Shares are more than 50% below Dec 2010 IPO price of $9.
After reporting Q3 results last Thursday which we believed were not bad given the overall slow state of the FX sector over the summer, Gain Capital (Forex.com) shares (NYSE: GCAP) continued to drift lower on Monday, and at one point in trading fell to $4.12 per share — well below Gain Capital’s previous all-time low of $4.25 per share — before trading up to close at $4.36. Gain Capital went public in December 2010 at a share price of $9.
GCAP share price, December 2010 – present. Source: Google Finance.
Gain’s $4.36 share price values the company at $154 million. And with Gain having $137 million in cash on hand (including short-term investments and receivables from banks and brokers, but excluding of course customer cash), and with no long term debt, the stock market is basically valuing Gain Capital’s business as being near worthless — or more specifically, at about $17 million (the $4.12 share price hit Monday implies a $145 million equity value, valuing the business at just $8 million). The stock market clearly has serious doubts about Gain Capital’s long term ability to generate significant profits. Part of Gain Capital’s problem stems from low trading volume in its stock. On Monday about 25,000 shares traded, and on average (past 3 months) less than 40,000 GCAP shares trade daily — not nearly enough to interest larger investors in the stock.
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.