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Screenshot of a breaking news alert e-mail from Q2 2017
Retail forex broker FXCM Inc. (NYSE:FXCM) has announced a special meeting of shareholders to be held September 21, 2015. The sole purpose of the meeting is to approve the company’s plan to effect a 1:10 reverse stock split – meaning shareholders would receive just one share post split for every 10 shares they now own.
Only FXCM shareholders of record as of July 29 are entitled to vote.
The (supposed) effect of the split is to pump up the value of FXCM’s share price. With less shares outstanding, each share is worth more.
FXCM’s stated reason for the reverse split was that it wants to remain listed on the NYSE. As we wrote earlier when the FXCM split plan was announced, we don’t totally buy the party line here. The NYSE has a minimum $1 share price requirement, and FXCM was still comfortably above that level when the split was announced.
The ‘real’ reason we believe is that many institutional investors shun stocks whose share price is below $5, some by rule. There are also certain short selling limitations on sub-$5 stocks, limiting how some investors trade those stocks.
Also, from a perception-of-the-company standpoint, it is much better to show customers: Hey, we’re an NYSE listed company with a $10+ share price, as opposed to being a ‘penny stock’ $1-range share price company. FXCM certainly uses its stature as a publicly listed company as a marketing tool in attracting new clients, even incorporating the ‘FXCM listed NYSE’ phrase into its Home Page logo.
So far, the market has not taken well to the reverse split plan. FXCM shares have dropped 15% since the plan was announced on July 21.
To see FXCM’s proxy statement sent to shareholders in advance of the September 21 vote click here.