Boutique Firm Stung By Defections As Cuts Fail To Stanch Losses

As Thomas Hughes prepared to run Gleacher & Co in 2011, he vowed to cut costs and transform the brokerage into a 'substantial force'. Now the stock is down 66% as he grapples with losses and worker defections.

Bloomberg reports that Gleacher, beset by $159.8m in losses in the past two years, is struggling to find a working strategy as Wall Street recovers from a 2008 financial crisis that had once opened the way for smaller firms to vie for deals and trades shunned by bigger competitors.

Hughes shut the equities division, fired the head of corporate debt and this month said he wouldn’t seek a sale or merger.

The debt-brokerage business, Gleacher’s most profitable, has been hemorrhaging staff, and the company said in a filing Tuesday that four directors plan to step down. At least 20 people out of fewer than 100 in the credit unit have defected since mid-February. The exits probably will have 'an adverse impact' on revenue, according to a February 19th regulatory filing.

'The solution of cost-cutting is a race to the bottom', said Lee Fensterstock, who led Broadpoint Securities Group Inc., the bond brokerage that bought Gleacher, from 2007 to 2010. 'You have to attract the best people and you have to pay them in a way that allows you to retain them'.

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