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A terrible market for resource stocks is prompting more job cuts at brokerage firms, with Stonecap Securities closing its Calgary office and trimming in Toronto to cut costs.
Stonecap is letting go an analyst and three junior bankers in Calgary because of market conditions and a lack of deals in the domestic oil patch. The independent firm also cut back office staff in Toronto, as well as a research analyst covering construction and engineering. The changes represent a cut of about 20 per cent in the number of companies Stonecap will be covering.
Stonecap made its debut in 2010, after employees bought the securities business formerly known as Blackmont Capital when the retail side of Blackmont was sold to an Australian bank. The firm also has a strategic investor in money manager Tom Caldwell's Urbana Corp. financial services holding company, which has backed the firm since then.
Most everything that brokerages do to make money in Canada is getting hammered. Trading volumes are down, as are the number of equity underwriting deals. This week's carnage in commodity prices is likely only to make the situation tougher at firms that focus on resources – which means most small firms in Canada. It's been hard on firms' bottom lines and their values. For example, Urbana lists its equity stake in Stonecap at a value of just under $800,000, down from a cost of $2.5-million.
"With Urbana's support and the restructuring initiatives we have undertaken, we will be able to withstand the current market turmoil and emerge in a stronger competitive position, especially given the dislocation that is occurring at other independent dealers," said Jeff White.
(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)
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