The Oracle of Bay Street: finance bad boy Michael Wekerle is back, and his new firm is already the talk of Toronto
The Oracle of Bay Street: finance bad boy Michael Wekerle is back, and his new firm is already the talk of Toronto
The Oracle of Bay Street: finance bad boy Michael Wekerle is back, and his new firm is already the talk of Toronto
Michael Wekerle’s wild lifestyle got him kicked out of the firm he helped build. Now he’s back and running a merchant bank that promises to make a lot of people very rich
When a video game player loads NBA 2K13, say, or Madden NFL on his Xbox, he’s invited to join a social media platform where he can play online against other gamers for money and prizes. The platform, which was developed by the Toronto company Virgin Gaming, is poised to become the Facebook of the gaming world. But, until recently, chances were good that Virgin would go the way of many promising Canadian tech companies and get scooped up by foreign multinationals, decamp for the U.S. or simply die due to a lack of financing.
Luckily, Rob Segal, Virgin Gaming’s chairman and CEO, met Michael Wekerle, the wildly successful Bay Street trader turned merchant banker who is quickly becoming known as the man who could save the Canadian tech and media sectors. Segal first encountered Wekerle in 2009, when he was attempting to license the Virgin name from Richard Branson’s massive media and travel conglomerate. He needed to raise $7.5 million to do the deal, and a friend suggested he talk to Wekerle. Segal says Wekerle was the most unusual trader he’d ever met. “He’s like Mick Jagger meets Warren Buffett,” he says. “He heard the concept, understood it immediately and said, ‘I can do this, no problem.’”
Last year, Wekerle’s new firm, Difference Capital, invested another $20 million in Virgin Gaming—money that allowed the company to rebuild its technology and prepare for its next stage of growth. “It was a big bet,” Segal says. “We were trying to do something no one had really done before, and Difference had the stomach for it.”
Wekerle is known on Bay Street as a risk-taker—and not just when it comes to playing the markets. He’s one of a handful of business personalities who transcend the gleaming towers and become known for their extraordinary market sense, their ability to make themselves and others extremely rich, and their high-flying lifestyles. Wekerle, however, is in a class by himself—an eccentric outsider with raffish hair, at least a dozen tattoos (a Stones tongue and a peace sign among them) and a preternatural talent for making money.
Difference Capital has only been around for a year, but it’s already the talk of Bay Street. Wekerle has raised funds from such big-name backers as Ned Goodman, the veteran investment banker behind the billion-dollar Dundee Corporation; Frank Giustra, the legendary Vancouver mining magnate and founder of Lionsgate Entertainment; and Seymour Schulich, another billionaire veteran of the mining industry, famous for co-founding Franco-Nevada. Wekerle found other investors by canvassing his diverse network of friends and colleagues: Bill Holland, the chair of CI Financial; John Crow, the former Bank of Canada governor; and Mats Sundin, to name just a few.
Difference has already invested in 20 or so private and public tech and media companies, all of which Wekerle believes have valuable intellectual property, a proven revenue stream and serious growth potential. Bay Street has ignored the technology industry for so long that a niche investor like Difference is sure to be a flame for many moths, all seeking capital to expand their operations. Wekerle intends to build Difference into the biggest tech banker in the country.
This is an ambitious goal for a guy who, only two years ago, crashed and burned—spectacularly. He was pushed out of GMP Securities—a firm he’d helped create—amid rumours of excessive partying and volatile behaviour. But Wekerle has always lived life on the edge. It’s in his DNA. He’s a rock star in a pinstripe suit, the guy everyone on the Street refers to as “Wek.”
It was only a matter of time before Wek came back.
Bay Street is like a solar system. The biggest planets are the banks and insurance companies, the full-service behemoths that draw on their large pool of savings (yours and mine) to trade in the country’s largest companies on the stock exchange (Rogers, Bombardier, Air Canada, etc.). These large financial services companies generally comprise about 20 per cent of the TSX themselves. Then there are smaller planets, still visible to the naked eye: the mid-tier firms like GMP Securities, Canaccord and Macquarie that occasionally compete with the banks but whose main function is to support (through financing, sales and research) the mid-sized companies on the exchange. The smallest planets in the system are the dozens of brokerages and specialty finance firms that primarily deal in small- to mid-cap companies.
