Vestcor Accused of Costing Tech Investors Millions
The company that manages billions of dollars in pension funds for thousands of New Brunswick public sector employees and retirees is being accused of causing financial losses for hundreds of investors across Canada.
Fredericton-based Vestcor Inc. and one of its senior executives are the targets of a petition filed in British Columbia that is seeking court approval for a class-action lawsuit.
The company is accused of falsely inflating the value of a corporate merger between two technology companies.
Vestcor invests the pension contributions of New Brunswick civil servants and other public sector employees in various investment vehicles, including stocks.
According to the petition application, Vestcor was the majority shareholder in Exro Technologies, and “orchestrated and significantly influenced” Exro’s 2024 merger with SEA Electric Inc., in which Vestcor also owned shares.
Exro paid $300 million to acquire SEA Electric after telling its shareholders that SEA would make $200 million in profits in 2024 — a figure that proved “delusional,” the court filing says.
“These facts and circumstances reflected within those representations were the basis of the grossly inflated valuation assigned to SEA Electric,” it says.
“Those purported facts and circumstances did not exist, or the manner of their representation in the material change report was false or misleading.”
It alleges Vestcor and its vice-president of equities Mark Holleran “did so in order to manage, or salvage, their significant investment in SEA Electric.”
The assertions in the petition have not been proven in court and Vestcor has yet to file a response.
“Our legal team is currently evaluating the merits of this lawsuit,” CEO Sean Hewitt said in an emailed statement.
“The claims have not been tested in court,” he added. “We have no reason to believe in their veracity.”
Sage Nematollahi, the lawyer who filed the petition on behalf of two shareholders, told CBC News that Vestcor “has lost a lot of money” as Exro’s majority shareholder, tying up “significant funds from pensioners in New Brunswick [with] this investment that has not done great.”
But in Hewitt's statement, he said the impact was “negligible” to the overall performance of Vestcor’s investment portfolios, estimating it at a fraction of one per cent of the total.
“Given the robust funded positions of our clients’ pension plans, and continued strong investment performance, there is no impact to the monthly income of pensioners,” he said.
The company managed a total of $23 billion in 2024 — an increase of $2 billion over 2023.
Vestcor, owned by the province’s two largest pension plans for civil servants and teachers, was created in 2016, replacing a government-owned agency.
It handles retirement plans for hospital workers, nurses, Crown corporation employees, provincial court judges, MLAs and others. It also manages other investment funds, including the University of New Brunswick’s endowment.
Exro was delisted by the Toronto Stock Exchange in October.
The company revealed in November 2024 that its revenue projections would fall far short of what it had claimed, recording a loss of $226 million, including a $211 million loss to the value of SEA Electric’s assets.
The losses led to “the complete collapse” of Exro, the filing says.
The petition alleges that Vestcor and Holleran “acted in bad faith and/or conflicts of interest” as “de facto directors and/or officers” of Exro.
The petition was filed by two shareholders, British Columbia resident Bryan Irwin, who held 27,500 common shares worth $22,000 at the time of the merger, and Ontario investor Mike Zienchuk, who had 900,000 shares worth an amount not disclosed in the court filing.
Nematollahi told CBC News that about 500 other shareholders have contacted his office about joining the lawsuit if it is certified as a class action case.
“There could be thousands of shareholders out there,” he said.
Zienchuk and another investor, Allan Crosier, have also filed a lawsuit in Alberta against Exro, two former company officials, the company’s financial advisors and its insurance underwriters.
Exro billed itself as a clean tech company that would design and build power electronics to improve the efficiency and cost-effectiveness of electric vehicles and energy storage systems.
Vestcor was a majority shareholder in Exro at the time of the merger and also held 14.3 per cent of preferred stock in SEA, meaning Vestcor was “acting both as a seller and a buyer,” the filing says.
I read this earlier this week and to be honest, I didn't contact Jon Spinney, CIO at Vestcor who I know because the allegations in the article are absurd.
What do I mean? Vestcor "orchestrated" Exro Technologies' buyout of SEA Electric Inc to save it on its book? It just seems like such nonsense.
The only thing leading to this accusation was this:
Vestcor was a majority shareholder in Exro at the time of the merger and also held 14.3 per cent of preferred stock in SEA, meaning Vestcor was “acting both as a seller and a buyer,” the filing says.
To which I say so what? It's not like Vescro forced Exro to merge with SEA.
But this is the part that really caught my BS detector:
Sage Nematollahi, the lawyer who filed the petition on behalf of two shareholders, told CBC News that Vestcor “has lost a lot of money” as Exro’s majority shareholder, tying up “significant funds from pensioners in New Brunswick [with] this investment that has not done great.”
But in Hewitt's statement, he said the impact was “negligible” to the overall performance of Vestcor’s investment portfolios, estimating it at a fraction of one per cent of the total.
“Given the robust funded positions of our clients’ pension plans, and continued strong investment performance, there is no impact to the monthly income of pensioners,” he said.
I categorically refute claims that Vestcor is losing or has lost a lot of money. Complete and utter nonsense!
Back in April, I went over Vestcor's solid 2024 results with CIO Jon Spinney and they were truly excellent on all fronts. You can read that comment here.
Moreover, as CEO Sean Hewitt notes, the loss from Exro's implosion was negligible so this story is much ado about nothing.
Basically, Sage Nematollahi (featured above), the lawyer representing plaintiffs used some contacts of his at CBC to make a big stink about Exro's implosion trying to tie it to Vestcor, making all sorts of unfounded and in some cases completely false accusations.
These lawyers are a dime a dozen in the securities field, typically they make all the money and recover little to no funds for their clients who subscribe to a class action lawsuit after a stock collapses.
Anyways, Vestcor will fight these allegations in court and if they are proven guilty of any wrongdoing, I will let my readers know.
I think this article is a bunch of nonsense that Jacques Poitras of the CBC got suckered into reporting (warning to all reporters, if unsure, before publishing contact yours truly, I will set the record straight).
More importantly, I want civil servants and teachers in New Brunswick to know that Vescor is doing an excellent job managing the assets of their pension plans.
Don't let this negative CBC article lead you to conclude otherwise.
Below, learn more about Vestcor and what it does. It's the most important pension fund in that region of the country and they are doing great work in my opinion.
Also, Keystone Financial made a clip on whether Exro has a chance at recovery. Take the time to watch this, he covers all the details well.
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