Global Brokerage Inc files Chapter 11 and its shares trade down…. just 5%


Chapter 11 reorganization filing

Let’s begin this article with what we wrote over the weekend when word broke of Global Brokerage Inc (NASDAQ:GLBR) filing for a “Chapter 11” bankruptcy reorganization – this isn’t your typical bankruptcy filing.

And, the effects of the filing (if any) on Retail FX broker FXCM, in which Global Brokerage holds a 50% interest, have been somewhat misunderstood with misinformation circulating on certain blogs.

Back to our article title…. After Global Brokerage announced plans to file for Chapter 11, its shares continued to trade, albeit on the small cap Nasdaq Capital Market instead of the Nasdaq Global Market. And GLBR shares barely reacted to the filing, ending Monday down marginally, by just 5%.

Why the mild reaction? Don’t “bankrupt” companies lose all their value?

Well the answer is, as we stated above, this is more about a reorganization than a bankruptcy. Global Brokerage basically came to an agreement with its convertible noteholders to extend the maturity of the debt by five years, buying the company a lot more time to repay them. It is effecting the reorganization with the “Chapter 11” filing, but GLBR shareholders aren’t really giving up anything in the reorg.

The ‘bigger news’, as far as GLBR shareholders are concerned, is that the company plans to delist its shares at some point soon altogether from the stock market, and deregister its common stock under the Securities Exchange Act. So, any small shareholders out there who want to ensure liquidity of their position will need to sell before the delisting happens, likely at the beginning of 2018 once the reorganization plan has been formally approved.

And so, things aren’t really that much different for shareholders of Global Brokerage today than they were last week. The company still holds it stake in FXCM. And, the company still owes convertible noteholders $172 million, with that debt being extended for five more years.

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Global Brokerage Inc files Chapter 11 and its shares trade down.... just 5%

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