Investment dealer GMP Capital Inc. has reworked its proposed $420-million takeover of a wealth management subsidiary to reflect the realities of a postpandemic market.
Back in February, Toronto-based GMP Capital unveiled plans to swap its publicly traded stock for shares in partly owned subsidiary Richardson GMP. Winnipeg’s Richardson family is a significant shareholder of both companies, and the restructuring has been playing out over the past two years.
On Thursday, GMP Capital announced that, as part of the transaction, its shareholders will receive an additional 15 cents a share, or a total of $11.3-million, in a special dividend. It also said the Richardson clan will leave additional capital in the company to fund expansion by keeping $32.1-million invested in preferred shares, a holding the family was required to redeem.
Story continues below advertisement
In addition, GMP Capital changed the terms of the share swap with Richardson GMP’s owners, who include the firm’s 165 financial adviser teams. The company was planning to trade one GMP Capital share for every two shares of privately held Richardson GMP; now the ratio is one share for every 1.875 shares.
GMP Capital executives said the changes reflect a decline in Richardson GMP’s value after the sharp drop in interest rates in March, which cut into the profits it earns on its clients’ cash balances. In February, the transaction valued the entire franchise at $500-million; now the figure is $420-million.
“The revised terms to the previously announced transaction in February, 2020, strike what, we believe, is an appropriate balance taking into account the effects of the global pandemic, feedback raised by various stakeholders and retaining the appropriate level of capital to execute our long-term value creation strategy,” said Donald Wright, chair of the board at GMP Capital, in a news release.
Shareholders are scheduled to vote on the transaction on Oct. 6. If the deal is approved, the Richardson family will own approximately 40 per cent of Richardson GMP, the company’s financial advisers will have a 28.5-per-cent stake and existing GMP Capital shareholders will hold 31.4 per cent.
Last year, GMP Capital sold its capital markets business to St. Louis-based investment dealer Stifel Financial Corp., raising $42.2-million, in order to focus on managing money for high net worth individuals. Richardson GMP advisers currently oversee $29-billion of client assets, up from $23.5-billion when the stock market slumped in March.
“After a multiyear process to transform GMP, we can begin to capitalize on the considerable opportunities in the multitrillion-dollar wealth management industry in Canada,” said Kish Kapoor, interim president and chief executive of GMP Capital. He said that once the deal is completed, the company plans to recruit financial advisers from rival dealers, including the bank-owned firms, and will attempt to acquire small wealth management platforms.
“We believe, and the Richardson family believes, that the financial services ecosystem needs strong, high-quality independent firms,” Mr. Kapoor said. “Amongst many things, the health crisis has reminded us about the importance and demand for high-quality, face-to-face advice, especially during a period of volatile and uncertain markets.”
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.
