FXCM shares up 135% last week: What will this week bring?

Shares of retail forex broker FXCM Inc (NYSE:FXCM) more than doubled in value in the December 14-18 trading week. The move up is a stunning turnaround for FXCM, which has seen its shares slowly decline in value basically since January 2015, when FXCM narrowly avoided bankruptcy from losses suffered in the January 15 surprise 20%+ spike in the value of the Swiss Franc.

The move up was a bumpy one though – among the ‘up’ days, including Friday’s 42% pop, was also a 16% decline on Tuesday.

Overall, the past five trading days for FXCM went as follows:

  • Mon Dec 14 – Closing price $8.08, up 52%
  • Tue Dec 15 – Closing price $6.76, down 16%
  • Wed Dec 16 – Closing price $9.16, up 36%
  • Thu Dec 17 – Closing price $8.77, down 4%
  • Fri Dec 18 – Closing price $12.43, up 42%

Can you say schizophrenic?

FXCM Leucadia renegotiateIn explaining the sudden rise in FXCM alongside a leap in the trading volume in FXCM shares there has been much speculation in various financial sites and blogs, ranging from a sudden focus on fundamentals, to insider buying (which did happen but in small amounts), to perceived upturns in FX industry trading volumes during what has been a very volatile December in the markets – which is typically a good thing for forex brokers.

Each of these reasons alone or in concert might explain a small move here or there for FXCM, but not the huge sudden interest in FXCM nor the size of the move. Other publicly traded forex brokers didn’t see much of a change. For example, shares of FXCM’s chief US rival Gain Capital Holdings Inc (NYSE:GCAP) were virtually unchanged for the week (up less than 1%).

As we’ve explained before, there will be a lot of continued speculation in FXCM stock following management’s release of a note on Friday December 11 indicating that they are trying to renegotiate the terms of the $300 million rescue loan FXCM received back in January from Leucadia National Corp (NYSE:LUK).

If FXCM can indeed ‘buy back its own upside’ from Leucadia, it is conceivable that FXCM might become once again an attractive investment. Without new terms, however, most of the future upside in FXCM belongs to Leucadia – not to FXCM shareholders – and therefore investors will likely dump the stock again.

Leucadia has said nothing one way or the other about the situation. So until they do, or until we hear more definitively from FXCM management as to whether or not they can actually renegotiate the loan, we expect more of the same schizophrenic trading in FXCM stock, alternating between hope and despair that the future is bright, and that the future (whatever it is) will belong again to FXCM shareholders.

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