GMP Capital Inc. is slashing nearly a quarter of its global work force, shuttering operations in Britain and Australia and eliminating its dividend.
The drastic restructuring comes amid a prolonged commodity rout that has battered Bay Street's independent dealers – whose revenues traditionally leaned heavily on resource companies – and in the aftermath of a multiyear shift in the investment banking business model that has resulted in a steep decline in trading commissions.
"It's very painful to part with good people," Harris Fricker, GMP's chief executive officer, said in an interview. "But this isn't a 'would like to,' this is a 'have to.'"
The Toronto-based firm announced 73 job cuts on Wednesday, including 29 positions in Canada, 22 in Britain, 12 in Australia and 10 in its U.S. energy business. Ninety-seven positions have been eliminated since the end of the third quarter, bringing the company's global head count down to 291.
GMP is far from the only independent brokerage hitting hard times. In November, its larger competitor, Canaccord Genuity Group Inc., axed 15 bankers in its U.S. operations. Earlier this week, that firm parted ways with a long-time senior executive, and more job cuts are thought to be coming soon.
Meanwhile, at the smaller end of the scale, a number of brokerages have gone out of business entirely – including Salman Partners Inc., Octagon Capital Corp. and Jacob Securities Inc. in the past two months alone. Over the past three years, more than 50 boutique firms, many highly exposed to the cratering resource sector, have either shut down or been swallowed up by a competitor, according to data from the Investment Industry Association of Canada.
GMP hasn't escaped speculation that it could sell all or part of its business, with a slew of names – including National Bank Financial Inc. and Raymond James Financial Inc. – surfacing as parties interested in buying Richardson GMP (RGMP), the prized high net-worth management business in which the brokerage owns a 31-per-cent stake. (The Richardson family and RGMP advisers are also part owners.)
"We believe the repositioning of GMP in 2016 will include the divestiture of their stake in Richardson GMP, which in our view would significantly boost capital," said Sumit Malhotra, an analyst with Scotia Capital.
But Mr. Fricker played down any notion of a sale any time soon.
"There is no action under way whatsoever to consider selling GMP Capital Inc. and there is no process under way to sell Richardson GMP. Zero."
GMP was founded in 1995 and went public in 2003. The brokerage was immensely profitable during the great bull run in resources, and some of its proprietary traders, such as Michael Wekerle, were among the best-paid people on Bay Street. In mid-2006, GMP's share price peaked at $28. The shares lost 2 per cent on Wednesday, closing at $3.84 – not far from an all-time low.
In Canada, the company parted ways Wednesday with some of its most senior employees in sales and trading, as well as operations.
Those affected include: Shawn Aspden, head of North American institutional equity sales; Cindy Tripp, co-head of institutional trading and one of the most senior women in the firm; Patrick Gagnon, managing director in institutional equity sales, who was based in Montreal and had been at the dealer since 1995; Wade Felesky, co-head of oil and gas; and chief compliance officer Leo Ciccone, who started at GMP in 1996.
GMP will take a $15-million after-tax restructuring charge. The cuts will save the firm $40-million a year.
Mr. Fricker conceded that dropping the dividend will cause shareholders – and his employees, who own about 26 per cent of the shares – "pain," but said the move was "unavoidable in the context of the current market."