Wekerle got his start in the early ’80s at First Marathon Securities, one of the smallest planets but an aggressive upstart. Then, as now, the keys to success on Bay Street lay in gathering intelligence and building relationships that could eventually be integrated into a trader’s entire firm: research, sales, investment banking. Wekerle proved a natural, eventually becoming the go-to trader for big institutions wanting to move large blocks of stock. When Ted Rogers launched his $3.1-billion takeover of Maclean-Hunter in 1994, it was Wekerle who was called up to buy shares.
He celebrated his successes by buying himself a Porsche, the first of many luxury sports cars he’d acquire over the years, and a house in Forest Hill that had belonged to the actor Al Waxman. He married his high school girlfriend, Patricia, and they had a daughter.
When he left First Marathon in 1995 and joined the newly formed firm Griffiths McBurney and Partners, he had an extensive list of loyal clients—Goodman, Schulich, the hedge fund manager (then at Altamira) Frank Mersch, the mutual fund manager Rohit Sehgal, Goldcorp’s Rob McEwen and Ian Telfer—all of whom confided in him and trusted him to trade their stock.
The move to GMP put him at the centre of Bay Street’s tech boom. The firm led a private placement (basically a pre-IPO capital-raising campaign) for a little-known company out of Waterloo called Research in Motion. In 1997, GMP took RIM public, and the company established itself as a new force on the Street. GMP’s return on equity was 125 per cent and higher in its first three or four years.
Wekerle built GMP into a trading powerhouse, earning $3 million to $4 million in bonuses every year. In 1996, he and Patricia bought a new house on Forest Hill Road. When they separated later that year, Wek’s house became a party pad, its bottomless beer fridge and indoor swimming pool drawing a revolving cast of revellers from Bay Street and beyond.
Wekerle was known as much for his extraordinary talent as for his extraordinary lifestyle. He was a wild man and a high roller, seldom seen with the same woman twice. In 1997, he bought Franco Prevedello’s stake in Centro, the upscale North Toronto restaurant. Around the same time, he began seeing a beautiful blonde woman named Lea-Anne Robbins—she was an assistant to the head of sales at a rival firm, Thomson Kernaghan. A week after the Centro deal closed, he brought Lea-Anne there for dinner. She took one look at the attractive waitresses Centro was known for, turned to Wekerle and said, “We’re not coming here anymore.”
Wekerle and Lea-Anne married in 2000, once his divorce from Patricia was finalized. Together, they had four kids and lived a luxurious, jet-set life. They had a 3,500-square-foot beach house in Fort Lauderdale and another on Harbour Island in the Bahamas. Wekerle had a side business with Gene McBurney, his partner at GMP, and Bill Holland, buying and renting out private planes, and he’d fly back and forth on weekends between his properties. When GMP went public in December 2003, Wekerle, as lead trader and one of the most profitable members of the team, became the single biggest shareholder. He would eventually accumulate 3.3 million shares, which, at the stock’s peak of $28.75 in May of 2006, would have been worth roughly $95 million.
The market downturn of 2008 coincided with strain in his marriage. There were financial pressures—by December of that year, GMP’s share price had dropped to $3.23—and Wekerle was stressed out about work. He says Lea-Anne loathed the ups and downs of the business. “She was a very organized person,” he told me, “so it was tough for her. One day you’re buying a Mercedes or Lamborghini, and three weeks later, you’re cancelling your newspaper subscription.”
It was around this time that Wekerle began taking his money out of the market and investing in distressed real estate in Florida. The timing was perfect; not only had the American real estate market collapsed, but the Canadian dollar was on par with the U.S. dollar for the first time since the 1970s. He brought Bill Holland in on the deal, and the two went on a $75-million buying spree, acquiring old motels, hotels and a shopping centre called Las Olas Riverfront.
