FXCM’s wild ride continues: shares up 36% Wednesday

As we predicted earlier this week when the announcement was made, FXCM Inc (NYSE:FXCM) shares are in for a lot of volatility and speculation until the company clarifies the situation.

Which announcement? And what situation?

First, the stats on FXCM shares the past three trading days:

  • 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%

So what is driving FXCM shares on this wild ride?

There has been a lot of speculation on blogs and in some financial sites about everything from a refocus on fundamentals at FXCM, to some technical phenomenon, to some members of FXCM management buying (a very small amount of) FXCM shares.


FXCM Leucadia deal detailsWhile some or all of these might be happening, they have nothing to do with why FXCM shares have gone on their rollercoaster ride. The answer is very simple – a brief announcement FXCM made after markets closed last Friday, hinting that the company is trying to renegotiate the terms of its $300 million loan from Leucadia National Corp (NYSE:LUK).

The problem the past few months with FXCM shares has been that shareholders perceive that there is little to no upside to FXCM shares, even if things operationally go well, which has actually been the case. Most of the upside belongs to Leucadia, thanks to the terms of the $300 million ‘rescue loan’ Leucadia provided to FXCM back in January.

Were FXCM management be able to actually undo those terms and buy out Leucadia in some reasonable form – via a cash payment, conversion of Leucadia’s rights into a ‘regular’ equity stake in FXCM, or a combination of the two – then it is certainly plausible that FXCM shares would head up and draw more investors and speculators to its shares.

But there is no guarantee that a deal will get done with Leucadia. In fact, there has been no word whatsoever from Leucadia on the situation.

For the time being, we expect more of the same up and down speculation in FXCM stock until FXCM management follows up on its Friday press release and clarifies the situation one way or another.

Stay tuned to LeapRate as we continue to follow this story.

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