Emerge Canada Inc. has missed a deadline to pay back the $4.7-million it owes to several exchange-traded funds it manages, leaving investors as unsecured creditors without their money.
In a client memo posted online Sunday night, the asset manager confirmed that all of the company’s ETFs had been closed as of Dec. 29. However, it was unable to pay fundholders the money it owed them – including accrued interest – prior the termination of the funds.
“Emerge Canada continues to work towards payment to unitholders, who are unsecured creditors of Emerge Canada for their pro rata portion of the Receivables,” the company wrote.
On Monday, Emerge spokesperson Corey Goldman declined to comment.
Emerge Canada borrowed the money from five of the ETFs it manages, starting in 2019. In April last year, the company said it borrowed the money to cover operating expenses for the fund. The five ETFs are branded as Emerge ARK funds, owing to a partnership with U.S.-based ARK Investment Management LLC, which is run by ARK’S Cathie Wood, a prominent U.S. investor. All told, Toronto-based Emerge Canada managed 11 ETFs.
On April 14, the Ontario Securities Commission imposed a temporary trading halt – known as a cease-trade order – on the company’s 11 ETFs. At the same time, The Globe reported that Emerge Canada, which manages about $118-million in assets, owed a total of $2.53-million to its six Emerge ARK funds, according to securities filings.
A month later, the OSC revealed that the amount was far higher than previously disclosed – with Emerge Canada owing $5.5-million to its own ETFs. The OSC also disclosed that Emerge Canada did not have enough working capital, and suspended its operating licence. The decision revealed that Emerge Canada was short of cash because it hasn’t collected money owed to it by its U.S.-based affiliate, Emerge Capital Management Inc.
Both companies are run by chief executive Lisa Langley. In November, The Globe reported Ms. Langley faced federal tax liens and lawsuits for alleged non-payment of money owed over the past 15 years in the United States and Canada.
On Sunday, the company told investors in the memo that it will arrange for payments representing each unitholders’ entitlement to the amount owed, and will post notification on the Emerge Canada website when repayment has been completed. There will be no expenses deducted from the amounts owing, Emerge said.
Emerge Canada notified unitholders of the liquidation on Dec. 20, and since then, some of the funds have been repaid to investors.
Emerge Canada owes the most – $3.9-million – to the Emerge ARK Global Disruptive Innovation ETF. That works out to nearly 40 cents a unit. Absent that payment, fundholders are receiving $6.71 a unit.
It owes $589,714 to Emerge ARK Genomics & Biotech, which also works out to 40 cents a unit, owing to the smaller number of units outstanding. Fundholders are set to receive $6.61 a unit.
Amounts owed to Emerge ARK Fintech Innovation ETF, Emerge ARK AI & Big Data ETF and Emerge ARK Autonomous Tech & Robotics ETF – all less than $100,000 – work out to seven cents to 13 cents a unit.