FXCM shares shed (another) 13% Tuesday, drop to new all-time low

FXCM just can’t seem to buy a break.

FXCM logo bigDespite posting some fairly decent financial and operating results lately, shares of retail forex broker FXCM continue to weaken. On an otherwise positive day for the stock market, and with no ‘new news’ out there, FXCM saw its shares drop 13% on Tuesday to hit its lowest level ever. FXCM closed the day at $5.86, the equivalent of just 59 cents per share from before FXCM’s recent reverse share split.

Despite having had to sell several of its assets and divisions (FXCM Hong Kong, FXCM Japan…) to help repay a $300 million rescue loan FXCM received back in January from Leucadia National Corp (NYSE:LUK), FXCM’s revenues and retail forex trading volumes have actually held up during most of 2015. Most forex brokers would be envious of FXCM’s $335 billion of trading volume posted in October.

But FXCM has suffered from some bad timing and luck, as well as from the ‘overhang’ of the Leucadia loan terms.

Timing-wise, the day FXCM effected its 10:1 reverse share split at the beginning of October, the company also had to disclose that it was the target of a successful account hack which saw some FXCM customer information compromised and some wire transfers initiated from FXCM customer accounts (all monies were recovered).

However the real anvil weighing down FXCM’s share price is the Leucadia loan. Or more specifically, the terms of the Leucadia loan. As we’ve written before (but still doesn’t seem fully understood by all investors), even if and when the Leucadia loan is repaid in full by FXCM, Leucadia will still get most of the upside from an eventual asset or corporate sale of FXCM.

So even if things (continue to) go well for FXCM, most of the benefit will accrue to Leucadia. Knowing that, stock market investors seem to be saying why take the risk of owning FXCM? Owning shares always carries some risk, so why not own shares where you get all the upside?

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