Languages evolve. Topics change. The conversations of the latest generation and the manner that they relate it through social media moves on. The Académie française can attempt to maintain the purity of French, but there has to be an allowance for progression.
English also advances. This became apparent when the word "cryptocurrencies" did not pass a spell check. And while "block" and "chain" both make it, of course, combining them into "blockchain" does not cut the mustard. C'est la vie.
Corporations also have to advance or often they join the dinosaurs. In the sector that GMP Capital (GMP-T) resides, many competitors have either bitten the proverbial dust or merged. This company has worked hard to be one of the survivors.
Effectively, it has two arms. The wealth management appendage through Richardson Securities is doing quite well, thank you. The unit is profitable and it was supposedly being wooed by Toronto-Dominion Bank for a takeover about a year ago. Alas, that fell by the wayside, perhaps because GMP is facing some lawsuits caused by an adviser who placed clients into investments that did not match their risk profiles. There are questions on whether TD wanted to face the cost and reputation-damaging fallout from the legal proceedings.
The part of GMP that was not doing well was the capital markets piece. This asset's primary raison d'être was to raise money in the commodity sector, which obviously has not been doing well over the past number of years. Last year, a takeover of FirstEnergy Capital (FEC) was accomplished – an attempt to expand the corporate footprint into the oil and gas patch. This has not been as successful as envisioned thus far and perhaps that was telegraphed by many FEC people who cashed in their chips as quickly as allowed through the agreement.
Last quarter, revenue at GMP was 21 per cent lower than the prior year and the bottom line showed a loss of $2.8-million. Those are not numbers that instill confidence in most investors.
But salvation may be in the cards through that new word, "cryptocurrencies." The company last week hosted what they called the Inaugural Blockchain Conference and Canada's "premier blockchain event." Evidently, it was a success for the stock price as it jumped more than 10 per cent, while trading more than 400 per cent of the normal volume. While that is a small-fry, one-day bump compared with bitcoin on its best days, it is still substantial, with potentially more in store as GMP arranges for the financing of some enterprises in this emerging technology.
Another potential driver of growth is enterprises in the marijuana industry. This is another field that is developing by leaps and bounds. Banks are still reticent to become players here but, of course, that will change. They do like to follow the money.
Back in the day, GMP traded above $25. Our hope is not so optimistic with an initial sell target of $15.44. Even that could be pie-in-the-sky. Still, this definitely seems to be a good time to get financially high on cryptocurrencies and marijuana. However you spell them.
Benj Gallander and Ben Stadelmann are co-editors of Contra the Heard Investment Letter.