How the market's crash has hit the wealthiest like Ivanhoe And Lundin And Connacher CEOs

JANET MCFARLAND

From Friday's Globe and Mail

October 16, 2008 at 8:11 PM EDT

The ranks of Canada's billionaires appear to be thinning in the painful bear market gripping global investors.

Since the market's peak on June 6, some of Canada's most famous business people have seen their stakes in public company holdings fall precipitously.

Robert Friedland, for example, who is best known for selling his Voisey's Bay nickel discovery to Inco Ltd. in 1996, has seen the value of his stakes in Ivanhoe Mines Ltd. and Ivanhoe Energy Inc. drop 66 per cent since the market peak in June.

Although his private holdings are not known, the value of Mr. Friedland's two major public investments have fallen far below the $1-billion level, totalling just $440-million as of Tuesday's close.

Two other hard-hit Canadian billionaires are Atco Ltd. owner Ronald Southern and Paramount Resources Ltd. chairman Clayton Riddell, who have both seen their public company holdings fall below the $1-billion mark since June.

In dollar terms, however, some of those hit hardest have been Canada's wealthiest billionaires because of the size of their company stakes.

The Thomson family, for example, has seen its stake in Thomson Reuters Corp. lose $3.2-billion in value since June, even though their majority ownership position is still worth $13-billion.

Grant Rasmussen of UBS Canada said ultra-high-net-worth individuals often have major investments beyond their public company shares, so it is difficult to estimate their true worth simply by looking at their companies' share prices.

“It would capture a large portion, because that is a big chunk of their wealth,” he says. “But the type of money they are rounding off, in terms of hundreds of millions of dollars, would still be a significant amount to most people.”

Older billionaires typically have the most diversified holdings: “With age comes wisdom,” Mr. Rasmussen says.

But even younger ones are often counselled to shape their portfolios to look like “barbells” to offset their risky holdings of one company's shares with large holdings in cash or equivalents, he said.

“So they would try to somewhat even out the risk profile of their two situations,” he said.

Some, he added, pledge some of their shares to borrow money, which they invest to hedge against the risk of so much exposure to one stock.

Most of Canada's wealthiest individuals are still rich by any standard, even if they have taken major hits since June.

Even Vancouver's Lundin family, which has been especially hurt by the market turmoil, still has $162-million of value in Lundin Mining Corp. and several other mining-related public companies. The estate of Adolf Lundin, who died in 2006, has seen its stake in Lundin Mining Corp. lose 70 per cent of its value since June and 97 per cent over the past year.

Lukas Lundin, chairman of Lundin Mining, said last week that he has never seen anything like the current commodities downturn.

“I'm very surprised. This is the worst correction we have had in the last 50 years,” he said in an earlier interview.

Some executives are feeling a pinch. Richard Gusella, chief executive officer of Calgary-based Connacher Oil and Gas Ltd., was required to sell almost half his shares in the company because of a margin call at his brokerage firm.

“Never in my wildest dreams did I expect, with the progress we've made as a company, that we'd have a market meltdown as we've seen,” he said earlier this week.

Amid the gloom, there are a small number of wealthy Canadians who have seen their wealth climb since June.

Prem Watsa, chairman and CEO of Fairfax Financial Holdings Ltd., has seen his stake in Fairfax climb in value by $128-million to $605-million as his company's share price grew by 27 per cent in the period. Similarly, Galen Weston, chairman of the George Weston Ltd. empire, has also seen his stake grow slightly to a total of $4.3-billion as investors move into safe staples such as grocery-store stocks.