FXall IPO hits the road – all the details

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What size deal? At what valuation? Compared to FXCM and Gain?

FXalllogoWell, it looks like FXall is (finally) ready to hit the road this week and begin meeting with institutional investors before planning to price its IPO next week, and begin trading on the New York Stock Exchange with ticker symbol "FX". (Companies going public traditionally do a one to two-week roadshow prior to pricing the offering, giving mainly institutional investors across the U.S. and Europe the chance to meet with management and ask questions).

The basic details:

SIZE: FXall plans to raise $75 million, with all the money going to selling shareholders. (Or specifically, 5.2 million shares at between $13.50 and $15.50 per share). The selling shareholders consist almost exclusively of several banks which as a group hold most of FXall's shares. However FXall's two largest shareholders, venture capital firm Technology Crossover Ventures (28%) and CEO Phil Weisberg (7%) are not selling any of their shares.

VALUATION: FXall will try to convince investors that its market value should be $411 million – right in line with our estimation when FXall first filed to go public back in September. And on a multiples basis, FXall expects the market to give it a significant premium to both FXCM and Gain Capital, as follows:

FXall IPO_valuation

RESULTS: FXall gave us a peek into its Q4 numbers in the updated "red herring" prospectus (note that the numbers are preliminary):

  • Trading volumes were down 7% in Q4 (as compared to Q3-2011), to approximately $82 billion daily.
  • Revenues were down 8% in Q4 to $29.3 million.
  • EBITDA was down 12% in Q4 to $14.2 million.

We believe that FXall may be facing something of an uphill battle in pricing its offering on these terms. The past few months have been somewhat difficult for Forex ECNs such as ICAP and Hotspot FX, which have all seen declining trading volumes, as has apparently FXall. Also, the fact that FXall's revenues (-8% in Q4) and EBITDA (-12%) have been falling faster than its volumes (-7%) points to tightening margins in the business, as we reported on earlier. Again, not an easy story to sell when you want a premium trading multiple.

In any event, many in the FX world will be keeping a keen eye on what happens with FXall's IPO. Stay up-to-date with LeapRate as things progress.....

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Guest Wednesday, 23 April 2014

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