WorldSpreads in turmoil – sale or bankruptcy next?

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FSA and KPMG have teams in on the weekend.

Worldspreads logoIreland-based WorldSpreads, one of three publicly traded (in London) financial spreadbetting companies, had its shares suspended from trading on Friday. WorldSpreads CEO Conor Foley abruptly resigned from WorldSpreads on Wednesday, which followed the resignation of CFO Niall O'Kelly in February. Now-ex-CEO Foley is also WorldSpreads' largest individual shareholder, holding 18% of the company.

As well, the firm's 5,000+ clients have been unable to withdraw money from their accounts.

The problems leading to the current situation began with CFO O'Kelly's resignation last month, after WorldSpreads announced it would record a loss for the current fiscal year (which closes March 31) due to (it claimed) a number of large successful bets by clients, leading to large payouts. They continued with the unexplained resignation of CEO Foley on Wednesday last week, and then the suspension of shares on Friday due to "accounting irregularities" discovered.

LeapRate has learned that the FSA, and an advisor group from accounting firm KPMG, are spending the entire weekend at WorldSpreads' offices, with a target of coming up with a "solution" before markets open on Monday. Potential solutions include insolvency proceedings, or a sale through a pre-packaged administration. This has been confirmed as well by the Financial Times.

The problems apparently include WorldSpreads dipping into client funds, allegedly leaving a substantial shortfall in the £10-£12 million range. 

The events at WorldSpreads come at a time when some of its competitors seem to be doing well. IG Group last week announced Q3 (ended February 29) prelim results which were OK if not spectacular. And Betfair-backed LMAX seems to finally be on track after some early growing pains. (After Worldspreads' shares were halted, the other two publicly-traded spreadbetting firms, IG Group and London Capital Group, traded up between 1-2% on Friday). Indeed, IG Group and London Capital Group are the most likely two potential buyers of WorldSpreads, should the FSA-KMPG group go that way and decide to try and pursue a quick sale "as-is" of WorldSpreads. Stay tuned, should be an interesting week........

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Guest Thursday, 24 April 2014

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