Canaccord Genuity Group Inc. announced plans Sunday to cut 4 per cent of its staff, blaming "market conditions" for the layoffs.
Approximately 80 out of Canaccord's 2,018 staff will lose their jobs, according to spokesman Scott Davidson. The cuts will mostly affect its operations in Britain, Europe and the United States. Canaccord will incur a $22-million charge related to the layoffs.
The Vancouver-based independent broker dealer and wealth management company did not elaborate on what it meant by "market conditions," but some analysts are concerned about the company's heavy exposure to the energy sector, particularly in Canada.
Over the past three years, about 15 per cent of Canaccord's investment banking revenue was directly tied to the energy sector, according to Sumit Malhotra, an analyst with Bank of Nova Scotia. The S&P/TSX capped energy index is down about 30 per cent since July, 2014. Canaccord shares have lost about half their value in the same period.
"This is not exactly the type of environment that has either companies or their investors thinking 'bought deal,' and the deterioration in the capital markets environment has had a clear negative impact on activity levels and operating conditions for the broker/dealer sector," Mr. Malhotra wrote in a recent note to clients.
Canaccord Genuity's shares were shaken in December on news that Quebec's securities watchdog is probing trading activity around Amaya Inc.'s blockbuster takeover of the PokerStars and Full Tilt Poker franchises.
Canaccord was an adviser on the transaction, and chief executive officer Paul Reynolds informed employees and investors that the company has not been targeted for any wrongdoing and is providing information on specific trades in its client accounts.
Earlier this month, Canaccord said it is opening an investment banking and advisory office in Dubai.
It has operations in 10 countries, including Canada, Britain, the U.S., France, Germany, Australia, Hong Kong and Singapore.
The company will report its Dec. 31 quarter on Wednesday.
Independents such as Canaccord have struggled in recent years to compete for market share with the largest players, such as the brokerage arms of the big banks. Paul Holden, analyst with CIBC World Markets Inc., says he "wouldn't be surprised" if fellow independent brokerage GMP Capital Inc. also reduced its head count. But Mr. Holden isn't expecting that GMP's cut would be as deep.
"They're [GMP] relatively lean in terms of their cost model. It's very much a low salary and cash bonuses [operation], when the revenue is there," he said in a telephone interview. "Their costs fluctuate a lot with revenue, which helps."
GMP will report its fiscal fourth quarter earnings in March. The firm did not respond to a request for comment.