Canada’s top 500 CEOs
CEO #138: Paul Reynolds
Financial Post Magazine November 04, 2008
Canaccord Capital CEO Paul Reynolds knows the trouble a four-letter acronym can cause. The Vancouver-based investment company’s stock took an nosedive this year – hovering just under six bucks in early October from a peak of around $25 – thanks in no small part to the consequences of being Canada’s largest retail seller of asset-backed commercial paper, the infamous ABCP.
Last year when investors lost confidence in ABCP, which was linked to U.S. subprime mortgages, the $35-billion non-bank ABCP market in Canada seized up. Most of the 1,800 retail investors who held the paper bought it from Canaccord, and they demanded their money back. Add that uncertainty to the impact of the economic slowdown, and the result was that in Canaccord’s 2008 fiscal year, profit sank to $31 million, 67% lower than 2007. But in the first quarter of fiscal 2009, ended June 30, Canaccord was able to increase revenue 20% over the previous quarter, to $172.7 million, due to higher commissions and cost cutting. “Given the difficult operating environment, we view this as a solid result,” Merrill Lynch analyst Sumit Malhotra said in a research note.
Meanwhile, Canaccord raised $60 million in its own recent equity offering, giving it some cash to help bail out its ABCP investors. In October, the committee representing ABCP investors approved a restructuring plan to convert the frozen investments into long-term notes, allowing Canaccord to move ahead with its own plan to fully reimburse its clients with less than $1 million in ABCP, at a cost of $138 million. But these days, the company is facing another troublesome acronym: In the three months ended Sept. 30, Canadian IPOs – Canaccord’s lifeblood – sank to their lowest-ever number: zilch.