FXCM Inc. (NYSE:FXCM), a leading online provider of Forex trading and related services, today announced that its Board of Directors has approved a 1-for-10 reverse stock split of its issued and outstanding Class A common stock. FXCM anticipates holding a special meeting of stockholders on September 21, 2015 to seek the approval of stockholders to amend FXCM’s Certificate of Incorporation to effect the reverse stock split and authorized FXCM’s Board of Directors to determine the effective date of the reverse stock split.
“Remaining a NYSE-listed company is an important objective for FXCM. The NYSE requires certain standards be met to continue as a listed company on its exchange, and while we currently satisfy all of those obligations and do not anticipate that changing, a reverse stock split will only serve to help strengthen our status and protect the company and its shareholders…” – Drew Niv, FXCM CEO concluded.
At the effective time of the reverse stock split, every ten shares of issued and outstanding Class A common stock will be converted into one newly issued share of Class A common stock. Any stockholders entitled to fractional shares as a result of the reverse stock split will receive cash in lieu of such fractional shares. A new CUSIP would be assigned to FXCM’s Class A common stock if the reverse stock split became effective.
Beyond meeting listing requirements as reasons for the split many companies will do a reverse split in order to get their stock price above the $5 mark, many fund managers shun shares trading in penny stock territory. Remember, FXCM plunged in the wake of the January 15th Swiss National Bank decision to de-peg the 1.20 cap on the Swiss Franc to the Euro which resulted in a massive collection of underwater trading accounts to the tune of hundreds of millions of dollars of which FXCM was then responsible for covering.
It should be noted that 75% of stocks in reverse splits end up declining, but it is not as easy making money shorting them as you might think. “The 25% that go up can go up so much they wipe you out,” says Andrew Lo, a finance professor at Massachusetts Institute of Technology’s Sloan School of Management.
Additional information about the reverse stock split can be found in FXCM’s preliminary proxy statement filed with the Securities and Exchange Commission on July 21, 2015 a copy of which is available here.