Piper Jaffray to Shutter or Sell Hong Kong Office
Piper Jaffray Companies said Wednesday that it plans to close or sell its Hong Kong office by end of September.
According to the company’s second-quarter earnings report, the Asian office suffered a loss of nearly $3.9 million during the quarter that ended on June 30, and its losses have amounted to more than $17 million over the past 18 months.
Meanwhile, the company as a whole earned $6.9 million during the quarter, or 37 cents per share—up nearly 138 percent from the $2.9 million it earned during the first quarter thanks largely to a $7.1 million tax benefit. However, earnings were down 35.5 percent from the same period a year ago. Revenue for the quarter totaled $106.4 million, down nearly 20 percent from the same quarter last year.
During the company’s earnings call on Wednesday, Piper Jaffray CEO Andrew Duff said that the company does not have the financial resources to absorb the “significant losses” from its Hong Kong operation.
“Hong Kong is a growth market, but it is also characterized by significant volatility accentuated by the global financial crisis over the past several years,” Duff said. “The decision to exit allows us to significantly reduce risk, immediately improve our financial performance, and focus our full attention on our strategy to organically remix our portfolio to higher-margin, higher-return businesses—namely asset management, public finance, and corporate advisory.”
Piper Jaffray entered the Hong Kong market in 2007 with its $50 million acquisition of Goldbond Capital Holdings Limited, an investment bank based in the region that became Piper Jaffray's Hong Kong operation. About 80 people currently work at the office.
The company said that exiting the Hong Kong market will likely result in $13 million to $18 million in cash proceeds in the current fiscal year, mostly thanks to a U.S. tax benefit.
Earlier this year, the Minneapolis-based investment bank and asset management firm announced plans to reduce its work force by 2 percent to 3 percent—or up to 30 employees—after experiencing steep declines in profits. Duff said at the time that the industry as a whole has experienced a decline in the volume of U.S. clients as the markets here are still in the early stages of recovery.
Piper Jaffray’s annual revenue totaled $458 million in 2011, making it one of Minnesota’s 50-largest public companies.