No, it wasn’t a strategic error. But, in hindsight, listening to...

No, it wasn’t a strategic error. But, in hindsight, listening to Henslow’s advice to use Cannacord for the capital raising to fund the acquisition was not the best decision.

See extract below from the Australian.

The Australian’s investigation reported that Canaccord had, on several occasions, issued bullish research notes to clients recommending they buy shares in various companies shortly before it undertook capital raising activities for the same groups.

In particular, Canaccord told clients in a note titled “Trusting the Oracle” on September 16 that copper explorer Eagle Mountain could be worth some $1.70 per share. The company’s Arizona copper project was located in a “mining-friendly jurisdiction with infrastructure providing a head start” and “exciting early stage targets add some spice”, the equities analysis read.

Eight days later, Eagle Mountain asked the ASX to halt trade in shares pending an update relating to a proposed capital raising. The $16m placement was to sophisticated and professional investors identified by Canaccord and PAC Partners, the joint lead managers.

The Australian did not suggest Canaccord broke rules, only that more explicit disclosure of its relationship with the companies it covered would have benefited clients using the research to inform investment decisions.

In a second instance, Canaccord recommended clients buy shares in Alcidion, an ASX-listed healthcare systems provider, less than a fortnight before it was named as the lead manager of the company’s $55m capital raising. The equities research note – titled “Finger on the digital pulse” – was distributed to clients on November 24, placing a 42c per share price target on the health technology company and flagging the potential for “new contract announcements and expansions”.

According to an Alcidion spokesman, its corporate advisers at Henslow suggested a second broker be brought on “given the size of the raise”. Henslow introduced Alcidion to Canaccord on November 8, two weeks before the bank recommended clients buy stock in the company.

Canaccord maintains its research analysts are completely independent from its sales and investment banking operations, and that the authors of those reports would have no knowledge of any discussions that the investment banking team would have on a proposed capital raising.