The logo for Canaccord Genuity is shown in Toronto.Staff/The Canadian Press
Unexpected regulatory issues have complicated plans for senior leaders of Canaccord Genuity Inc. to take the independent Canadian investment bank private, raising the risk that the $1.13-billion deal will not proceed.
Citing an “ongoing regulatory matter” involving one of its foreign subsidiaries, the company said early Monday that approvals required for the $11.25 per share all-cash bid to proceed likely would not be received before the bid expires on June 13. Approvals might not even come before the management group’s financing commitments – $825-million from New York-based HPS Investment Partners LLC – expire on Aug. 9, the company said.
“There can be no assurance” that the deal will be completed because of the delay, the bidding group – comprising Canaccord chief executive Dan Daviau, board chair David Kassie and roughly 50 other management-level employees – added in a separate statement. If the deal is completed, the management group said, new terms and conditions may be required.
The development represents a surprising setback for a deal that was believed to have reached its end game nearly two months ago. In March, all four members of the special committee of Canaccord’s board of directors that was reviewing the buyout offer resigned under pressure from Skky Capital Corp. Ltd., which owns an 8.8-per-cent stake in Canaccord.
Skky, a Bermuda-based fund manager controlled by Canadian financier Gordon Flatt, said on March 7 that it had “lost confidence” in the original special committee after it rejected the management group’s offer as too low. The new special committee consists of four directors, one of which – Terrence Lyons – was hand-picked by Skky.
In addition to the regulatory issue, Canaccord also announced Monday that the management takeover bid would no longer require the company to only seek rival bids for the entire business.
By removing the condition, the company can now look for potential buyers for specific Canaccord divisions, such as its lucrative wealth management business in Britain.
“One of the reasons why the last [special committee] left was their feeling that the condition against a process for parts of the company was hindering their process,” said a source close to the company, whom The Globe and Mail has agreed not to identify as the person is not authorized to comment publicly. “Although there is not much interest in all or part [of the business] right now, given this market.”
The regulatory matter that has slowed approvals for the deal is related to Canaccord’s capital markets business, the company said, and its subsidiary has made “significant enhancements to its compliance functions and significant investments in additional staff and technology” in response. Advisers for the company and the management group did not respond to requests for more details, but the source close to the company described it as “nothing serious.”
“Every single day, every single bank and investment bank has some issue like this and it is immaterial, but it does impact change of control which is why the company disclosed it,” the source said.
Canaccord expects the regulatory matter to be resolved “in the ordinary course,” the company said. In the meantime, “there is no current intention to propose the sale of any material asset.”
If the Aug. 9 financing deadline can be extended, the source close to the company said the deal still has a good chance of getting done. HPS did not immediately respond to questions on whether the investment firm would be willing to consider such an extension.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
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