Five years after starting, Canadian resource-focused investment dealer, Byron Capital Markets has shut its doors. Due to the lack of fundraising needs of mining companies in Canada, these boutique investment dealers, whose lifelines are small equity raises, are having a difficult time keeping afloat. In this environment, the boutiques that lack significant advisory businesses (see Haywood Securities who continues to advise on some of the most significant mining deals) and/or sales/trading revenues will continue to bleed money.
In an article in the Wall Street Journal today, Campbell Becher, Byron’s CEO said: “The current cost environment is too difficult to be profitable.”
This decision by Byron follows a number of boutique mining-focused dealers that have come under pressure and closed up shop. Last year, Fraser McKenzie shut its doors, citing the slowdown in metals and mining. Then, in January 2014, Stonecap Securities was bought for an unspecified amount by Westwind Partners founder, David Beatty’s new shop, Edgecrest Capital.
“Agency trading has changed dramatically over the past five years,” Mr. Becher said. “There has been massive commission compression. Traditionally, agency trading covered the operating expenses of the firm, [but] it no longer does that.”
With the glitter of the bullish headlines in the mining sector now fading, the reality of the trough in the cycle continues. Although the sector has enjoyed a nice bounce from the lows in December 2013, it is hardly ‘back to business’ for these resource-focused boutiques and the clients they serve.