FXCM to change its name, shares tumble as Leucadia deal restructuring disappoints shareholders

Lots of news out of FXCM Inc (NYSE:FXCM) last night.

As reported at LeapRate, after US markets closed Thursday at 21:00 GMT, FXCM released its:

After the markets had a moment to digest all that news, FXCM shares tumbled in after hours trading by about 24% (after falling 4% during Thursday’s trading session), settling at $11.00 after closing regular trading at $14.46.

So what disappointed investors?

Clearly, it wasn’t the financial or FX trading volume results, both of those basically fell in line with or even slightly exceeded expectations.

FXCM Leucadia renegotiateThe unveiling of FXCM’s new and improved deal with Leucadia National Corp (NYSE:LUK) seems to be what brought on the wrath of FXCM shareholders, although we will have to wait until Friday’s regular trading session to see the full effect of the restructuring.

As we’ve reported before, what has sent FXCM shares on a bit of a run upward lately has been the hope that FXCM’s $300 million loan from Leucadia – which included terms giving Leucadia most of the upside in FXCM in a future potential sale of the company – would be renegotiated to give FXCM shareholders back some of that upside.

The general speculation was that Leucadia would take a straight up equity position in FXCM, in return for Leucadia giving up its upside rights. That would (the argument goes) give shareholders a reason to buy FXCM shares again, incentivize FXCM management, and still give Leucadia a good amount of upside in the future of the business as FXCM’s share price (hopefully) rose if results warranted.

Well, it didn’t exactly turn out that way.

In fact, the new ‘restructured’ deal seems to have been done solely to provide more upside to FXCM management, with FXCM shareholders actually giving up some of their (small-to-begin-with) upside, for the benefit of keeping FXCM management incentivized and happy. The old versus new & ‘improved’ deal:

Old Waterfall Revised Waterfall
Amounts due under Credit Agreement 100% Leucadia 100% Leucadia
Next $350 million 50% Leucadia
/ 50% FXCM
45% Leucadia / 45% FXCM /
10.0% FXCM Management
Next $500 million 90% Leucadia
/ 10% FXCM
79.2% Leucadia / 8.8% FXCM /
12.0% FXCM Management
All aggregate amounts thereafter 60% Leucadia
/ 40% FXCM
51.6% Leucadia / 34.4% FXCM /
14.0% FXCM Management

Oh yeah – a small but seemingly overlooked detail of the announcements made was that FXCM is going to change its name and NYSE ticker symbol as part of the plan to rehabilitate the company’s image. However no hint was given as to what the renaming will be.

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FXCM to change its name, shares tumble as Leucadia deal restructuring disappoints shareholders


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