Canaccord Genuity pushed Alcidion shares pushed ahead of raising

Canaccord Genuity recommended clients buy shares in Alcidion less than a fortnight before it was named as the lead manager of the company’s $55m capital raising.

An investigation by The Australian has revealed numerous instances where Canaccord has made share recommendations to clients without explicitly disclosing there may be a conflict of interest. Picture: NCA NewsWire/Nikki Short

Canaccord Genuity recommended clients buy shares in Alcidion 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”.

On December 7, the company put its shares into a trading halt and said it would provide an ­investor update about a capital raising.

At the time, Alcidion shares were trading at 34c. On Thursday, shares rose 1c to close at 24c.

An investigation by The Australian has revealed numerous instances where Canaccord – which runs one of the country’s most active investment banks specialising in smaller companies – has made share recommendations to clients without explicitly disclosing there may be a conflict of interest. Earlier this week, The Australian reported that Canaccord had placed a “speculative buy” rating and published a highly favourable research note about Eagle Mountain Mining eight days before the copper explorer said it was undertaking capital raising – which was being conducted with the assistance of the bank.

Canaccord firmly denies that its work with companies has any influence over the content of its research notes, used by investors to decide what equities to buy, which are expected to be entirely independent.

In a statement on Thursday, Canaccord said its research analysts were “completely independent from its sales and investment banking operations”.

“This independence is reinforced by information barriers and compliance systems designed to separate research from other parts of our business and manage any conflicts of interest that arise.

“A research analyst would have no visibility over any discussions that the investment banking team would have on a proposed capital raising,” the company said.

Canaccord added that its information barriers and disclosure practices reflect those of other integrated global investment banks.

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

“The UK market has many similarities with the ANZ market, and the company has demonstrated some solid contract wins, especially with presence in 27 of 145 NHS trusts,” Canaccord’s analyst wrote in the November note. “We view the existing track record positively and look forward to ongoing new contract announcements and expansion in the UK and beyond.”

The $55m capital raising was intended to fund the company’s expansion into the UK through its acquisition of Silverlink PCS Software, one of the administration system providers servicing the NHS. The raising consisted of a $30m placement to institutional and sophisticated investors and a non-renounceable entitlement offer to raise a further $25m from institutional and retail shareholders, with Henslow and Canaccord named as joint lead managers.

The Alcidion research – in the appendices of the report – noted Canaccord intended to seek or expected to receive payment for providing the company with investment banking services within the next three months.

On Monday, The Australian reported that Canaccord had circulated numerous research notes to its clients that made no specific mention that payments for its investment banking services were partially tied to the share performance of the companies they were recommending.

The corporate regulator on Wednesday said it was “critical” that equities research ­released by brokers represented “genuine” opinion and were not swayed by commercial decisions. The Australian Securities & Investments Commission also warned it conducted spot checks of transactions to ­review how conflicts of interest are handled.

Although it declined to comment specifically on Canaccord, the regulator said misleading behaviour could “have a significant impact, and not just on the client or the general investor”.