GMP Capital Inc. reported a third-quarter loss of $25.4-million as revenue declined in its capital markets business, which is in the midst of being acquired by U.S. brokerage Stifel Financial Corp.
A year ago, GMP had net income of $2.9-million in the third quarter. The year-over-year decline, which was primarily due to an $18-million net loss at its investment banking arm, comes as the company shifts its focus to its wealth-management business, Richardson GMP, which has $28.6-billion in assets and 160 teams of financial advisers.
In June, GMP announced it would sell its investment-banking business to St. Louis-based Stifel for roughly $70-million. GMP was once among Canada’s top independent investment banks, raising money for small to medium-sized corporations, particularly in the technology, cannabis, mining and oil and gas industries. But it has suffered a number of blows in recent years, including a downturn in resource markets, shrinking trading commissions and a failed expansion.
Meanwhile, financings in the cannabis business, once a bright spot for independent dealers such as GMP and rival Canaccord Genuity Group Inc., have all but dried up. Canaccord chief executive Dan Daviau said Thursday that cannabis contributed “literally zero” to his firm’s second-quarter income, which was down roughly 27 per cent from a year ago to $13.2-million.
Once the sale to Stifel is complete, GMP, which currently has a 33-per-cent stake in Richardson GMP, plans to buy the remaining 67 per cent of the wealth manager from its employees and Winnipeg’s Richardson family. The deal, which will be done through a stock swap, will make the Richardson family the company’s largest shareholder.
“The key takeaway for the quarter is that the sale of our legacy capital-markets business is nearing the finishing line," GMP CEO Kishore Kapoor said during a conference call Friday.
"The sale will mark the completion of the first step toward transforming GMP into a firm that can be the very best at providing high net worth clients independent, non-bank points of access for their wealth management needs for generations to come.”
Cash from the sale will be used to expand the wealth-management platform, Mr. Kapoor said. The deal is expected to close in the fourth quarter and is awaiting one final regulatory approval.
Former GMP CEO Harris Fricker received two times his annual salary and bonus – roughly $7.7-million – when he stepped down in August. He will receive an additional $1-million bonus if the deal closes.
Mr. Fricker remains president and CEO of the capital markets business and will join Stifel after the sale closes. A number of other key staff have also signed employment agreements with Stifel.
“Integration teams at Stifel and GMP are working closely to ensure a smooth transition of the business on day one,” Mr. Kapoor said.
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