ENGINES FAIL ON SHORT FLIGHT.

Marc Cohodes, America’s blustery short-seller and aggressive market basher, said this about Toronto’s Home Capital Group last April: The fraud “is widespread. It extends to the board … it is top to bottom.” That and other rhetorical grenades helped sink Home Capital’s shares from $ 30 to $ 6 earlier this year. So far the fraud claims have not been substantiated and no charges have emerged. After working out a regulatory issue with the Ontario Securities Commission over disclosure, Home is now at $15 and attempting, with a new CEO and fresh backers, to regain its position in the mortgage market.

Now Cohodes has another small- cap Canadian company in his grip — Exchange Income Corp., an airline and aviation company based in Winnipeg. It trades on the Toronto Stock Exchange as EIF. In a July 11 tweet, Cohodes said “The lights will be turned off at EIF… They will also be exposed for what and who they are.”

As to what and who will be exposed, Cohodes has already described in graphic detail — often via cartoons — in tweets and in “reports” posted via Twitter.

In his report on Exchange Income Corp., he raises the spectre of a “ponzi scheme,” because EIF pays out more dividends per share than it earns per share. Cohodes claimed, in a recent report, that the CEO of EIF has a rocky track record and suggested he “stop lying” about EIF’s financial and airline operations. Cohodes alleges EIF’s aircraft maintenance failures have caused “very real deaths and serious injuries.” The opening page of Cohodes’ sensational July 5th report carried a large headline that said “Please, Transport Canada” and called on the government to “ground all” the aircraft operated by its EIF subsidiaries in Canada’s northwest, including Perimeter, Bearskin, Calm Air and Keewatin Air.

That’s just a short list of the pile- on of EIF claims made by Cohodes in recent weeks. So far, the market isn’t quite buying his condemnation of the company. Shares of EIF dropped from $ 33 to $30 when the July 5th report landed, but have since held at above $30. They took a little dive below $30 last week after Cohodes tweeted that he was “going to put a Grenade” in the pants of an analyst who challenged his conclusions as “running on fumes.”

The new grenade turned out to be sensational quotations from an unnamed pilot about EIF airline safety. The shares bounced back over $31 on Monday.

Cohodes may have to lob a lot of explosives to take down EIF analysts. In the wake of his attacks, analysts have condemned his claims that EIF is about to post a disastrous second quarter. It’s scheduled to report those numbers late Wednesday. Analysts also posted their contrary views that EIF shares should go higher. National Bank analysts target $ 45; Laurentian $48; Cormark Securities $40; Raymond James $48.

The company itself, which accused Cohodes of running a “short and distort” campaign, also disputes the core issues raised by Cohodes, including his claim that EIF’s latest quarter will be a “disaster.” In a statement, EIF said it “reiterates its expectation that the Company will meet analyst consensus for the 2017 fiscal year. Furthermore, we are having a strong second quarter.”

To which Cohodes asked if this is “just more lies?”

Many analysts who follow the company have dismissed Cohodes, saying his accusations “lack credibility” and are “misguided.”

One Cohodes r e por t slams EIF’s CEO, Mike Pyle, for having been a former executive at Arctic Glacier Income Fund, a Winnipegbased ice cube maker that expanded across Canada and the United States before collapsing in 2012. Trouble is, Pyle left Arctic Glacier in 2002, well before it ran into trouble with excess debt and bizarre U.S. anti-trust allegations from which it never recovered. Cohodes implies malfeasance, but no top executives were ever charged.

National Bank analyst Trevor Johnson, in a report, politely said the attempt to draw a parallel between Arctic Glacier and EIF is “misguided.” The anti- trust case, moreover, appears in U. S. documents to have been waged solely against regional vice- presidents at the state level over market allocation practices that took place between 2001 and 2007. Pyle left in 2002. Asked in an email about Pyle’s role, Cohodes responded: “He was an Executive when the misconduct took place... if you are the COO it doesn’t matter where the misconduct took place he is responsible.”

Asked about analysts’ comments that he is “misguided” on Arctic Glacier, Cohodes responded: “I don’t really care what the analysts think or say. ( T)hey are paid by the company to raise money for them to pay a dividend they don’t earn or Cash Flow.”

Cohodes’ claim that EIF operates dangerous aircraft also appears to be open to challenge. He cites two crash incidents that Canada’s Transportation Safety Board did not blame on the company. The board said a Bearskin/ Perimeter crash in 2013 in Red Lake, Ont., which killed two pilots and three passengers, was due to a “premature engine failure.” The engine had accumulated 2,948 hours since its last major overhaul, said the board. “The next major i nspection was not due until 3,500 hours. Failure of engine components 552 hours prior to the next inspection would be described as premature. Premature engine component failures have occurred in this engine type, but are rare.”

Cohodes suggested otherwise. “What happens,” he suggested, “if you don’t maintain 30 year old planes in order to pay dividends?” Transport Canada, in an email to the Financial Post, did not identify problems and said all EIF airlines hold valid operating certificates.

The other EIF airline fatality cited by Cohodes involved the death of an infant in a December 2012 “collision” landing in Nunavut. Among the main thrusts of the report afterward was to note that weather conditions unexpectedly changed, and scolding Transport Canada regulators for not mandating proper systems for securing infants.

Like any company, EIF carries its share of corporate risk. Analysts who follow EIF seem to have a clear grasp of what those risks are. There’s plenty of room for debate over EIF’s expansion methods, its funding regime, its high dividend payouts and its competitive operating environment. See too much risk? Don’t buy.

Cohodes said in an email that “I am doing the public a huge service here.” I disagree. He has taken a contrary investment position in EIF, presumably personally selling the stock short. For his own benefit he is stating facts about EIF airline safety that at best are in stark disagreement with the transportation regulator, using sensational references to Ponzi schemes, and unfairly attacking executives with suggestions they are lying. In short, Cohodes the short seller is engaging in market jockeying that is beyond what Canadians should expect from stock market players.

Cohodes, having promised to turn the lights out at EIF, is trying to shoot them out.

IT WILL TAKE LOT OF EXPLOSIVES TO TAKE DOWN SUPPORT FOR EXCHANGE INCOME CORP.