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Daniel Daviau, President and CEO Canaccord Genuity Group Inc.

Shares in Canaccord Genuity Group Inc., an independent brokerage with significant operations in Europe, were hit hard Friday after Britain voted to leave the European Union.

Canada's largest boutique investment bank was down roughly 4 per cent by mid-afternoon in trading on the Toronto Stock Exchange after falling as much as 6 per cent earlier in the session.

Canaccord pulled in 36 per cent of its fiscal 2016 revenue from its British and European operations, with a large footprint in both investment banking and wealth management. Combined operations in Britain and Europe represent the company's single biggest geographic segment. (Canada, its second biggest, represents 31.4 per cent). Canaccord also has significant U.K. currency risk, as earnings generated in sterling must be reported in Canadian dollars.

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"While the ultimate effect on capital markets of Brexit is uncertain, the only thing we can be sure of is that there will be short-term volatility," Canaccord chief executive officer Dan Daviau wrote in an e-mail to The Globe and Mail.

"This presents challenges, but also opportunities – gold names, for example, are expected to gain strength, which will improve activity levels in a space where we have been historically dominant."

Business in Britain, particularly on the capital markets underwriting side, has been weak at Canaccord for the past two quarters – partly because of uncertainty over the looming Brexit vote. Capital markets revenue in the fourth quarter fell by 15.7 per cent year-over-year in Britain and Europe.

On the U.K. wealth management side, which is one of Canaccord's most valuable, lucrative and best-performing assets, the impact isn't expected to be particularly damaging in the short term. Observers are more concerned about the effect over the longer term, and whether the British economy spins into a Brexit-induced recession.

"Our wealth business in the U.K. continues to be a strong franchise and one that is well positioned to grow opportunistically if others falter," Mr. Daviau said.

Canaccord's head count in Britain, much like in other markets, has been shrinking. In February, the broker laid off roughly 50 employees there as part of a wide restructuring.

In January, GMP Capital – Canaccord's closest competitor in Canada – pulled out of Britain entirely.

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Any currency hit that Canaccord may take on weakened sterling may be partly offset by a stronger U.S. dollar. Canaccord takes in just under 28 per cent of its revenue from its U.S. business.

While Canaccord's share price is taking a hit today, the recent trend in the stock has been up. The firm recently closed a private placement of roughly 6.7 million shares, worth $26.5-million, which was open to employees only.

Insider trading data shows that Mr. Daviau bought roughly 790,000 shares in the offering, worth $3.3-million. Meanwhile, Pat Burke, president of Canaccord Genuity (Canada), bought 325,000 shares, worth approximately $1.35-million. The buying by management is a signal that they believe the stock is undervalued, and "a strong indication of employee confidence," Mr. Daviau added.

The shares were offered at $4.17, a discount to the market price, and came with half a warrant to buy additional units. Holders are unable to sell, or exercise the warrant, for up to three years.

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