In March 2010, Wekerle and his family were vacationing at the exclusive Las Ventanas Al Paraíso resort in Los Cabos, along with a dozen friends and family members. Three days before their scheduled return, Lea-Anne announced she was flying back to Toronto early. She boarded their jet that night, leaving him and the kids behind. When the family returned to Toronto, Wekerle’s mother and sisters were waiting out front of his Forest Hill home. One of his sisters took the children away, and Wekerle went inside, where he was told Lea-Anne, who was 39 years old and taking multiple prescription medications, had died that morning of a heart attack.
In the following months, a grieving Wekerle began behaving erratically. Sometimes he would go to work at noon, sometimes not at all. But when he did, he would arrive to the whispers of colleagues who’d heard about his latest late-night shenanigans—dancing like Jagger on the patio at One, say, or driving around town with a car full of women.
The atmosphere at GMP was tense, and not just because the market was tanking. The company had grown to 1,500 employees, with offices in Calgary, Montreal, New York and London, and had recently merged its wealth management division with Richardson Partners, changing its management makeup. There was much jockeying among the executives and infighting over the direction of the company. Wekerle thought the resource cycle was waning and that the company needed to diversify, which put him at odds with some of the other executives. But he also recognized his role was changing. The large block trades on which he’d built his reputation were now increasingly done by computers. Commissions had gone from seven cents a share in his heyday down to one or two cents. The quick thinking, fast-talking, big-money-generating institutional trader was becoming less of an asset.
The GMP partners suspected Wekerle was clinically depressed and asked him to undergo counselling. They also wanted him to submit to regular urine tests—which he says he consistently passed. It was humiliating: the men he’d helped make rich were treating him like a delinquent teen. Wekerle made his displeasure known by retreating from the firm’s day-to-day operations, biding his time until his partners worked out a severance.
What happened next sped up his exit. Early that summer, Wekerle flew to Halifax to attend a charity fundraising roast in honour of one of his closest friends, Rob Steele, the president and CEO of Newcap Radio. Wekerle had a few drinks on his plane on the way out, and arrived at the venue primed and in the company of his female flight attendant. The event was hosted by Rex Murphy. Emboldened by the booze, Wek got up from his table and sauntered up to the stage, then grabbed the mike from Murphy and began gushing over Steele, at which point two men escorted him off the stage.
A story in Frank with the cover line “Soused Gazillionaire Bounced From Rob Steele Roast” detailed the entire incident and included photos of Wekerle kissing his flight attendant. Soon a YouTube video of the gaffe was forwarded around Bay Street. For those who wanted him out of GMP, it was sufficient ammunition. Wekerle had to go.
For the first time in his career, Wekerle was on his own. He’d agreed to a two-year non-compete in exchange for $7.5 million. He’d already sold a third of his GMP stock at $12.50 a share, and sold his remaining stock soon after. Wek could have retired comfortably, but he wasn’t done. Within months, he was plotting his comeback.
His main co-conspirator was Paul Sparkes, an old friend of Rob Steele’s who had served as director of operations to Jean Chrétien and was the former head of corporate affairs for CTVglobemedia. The two talked about a collaboration, though they didn’t know what form it would take. Bay Street was still reeling from the downturn, and money was tight. Many of the smaller brokerage firms (and even mid-sized ones like GMP) were struggling: fixed costs, covering items like technological systems and employee payroll, were exceedingly high. At the same time, revenues—especially those derived from trading and investment banking—were tanking. One of the after-effects of the financial crisis was increased regulation, and the cost of complying with all the new rules was especially onerous for small shops. According to reports from the Investment Industry Association of Canada, by mid 2012, half of the boutique operations—approximately 90 firms—were losing money. Roughly 30 had disappeared since the crash, either through acquisitions or by simply shutting down.
