GMP Mails Letter to Common Shareholders

Toronto, September 22, 2020 – GMP Capital Inc. (“GMP” or the “Company”) (TSX: GMP) today announced that it filed and is mailing another letter to common shareholders and has published a new Question and Answer document for common shareholders.

The letter is available on SEDAR and on the Company’s website at this link. The Q&A is appended to this news release and is available on the Company’s website at this link.

Both the letter and the Q&A respond to misguided criticism and miscalculations by a dissident. He promises more money to common shareholders of GMP, but he can’t deliver. To the contrary, there is significant risk that there will be less for everyone if common shareholders vote to support him.

At issue are the terms under which GMP proposes to increase its ownership of the wealth management company Richardson GMP Limited (“Richardson GMP”) to 100% from 33.2% through a share exchange (the “RGMP Transaction”). Your Board of Directors asks that you vote FOR the RGMP Transaction and FOR the Company’s nominees for election to the Board.

  • GMP Mails Letter to Common Shareholders, Publishes New Q&A and Provides Confirmation on Board Independence
  • Common Shareholders Should Vote FOR the RGMP Transaction Resolution and FOR the Company’s Board Nominees

The Independence Commitment
Separately, in response to questions from stakeholders, GMP confirmed today the commitment from the Company and its largest shareholder to maintain a majority independent board of directors. This provides GMP’s minority shareholders an explicit assurance that if the RGMP Transaction is approved, future GMP boards will consist of a majority that is both independent of the Company and independent of Richardson Financial Group Limited (“RFGL”), the Company’s largest shareholder (the “Double Independent Majority”).

GMP urges common shareholders to end the uncertainty regarding the ownership of Richardson GMP by voting the BLUE proxy FOR the RGMP Transaction and FOR the Company’s nominees to the board.

“A Double Independent Majority such as GMP will have following the RGMP Transaction is standard protection for shareholders of Canadian public companies, including those with a significant shareholder,” said Donald Wright, chair of the GMP board and the independent special committee that negotiated the RGMP Transaction for the benefit of all GMP common shareholders.

“It was always contemplated, and in response to shareholder questions we are pleased to confirm to all our stakeholders that we will adopt this standard. If the RGMP Transaction is approved, the board intends to continue its process of identifying new independent directors with additional wealth management experience to further strengthened the board.

Vote to keep Richardson GMP’s Investment Advisors

A vote FOR the RGMP Transaction is a vote to keep the most critical drivers of our future growth – Richardson GMP’s Investment Advisors. They overwhelmingly support the RGMP Transaction. They can readily depart for competitors, and GMP and your Board believe many of them will. They won’t wait around for the dissident and his nominees to attempt a lengthy renegotiation.

Richardson GMP’s Investment Advisors know well the dissident and his track record from his prior roles at GMP and Richardson GMP. Having taken his measure, Richardson GMP Investment Advisors representing approximately 97% of Richardson GMP’s assets under administration have indicated their support for the terms of the RGMP Transaction. That should tell you something.

The dissident may try to downplay the threatened departure of Richardson GMP’s Investment Advisors as just a scare tactic. Don’t be taken in. Instead, look closely at the dissident’s demands. You will clearly see them as the Richardson GMP Investment Advisors see them – as an unequivocal directive to find employment elsewhere.

The Dissident’s Calculations Regarding Available Cash are Wrong and Misleading
As further explained in the new letter to common shareholders, there are three key significant miscalculations by the dissident. These miscalculations undermine the dissident’s argument that the RGMP Transaction will result in the overcapitalization of GMP.

Don’t accept the dissident’s dubious claim that he can renegotiate the terms of the RGMP Transaction to include a $40 million GMP common share buyback and still hold Richardson Financial Group Limited (“RFGL”) to the concessions it made to GMP’s Independent Special Committee.

