With at least some of the dust settled from the past few days’ activity in the Forex industry following last week’s surprise SNB removal of the EURCHF 1.20 floor and the subsequent large move in the Swiss Franc, there still remain a few questions to address.
One is, of course, what will happen today when FXCM Inc (NYSE:FXCM) shares begin trading again on the NYSE. FXCM shares haven’t traded since last Thursday. The shares were halted all day Friday as FXCM scrambled to stay onside its regulatory capital requirements after reporting $225 million in negative client balances from client CHF trades. On Monday US stock markets were closed for Martin Luther King Jr Day.
Some quick background.
FXCM shares closed at $16.70 last Tuesday. They traded down 11% last Wednesday to close at $14.87, after FXCM reported that its margins were going to be lower in Q4, earning in the $70 revenue-per-million range, down from $75-80 per million previously.
Then the Swiss Franc move hit Thursday morning.
FXCM traded down another 15% Thursday to close at $12.63, as many publicly traded brokers traded down similar amounts in the confusion following the SNB’s surprise move.
That was the last time FXCM shares officially traded. As we noted above, they remained halted all day Friday as FXCM scrambled to find a financial lifeline, which it eventually received in the form of a $300 loan from Leucadia National Corp (NYSE:LUK).
As we explained in our FXCM-Leucadia deal details article, the Leucadia investment will:
- in the near term: siphon off a good portion of FXCM’s cash earnings to Leucadia via the 10%-rising-to-17% coupon on the $300 million loan, and
- in the long term: give Leucadia most of the upside from an eventual sale of some or all of FXCM.
So existing FXCM shareholders now have a lot less than they had last week. Even if FXCM continues along without a glitch, they will be sharing a lot of their near term income and their long term upside with Leucadia. But they do have something, which is certainly a better option than entering administration, a fate that befell Alpari UK in similar circumstances.
So where will the shares trade?
Although FXCM didn’t trade on Friday, as per the chart above (Source: Google Finance) there was trading Friday in the pre-market and after-market. In the pre-market Friday (before the Leucadia deal was announced) FXCM was bouncing around at just $1.50-2.00 a share. After the Leucadia deal hit the wires, post-market trading rose somewhat to just above $4.00.
And as at the time of writing (Tuesday 11:45 GMT), FXCM is once again trading in the pre-market between $2.50-4.50 per share, although as the morning goes on the price keeps dropping toward the lower part of that range.
Stay tuned to LeapRate, we’ll keep you informed.