GMP Capital cuts staff amid slowing energy financings

GMP Capital Inc. is trimming staff at its Canadian capital markets business amid a slowdown in merger and acquisition activity and equity-raising by energy companies.

The company is laying off roughly 20 people, or 10 per cent, of the staff from its Canadian capital markets business, according to Harris Fricker, GMP Capital’s chief executive officer. He said the aim of the cuts, which particularly affect Calgary-based GMP FirstEnergy, is to improve competitiveness and profitability in light of the industry’s “operating realities.”

“It is always difficult to part ways with good people but our actions regarding staffing and our cost-base are driven by the need to ensure that GMP remains a dominant player in the small/mid cap space in Canada,” Mr. Fricker said in an internal note provided to The Globe and Mail.

The layoffs represent about 7 per cent of the 300 people employed by GMP Capital globally.

The energy market has been sluggish coming out of a protracted downturn in oil prices, with a slowdown in merger and acquisition activity and equity-raising by energy companies.

Last year, energy companies – including oil and gas producers, pipelines and utilities – issued a total of $13-billion of equity in the first half of the year, according to data from TD Securities. This year, they raised only $1-billion in the first six months.

GMP bought FirstEnergy, a prominent boutique brokerage, in the fall of 2016 for $98.6-million in a bid to grow its energy banking business after its own Calgary-based franchise had weakened.

At the time of the acquisition, it looked as if the energy market was headed for a rebound. But that recovery stalled due to a number of factors, including a supply glut and trade tensions.

Now, oil prices seem to be finally rising, with U.S. West Texas Intermediate cracking US$70 a barrel in May for the first time since 2014. But the rally in the commodity price hasn’t translated to higher stock valuations for oil and gas producers, as investors have lost their appetite for the sector in part because of protracted delays in pipelines that would expand capacity to export oil and gas.

In recent weeks, GMP’s stock has been trading near an all-time low and is down 21.5 per cent year-to-date, while its biggest competitor, Canaccord Genuity Corp., is up 27 per cent on a year-to-date basis. GMP’s shares closed at $2.64 on Wednesday on the Toronto Stock Exchange, down six cents or roughly 2 per cent.

The last big round of layoffs at GMP was in 2016, when the Toronto-based investment dealer slashed nearly a quarter of its global work force in response to the commodity rout.

Independent investment dealers such as GMP and Canaccord have traditionally relied heavily on the resources sector for revenue. More recently, they have been working with the cannabis sector to fill the gap left by mining and energy companies.