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Come to Your Senses... FXCM (FXCM) is Worth No More than $0.85/Share - Analyst

January 23, 2015 11:18 AM EST
Get Alerts FXCM Hot Sheet
Price: $2.80 --0%

Rating Summary:
    4 Buy, 2 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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Shares of Swiss National Bank causality, FXCM Inc (NYSE: FXCM), continue to see volatile trading. Today shares of the currency broker opened down 15% but then rallied back to the flat-line on unsubstantiated takeover speculation. But while speculators continue to view the stock as cheap given that it was at nearly $15/share before the recent plunge, one analyst said the equity is nearly worthless.

Citi analyst William Katz affirmed his Sell rating and $0.75 price target, saying the sharp increase in the shares and spike in trading volume "creating a befuddling decoupling from the economics provided in the Leucadia financing schedule."

Detailing the implications for FXCM shareholders for each tranche of the Leucadia financing schedule, Katz said "the residual value to shareholders is worth no greater than $0.60 to $0.85 per share." He does not believe the "all in" market cap – including proceeds claimed by Leucadia and/or debt holders – should exceed $1.2B, which was the market cap value at the close of January 14th.

"Looking at the waterfall another way, we believe 95% of the economics of a sale with proceeds up to $1.33B would go to Leucadia and debt holders, suggesting only 5% remaining for FXCM shareholders," he said.

Katz provided a sliding scale to highlight the fact that the shares are trading at a price that implies a $1.76B “all in” market cap, or $500M greater than prior to the announcement of the $225M negative client equity balances on 1/15 ‒ and significant franchise impairment and reduced EPS power there of.

"We believe the shares are trading at unsustainable levels and we expect the price to migrate toward our target price as investors work through the implications of the Leucadia financing, which suggests 75%+ downside, in our view," he concludes.

For an analyst ratings summary and ratings history on FXCM Inc click here. For more ratings news on FXCM Inc click here.

Shares of FXCM last traded down 6.9% to $2.89.



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