On growth, Richardson GMP’s competitors are investing in recruitment, and there will be a negative impact on Richardson GMP if it does not keep up or surpass them. For example, on August 1, 2018 one such competitor announced that it had raised $115 million in support of wealth management growth, including recruitment. Richardson GMP must invest to drive sustainable growth in the business to the benefit of all common shareholders.
On breadth, our operations include not only wealth management, but also a clearing broker, RF Securities. This business is a significant strategic advantage for GMP, its clients, and its shareholders, providing clearing services for RGMP and Stifel Canada, margin lending to support RGMP clients and also includes a securities borrowing and lending business. The dissident’s transparent attempt to under-estimate the capital needed to support operations at $20 million is simply a self-serving mathematical illusion. The clearing brokerage is an important business for us, but it comes with obligations regarding our balance sheet and regulatory capital, both of which are key factors considered by banking, credit and other counter-party relationships. At a very minimum, to enable us to continue this important business together with our wealth management platform we need to maintain at least $20 million more than the dissident believes. To do otherwise would negatively impact our clearing business operations. That level of capital assumes status quo in both of those businesses, but our objective is to grow aggressively the wealth management business through recruitment and tuck-in acquisitions, which will require us to maintain an even stronger balance sheet.
5. The dissident suggests an IPO of Richardson GMP as Plan B. Was an IPO considered in the past?
Yes, but it was abandoned. An IPO needs the consent of the three principal shareholders of RGMP – GMP, RFGL and the IAs, which could be difficult to obtain and could add delays, costs and complexities. A spin-off was also considered but was determined to be too complicated and not tax effective for GMP shareholders.