 60 percent in one day.

Note that Keith Brackpool, CEO of Cadiz, plead guilty to charges of securities fraud in the UK. Does he know how to do manipulate shares and do insider trading? Yes. Is it possible that he is doing that? Yes.

What intrigues me is that Brackpool took options on 60,000 shares on May 22. They were worth about $400,000 then and about $750,000 2 weeks later. (He only had 90,000 shares before exercising that option. Was it "in the money"? Did he sell those shares? I can't tell. Help, anyone?)

I've spoken to Emily about this situation and these are my own ideas, but the facts may be telling us an interesting story. Anyone got more to tell?

Bottom Line: It's fine to buy and sell water to make a profit. It's NOT fine to use political influence to change the value of your water trading company. I would not be surprised if Cadiz has crossed that line.
* The endorsement was highlighted in a June 5 press release, so it was issued the day before.