RFGL, a party to the RGMP Transaction negotiations, was entitled to have its equity in Richardson GMP redeemed for cash at closing. It agreed to forego that entitlement if those funds would be used for growth. During very prolonged negotiations, RFGL stipulated that its funds should not be used merely for distribution to common shareholders.

Be wary of any assertion by the dissident that he could successfully persuade RFGL otherwise. The more likely outcome is a stalemate and value destruction as Richardson GMP’s Investment Advisors depart for competitors.

The Better Way: Approve the RGMP Transaction
Fortunately, there is a better way. If common shareholders approve the RGMP Transaction, the Richardson GMP Investment Advisors collectively will become significant common shareholders of a GMP poised for growth in the multi trillion-dollar wealth management industry.

To further align themselves with GMP’s long-term value creation, the Richardson GMP Investment Advisors have accepted a three-year escrow on 90% of their new GMP common shares along with non-compete constraints. They are confident that the RGMP Transaction will enable Richardson GMP to grow in an atmosphere of ownership certainty.

The fact is there is significant upside in a favourable vote and there is significant downside risk if the dissident is successful in disrupting the RGMP Transaction and electing a new Board. That is why it is crucial that you vote FOR the RGMP Transaction Resolution and FOR the Company’s slate of Board nominees. Your support is extremely important. Please vote your BLUE proxy today. Don’t let the uncertainty persist.

Vote Today, and Only Using the BLUE Proxy

The Board recommends that common shareholders vote today, using the BLUE form of proxy or voting instruction form. Vote after reading GMP’s latest letter dated September 22, 2020, and after reading GMP’s Management Information Circular dated September 8, 2020 and the accompanying letter to shareholders:

–  FOR the RGMP Transaction; and
–  FOR the Company’s nominees for election to the Board.

Shareholders with questions may contact the Company’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, at 1-866-879-7644 toll free in North America, or call collect outside North America at 1-416-867-2272 or by email at [email protected].

The full text of the new Question and Answer document follows:

Questions and Answers About the Dissident Circular
1. Is it in shareholders’ interest to return more cash to shareholders, beyond the $0.15 per share Special Dividend already proposed?
No. GMP should not weaken its balance sheet following this transaction. We believe that the best way to create further value for all shareholders is to put our cash to immediate use by recruiting Investment Advisors (IAs) to join Richardson GMP because they are the engines of future growth. Beyond that GMP will need to be disciplined in its use of capital, particularly given the continuing uncertainty in the economic environment caused by the global pandemic. There is no room for a short-term focused and self-serving share buyback proposed by the dissident or for the dissident’s misguided calls for the Company to de-emphasize growth. Moreover, the Company is wasting valuable shareholder capital on a costly and unnecessary proxy fight.

2. Why should I care about the future after I get the share buyback proposed by the dissident?
Assuming a proportionate tendering by shareholders, only 30% of your equity would be purchased for cash in a share buyback. Your remaining 70% would be exposed to the future success of the business. If you vote to weaken the balance sheet, you devalue your remaining shares to an extent that we believe will more than offset any benefit from the share buyback.

3. The dissident says in his circular that there is much more cash available to fund a buyback – what is wrong with his calculations?
There are four fundamental errors in this dissident’s calculations that vastly overstate the amount of capital that the dissident believes GMP can prudently distribute:

The $20 million miscalculation: The dissident claims “he understands the capital needs of GMP and RGMP”, but yet completely ignores the capital requirements of GMP’s existing carrying broker business. The fact is, based on industry best practices, our carrying broker can’t operate on $20 million of capital without negatively impacting banking and counterparty relations, margin lending and stock borrowing and lending activities. That’s why the RGMP Transaction contemplates a prudent and necessary capital level of $40 million to support both businesses. Further, as the Company continues to grow it will require even greater amounts of capital.

The $18 million miscalculation: The dissident intends to cut by $18 million, or 50%, the cash required in connection with the Richardson GMP IAs recognition plan. The fact is we have already offered the IAs a choice of cash or shares and 95% of the $36 million recognition plan has already been subscribed for by IAs in cash.

