Canaccord chief executive officer Dan Daviau says the record-breaking pace of financing activity will slow in the coming months, as investors grow cautious on committing new capital to sectors, such as technology, in which valuations have soared.
“The pace of new issue activity is going to moderate, we all recognize it can’t go on like this forever,” Mr. Daviau said. He said the recent flurry of initial public offerings is likely to slow. “High-quality companies can still raise money, it’s just going to be a little harder to get IPOs done,” Mr. Daviau said.
On Tuesday, Canaccord reported a $270-million profit on revenue of $2-billion for the year ended March 31, both high-water marks for the Toronto-based investment bank. Canaccord advised on 713 transactions over the past 12 months, almost twice the 373 deals it worked on the previous year.
However, as red-hot growth stocks cool off, Canaccord’s CEO says a rally may be starting in commodities. “If we’re now in the early stages of an economic recovery, that favours sectors such as mining,” Mr. Daviau said.
“We seeing investors shift out of the FAANG stocks [Facebook , Apple , Amazon , Netflix , Google] and into commodity plays. If you’re an investor who is concerned about inflation, or the value of the U.S. dollar, then you’re looking at mining.”
In the six years since he was named CEO, Mr. Daviau has expanded Canaccord’s wealth-management platform through organic growth and a series of acquisitions, including takeovers in Britain and Australia. Last year, wealth management accounted for $45-million of the company’s profit, on revenue that rose by 44 per cent to $199-million.
In April, Canaccord offered to acquire Canadian rival RF Capital Group Inc. , parent to Richardson Wealth, for $367-million. The board of RF Capital and the firm’s controlling shareholder, Winnipeg’s Richardson family, turned down the proposal and refused to negotiate with Canaccord.
Late Tuesday, Canaccord withdrew the takeover proposal. “We’re willing to work with them, they have a good business with good people, but it’s their call,” Mr. Daviau said.
He said in recent years, Canaccord made significant investments in the technology and compliance systems that support its investment advisers, and the company plans to continue recruiting teams from rival firms.
Canaccord’s client assets under management were $88.8-billion at the end of March, up $28-billion over the past 12 months. The company made its first push into the Scottish wealth-management market in April by announcing plans to acquire Adam & Co. from NatWest Group PLC for $95-million. Edinburgh-based Adam & Co. has $2.9-billion of clients’ assets under management and the takeover is expected to close this summer.
In February, Canaccord announced it was selling a 22-per-cent interest in its British wealth management unit to fund manager HPS Investment Partners LLC for $216-million. The transaction is expected to close this summer.
After announcing the HPS investment, Canaccord bought back its own convertible debentures for $169-million, significantly reducing the number of outstanding shares in the company on a fully diluted basis and eliminating payments on the debentures that paid 6.5-per-cent interest.
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