Gain Capital also faces shrinking margins in its key retail FX business.
U.S.-based retail Forex broker Gain Capital (Forex.com) reported its Q4 results today, and they were not pretty. Gain reported its largest quarterly net loss as a public company, $4 million (left chart below), and an EBITDA loss of $5 million, also a quarterly worst.
Gain Capital’s losses occurred on Q4 trading volumes which actually weren’t that bad (right chart above) — both retail and institutional and retail volumes inched up nicely in Q4 from Q3 levels. What this means — revenues going down while volumes went up — is that Gain Capital saw much lower margins or “pips-earned-per-trade” in Q4 (see yellow chart below), something we haven’t seen at other firms reporting, such as FXCM which maintained steady margins in Q4.
We’ll see how the stock market reacts tomorrow to Gain’s results. But for now, it is clear that Gain Capital and its management have a long way to go to convince investors that they are indeed a solid investment — and have the ability to stem the company’s losses and start earning profits again. Gain’s shares (now at $4.32) are less than half their December 2010 IPO price of $9, while rival firm FXCM, which went public the same month as Gain, has seen its shares rise nicely to exceed their IPO price.
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.