The $75 million miscalculation: The dissident is mistaken in his belief that RFGL would agree to leave $75 million in the business that it is otherwise entitled to receive under the RGMP Shareholders Agreement at closing, if the RGMP Transaction is not approved. RFGL has been very clear that it has agreed to these concessions provided that the $75 million is used in the business to fund future growth and not to be used to fund the dissident’s self-serving share-buyback.

The $52 million miscalculation: The dissident derives $52 million from two years of future cash flows, while not adjusting any other line items, each of which represent one year’s worth of costs. Moreover, there is a clear double-count error because the dissident’s $52 million includes the full-year estimate of free cash flows for 2020, when half of that amount has already been captured in Richardson GMP’s net working capital of $58.2 million as at June 30, 2020. Finally, the dissident implicitly argues that future cash flows can pay for a current share buyback, which is not only irresponsible, but reckless.

4. Is the dissident correct that Richardson GMP’s wealth management business has not missed out on opportunities to grow while operating with less than $30 million on the balance sheet?
The dissident is incorrect to assert that no growth opportunities were missed. The dissident is correct about the amount of capital with which Richardson GMP has historically operated but this ignores the potential for growth and the full breadth of GMP’s business.

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.

6. What are the risks of putting Richardson GMP up for sale?
Richardson GMP’s IAs have told us that they would be better off accepting individual recruitment offers from competitors, compared with participating in the sale of Richardson GMP. They have also advised us that they prefer the RGMP Transaction over any other alternative because they believe the strong balance sheet would accelerate profitable growth.

There is also no guarantee that a sale would result in more money for GMP shareholders after taking into account tax consequences and the repayment of the outstanding GMP preferred shares if GMP were to be wound up after the sale. The value of Richardson GMP was independently determined by RBC Capital Markets in its valuation. There is no guarantee that a sale in the context of a forced process would lead to a third party paying a higher price.

7. What board governance protections will minority shareholders have following closing of the RGMP Transaction?
Minority shareholders will be protected. GMP, with the agreement of Richardson Financial Group Limited, has confirmed its commitment to ensure that a majority of the Board will be independent including being independent from RFGL. That commitment is further described in GMP’s news release dated September 22, 2020.

8. Doesn’t the GMP incumbent Board, which includes two Richardson Financial Group Limited nominees, breach the terms of the Richardson GMP Investor Agreement?
No. The Investor Agreement provides that Richardson Financial Group Limited is entitled to two nominees so long it holds more than 10% of the shares of GMP – as it does now and will continue to do at the closing of the RGMP Transaction. The only situation where that entitlement would decrease is if Richardson Financial Group Limited was the party to cause the size of the Board to decrease. When GMP sold its Capital Markets business, the GMP three directors connected with that business stepped down or joined one of our competitors. That was not a situation that required a reduction in Richardson Financial Group Limited’s representation on the GMP Board. GMP, with the agreement of Richardson Financial Group Limited, confirmed its commitment to ensure that a majority of the Board will be independent including being independent from RFGL. That commitment is further described in GMP’s news release dated September 22, 2020.

9. Why appoint a Richardson Financial Group Limited nominee as Interim President and CEO in the midst of this transaction?
Mr. Kishore Kapoor was appointed interim CEO in August 2019 in consideration of the GMP Board’s go-forward wealth management strategy. The timing followed the signing of the purchase agreement to sell GMP’s capital markets business to Stifel Financial. The CEO that Mr. Kapoor succeeded was part of the capital markets team moving to Stifel Financial and it did not make sense to have him continue while the capital markets sale transaction was being finalized.

Mr. Kapoor was appointed to the interim role by unanimous approval that included the support of the dissident when he was on the Board. Given Mr. Kapoor’s extensive background which includes leading Wellington West Holdings Inc. and Assante Corporation, the Board believed, and based on performance continues to believe, that Mr. Kapoor is the right person to take on the CEO role.

