Shares of retail forex broker FXCM Inc (NYSE:FXCM) are still trying to find solid footing, as investors and traders try to come to grips with what the Leucadia deal means for them and for the future of the company.
Wednesday trading saw shares of FXCM rise 46% to close at $2.33, while during the trading day the shares fluctuated wildly between $1.65 and $2.50.
Clearly, investors are still trying to figure out what the Leucadia deal implies for the value of the company to its shareholders.
FXCM intraday chart from Wednesday January 21st. Courtesy: Google Finance
Speculators too seem to be joining the fray and looking to make a quick buck as the shares keep bouncing around. Similar to Tuesday’s action, more than 90 million FXCM shares changed hands – more than FXCM has outstanding in total! – meaning that a lot of buy-and-flip is going on.
And those of you following the company or looking for news on FXCM would have noticed a few similarly-worded notices put out by law firms such as The Rosen Law Firm, Levi & Korsinsky, Tripp Levy, and others. These law firms each state that they are ‘launching an investigation’ into FXCM and are asking FXCM shareholders to contact them to join a possible class action law suit against the company.
One of the announcements noted that FXCM may have misled investors in its shares by understating the risk the company faced from the potential for negative client balances – which of course is what ultimately forced the company to get a financial lifeline from Leucadia.
For example, in its latest 10-K filing with the SEC, FXCM states that:
We believe that as a result of implementing real-time margining and liquidation processing, the incidence of customer negative equity has been insignificant.
These are law firms, some large and some small, which specialize in ‘securities litigation’. The main thing a lawsuit needs is someone who lost money. So these firms wait for a company to go bankrupt or – even better – see a large drop in their share price while staying in business. They then try to find fault of some sort with management or owners, try to find some shareholders to back them, and launch lawsuits against the company.
Just another thing for FXCM to have to deal with.