In March 2012, using $4.2 million of his own fortune, Wekerle, along with Sparkes and Henry Kneis, a derivatives expert and former First Marathon colleague of Wekerle’s, launched Difference Capital. They set up shop on the 29th floor of the Exchange Tower and began hiring people from other firms, including Canaccord’s Neil Johnson, who became Difference’s CEO. Because Difference is a merchant bank, Wekerle is able to both invest in and advise companies at the same time. The model has the potential to make him much more money than a traditional brokerage.
Merchant banks aren’t as common on Bay Street as they are in the U.K. and Europe. Merchant bankers lend an investee company money in exchange for shares, then advise the company on strategy, financing, marketing, government relations and regulations, in exchange for a monthly fee. The bank generates money from its management fees, investments, and advisory business.
In the ’70s and ’80s, the Bronfmans ran a massive merchant banking operation called Hees International, whose investments included such large companies as Brascan, Royal Trustco and Noranda—the remnants of which were eventually rolled into Brookfield Asset Management. Though Hees was initially lauded for providing capital to fledgling companies, it was later dismissed by investors as being too byzantine, opaque and self-serving. Over the last few years, merchant banks have been springing up again on Bay Street, promoting themselves as experts at deal making and raising private capital.
Wekerle and his partners have managed to woo an impressive list of board members and advisors—largely drawn from their own Rolodexes—in their first year of operation. The Difference Capital board includes Ivan Fecan, the former CEO of CTVglobemedia (whom they lured out of semi-retirement) and John Albright, a well-known venture capitalist. Their advisory board includes the former Liberal premier David Peterson and the former Conservative MP John Reynolds, providing connections on both the centre-right and centre-left of our shrinking political spectrum.
Wekerle hired Jeff Kehoe, a former crown attorney and VP of enforcement at the Investment Industry Regulatory Organization of Canada (the industry’s main regulator), as a partner and the firm’s head of compliance. Kehoe knows the rules and regulations better than anybody. Nothing says Difference is playing by the rules quite like having the one-time police chief on staff.
Wekerle tells his investors that the tech sector is undervalued and ready to be exploited. He figures that if tech stocks grow to comprise 20 per cent of the capital markets, that represents a $200-billion opportunity. And the best way to take advantage of it is to invest in multiple companies at the same time.
One of Wekerle’s largest media investments is in Thunderbird Films, a joint venture with Frank Giustra. Thunderbird is in the content development business and owns the rights to properties like Blade Runner, which it plans to roll out in various media—film, television, gaming and small screens—over the next five years. In the new media realm where content is king, these types of wide-appeal, multi-platform properties are prized for their ongoing licensing and merchandising potential.
Wekerle has also invested in Appinions, a New York–based outfit that analyzes social media data for advertisers and corporations, and BrainScope, a U.S. technology company that has developed a real-time method of diagnosing concussions and whose other investors include Steve Case, the co-founder of AOL.
In July, Paul Sparkes and Ivan Fecan went to London on behalf of Difference to meet with the actor Andy Serkis (best known as Gollum in The Lord of the Rings), who runs a film production and animation company called The Imaginarium. The company has produced such movies as Bridget Jones’s Diary and Elizabeth, but it’s the performance capture animation part of its business (used in The Lord of the Rings and The Hobbit) that Wekerle is most excited about.
Wekerle has grand plans: he envisions Difference becoming an international player with a billion dollars in investments and offices in Vancouver, Montreal, Boston, New York and London. Some Bay Streeters, however, are skeptical about his tech wager, believing the resource sector still has legs—that global demand for oil, minerals and metals won’t abate anytime soon. Even Difference investors Frank Giustra and Ned Goodman are still heavily committed to resources; both have significant stakes in gold, whose price dropped 20 per cent in the last year but is still seen as a safe hedge against future inflation. The merchant banking model makes some investors nervous. The old Hees International companies created huge wealth for its principals, but ultimately not much value for its investors or investee companies.