Mr. Kapoor was appointed to oversee the completion of the sale transaction and prepare the company for its transition to focus on wealth management. Mr. Kapoor ensured the smooth transition and sale of the capital markets business, and with 97 percent support of the Richardson GMP IAs and public support of 600 Richardson GMP employees for the RGMP Transaction, he has positioned GMP for success.

10. Why should I believe that Richardson Financial Group Limited made real concessions when the dissident says those concessions are illusory?
The dissident’s false claim overlooks the considerable work of the independent Special Committee in negotiating with Richardson Financial Group Limited. Richardson Financial Group Limited was afforded considerable protections under the Richardson GMP Shareholders Agreement first negotiated in 2009. These protections were established with the involvement of the dissident in his role as President and CEO of GMP at that time.
As clearly demonstrated in the table below, the independent Special Committee was able to persuade Richardson Financial Group Limited to give up three valuable protections in return for the RGMP Transaction, whose terms are fair and balanced. In total, the RGMP Shareholders Agreement called for the immediate cash payment of $75 million to Richardson Financial Group Limited at closing. GMP believes that it was real, and not illusory, for Richardson Financial Group Limited to leave that capital in the business to fund future growth.


11. Is the proposed $0.15 per common share Special Dividend fair to all shareholders, or just Richardson Financial Group Limited?
The size of the Special Dividend reflects the interest of ALL shareholders. It was the outcome of a fair and balanced negotiation. It returns cash to pre-closing GMP common shareholders while also ensuring GMP has the financial capacity and flexibility to pursue its long-term growth plans. Beyond funding growth, it reflects the Board’s prudent desire to preserve cash during the uncertain economic environment caused by the global pandemic outbreak while safeguarding the existing obligations of the business (including retiring or renegotiating the $67 million debt facility that matures at RGMP in September 2021 and servicing of GMP’s $115 million preferred shares). To be clear, the Board believes that any payment in excess of the $0.15 per common share Special Dividend will weaken one of the firm’s three key pillars of success, namely a well-capitalized wealth management business.

12. If the RGMP Transaction doesn’t proceed how will Richardson GMP be governed?
Richardson GMP will be governed by a Board of seven directors, of which two are nominated by GMP, two are nominated by Richardson Financial Group Limited, and two represent IAs. The remaining director is Richardson GMP’s CEO. This composition of this board is likely going to result in deadlock or present a challenge to GMP representatives in the event the RGMP Transaction is not approved and/or the dissident’s nominees are elected to the GMP Board.

13. Why do some of GMP’s directors not own shares?
All GMP directors are common shareholders except for the two most recent incumbents, who will be required to purchase shares under GMP’s minimum share ownership policy but have been legally prevented from doing so because negotiations for the RGMP Transaction have been underway since they joined the Board in 2018.

It reflects poorly on the dissident that he attempted to score points about GMP director share ownership while neglecting to mention that all directors were restricted by a trading blackout. The dissident was fully aware of it, having served on the Board when the most recent incumbents joined and for more than a year with them afterwards, while the blackout was always in effect.

Notably, a dissident nominee was once a shareholder but owns no shares now. In contrast, no GMP directors or nominees have ever sold down their ownership positions in GMP shares, never mind sold them all.

14. Why appoint RBC as financial advisor, given their historical relationship with the Richardson group?
RBC is a leading financial institution with deep experience in these specific areas. The Special Committee interviewed several firms for the role of financial advisor and chose RBC based on its depth of this experience and expertise. The Richardson family played no role in that decision.

Further, we think it is absurd to assert a potential conflict based on a transaction completed a quarter century ago, and to suggest that this would influence the independence of Canada’s largest financial institution.

This press release contains “forward-looking information” as defined under applicable Canadian securities laws. This information includes, but is not limited to, statements concerning our objectives, our strategies to achieve those objectives, as well as statements made with respect to management’s beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans” or “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management’s current beliefs and is based on information currently available to management. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement.