Then there’s the fact that Wek’s company is, well, Wek’s company. His jump into merchant banking is unusual for an institutional trader, whose primary function is that of a facilitator—freeing up the money that then greases the wheels of the capital market machine. As a fund manager, he’s untested.
Plus, his unconventional lifestyle may be a turnoff for more conservative types. Despite the hidden hedonist tendencies of many Bay Streeters, the culture is still largely governed by a pious sense of propriety—something Wekerle rails against. He is unapologetic about his lifestyle choices: fast cars (his latest, a Porsche 918 Spyder hybrid), a revolving cast of girlfriends, jet trips to Prague to party with Czech hockey players. He’s also a friend of the actor Mark Wahlberg—they’re opening a burger restaurant together in downtown Toronto.
For the past two years, Wekerle has hosted a day-long party at his 80-hectare farm in Caledon to raise money for a charity called Seeds of Hope. He bought the property from the retired Conservative senator (and, coincidentally, former Hees International principal) Trevor Eyton—a sign of social transformation if ever there was one. The event is called, appropriately, Wekfest; this year’s headliner was Snoop Dogg.
Wekerle recently finished building a mausoleum for his wife in Mount Pleasant cemetery, near the Labatt and Tory families’ plots. When he ran into John Tory at a Yorkville art opening recently, he told Tory about the new monument. “There goes the neighbourhood,” Wekerle joked.
On an oppressively humid evening last July, Wekerle was hanging out on his yacht, a 63-foot Ferretti he co-owns with his friends Gene McBurney and Steve Joyce, of Tim Hortons fame. (They dock the boat behind the Molson Amphitheatre at Ontario Place.) Wekerle was wearing a porkpie hat, Prada aviator shades and orange shorts, his small paunch and 30 years’ worth of tattoos on full display. He perched on the rear of the yacht, feet up, beer in hand, awaiting his guests for an evening cruise and holding court before a group of young Difference Capital associates.
The cruise was a semi-impromptu event. As he was leaving the office, he quickly yelled out an invitation to the rest of his staff: “Hey guys, we’re going to the boat. If you want to come, be there at 6:30. Boat leaves at 7.” (The young Difference Capital associates refer to such last-minute invitations from their boss as “Wek Days.”)
Wekerle was in a celebratory mood. Earlier that day, he’d managed to pull together the last $8 million of a $50-million fundraising effort for Difference. He’d spent the afternoon buzzing around his office, calling on some of his oldest friends and business associates to help him with this final push before their deadline, set for the following day. Some of his friends had already ponied up money; now they were being asked to open their wallets for a second (or third) time. But Wekerle is persuasive. By the time the markets closed at four o’clock that afternoon, the deal was pretty much done. “There’s a guy with $4 million who still needs to confirm,” he said, “but I’m pretty sure I got him there.”
All in, Difference Capital had raised $100 million in three months. That’s no small accomplishment, for a number of reasons. One, it was summertime, a period when much of the reliable capital on Bay Street leaves town to frolic in Muskoka, Georgian Bay or other leisurely points east and west. Second, there’s no such thing as reliable capital these days—or whatever reliable capital there once was in Toronto has dwindled over the last few austere years. The remaining big money is controlled by a remarkably small group of tightly clenched fists. In short, it’s a tough time to be raising money, and Difference was now managing $220 million in assets.
There was plenty of booze on board Wek’s yacht. As it wound through the Toronto Islands, the boat’s speakers blared The Clash, David Bowie and U2. The boat made a pit stop at a marina and restaurant on Centre Island, and Wekerle hit the patio overlooking the docks, where he bought plates of poutine and onion rings and a round of tequila shots for his staff. There were a few other patrons seated on the patio, most of them seemingly bemused by Wekerle’s non-stop banter and the music echoing from the yacht.
But as the boat pulled away, two older couples sitting at a corner table started applauding, grateful to be seeing the stern side of Wek’s merry ship of fools. Wekerle yelled something cheeky back at them, but they couldn’t hear his raspy voice over the rising chorus of “Sunday Bloody Sunday.” They gave him a standing ovation.