The forward-looking statements included in this press release, including statements regarding the RGMP Transaction, the nature of GMP’s growth strategy going forward and execution of any of its potential plans, are not guarantees of future results and involve numerous risks and uncertainties that may cause actual results to differ materially from the potential results discussed in the forward-looking statements. In respect of the forward-looking statements and information concerning the consolidation of 100% of ownership in Richardson GMP, and the Company’s strategy going forward, management has provided same based on reliance on certain assumptions it considers reasonable at this time including the timing of the completion of any transaction involving Richardson GMP and that any conditions precedent can be satisfied. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release.

Risks and uncertainties related to the RGMP Transaction include, but are not limited to: failure of GMP and RFGL to obtain the required shareholders and regulatory approvals for, or satisfy other conditions to effect, the RGMP Transaction; the risk that the RGMP Transaction may involve unexpected costs, liabilities or delays; the risk that, prior to or as a result of the completion of the RGMP Transaction, the business of GMP and/or Richardson GMP may experience significant disruptions, including loss of clients or employees due to transaction related uncertainty, industry conditions or other factors; risks relating to employee retention; the risk that legal proceedings may be instituted against GMP or Richardson GMP; risks related to the diversion of management’s attention from GMP’s ongoing business operations; and risks related to the COVID-19 global pandemic. For a description of additional risks that could cause our actual results to materially differ from our current expectations, see the “Risk Management” and “Risk Factors” sections of GMP’s most recent Annual and Interim MD&A and the “Risk Factors” section in the Company’s AIF. For additional information on the risk factors related to the RGMP Transaction, see “The RGMP Transaction – Reasons for the RGMP Transaction” and “Risk Factors” in the Management Information Circular. Material assumptions and factors underlying the forward-looking

information in this press release include, but are not limited to, those set out in “Business Environment – Outlook” in GMP’s most recent Annual and Interim MD&A. GMP’s most recent Annual and Interim MD&A and the Management Information Circular are filed under the Corporation’s profile on SEDAR at

Although forward-looking information contained in this press release is provided based on management’s reliance on certain assumptions it considers reasonable, there can be no assurance that such expectations will prove to be correct. Certain statements included in this press release may be considered a “financial outlook” for purposes of applicable Canadian securities laws, and as such, the financial outlook may not be appropriate for purposes other than this press release. Readers should not place undue reliance on the forward-looking statements and information contained in this press release. When relying on forward-looking statements to make decisions, readers should carefully consider the foregoing factors, the list of which is not exhaustive.
The forward-looking information contained in this press release is made as of the date of this press release, and should not be relied upon as representing GMP’s views as of any date subsequent to the date of this press release. Except as required by applicable law, Management and the Board undertake no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

GMP currently operates through two business segments: Operations Clearing and Wealth Management; and a corporate segment. Operations Clearing provides carrying broker services to Richardson GMP and other third parties, including trade execution, clearing, settlement, custody, and certain other middle- and back-office services, and other expenses associated with providing such services. Wealth Management consists of GMP’s non-controlling ownership interest in Richardson GMP. Richardson GMP, one of Canada’s largest independent wealth management firms, is focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. GMP is listed on the Toronto Stock Exchange under the symbol “GMP”. For further information, please visit our corporate website at

For further information please contact:
GMP Capital Inc.
Rocco Colella, Managing Director, Investor Relations
145 King Street West, Suite 200, Toronto, Ontario M5H 1J8
Tel: (416) 941-0894
Email: [email protected] or [email protected]

Media contact:
Longview Communications and Public Affairs
Boyd Erman (416) 523-5885; [email protected]
Alan Bayless (604) 694-6035; [email protected]

Shareholders with questions may contact the Company’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, at 1-866-879-7644 toll free in North America, or call collect outside North America at 1-416-867-2272 or by email at [email protected].