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Screenshot of a breaking news alert e-mail from Q2 2017
Interdealer broker ICAP (LON:IAP) saw its shares drop more than 10% on Wednesday, after the company released its results for the six months ended September 30 (ICAP has a March 31 fiscal year-end). The shares fell in heavy volume, with about four times the average number of shares changing hands.
The drop is somewhat puzzling to us. ICAP had already announced, back in a September 30 Trading Update, that its revenues would be down about 10% for the period (on what it calls a ‘constant currency’ basis), and in reality when they reported actual results yesterday they were down just 9% – not a big difference, but if anything they surprised a little to the upside.
And the post-September update and outlook given by ICAP was clearly positive. Profit margins are up. EBS’s FX volumes set a daily record during October. And strategically, ICAP is certainly set to benefit from the increasing automation in trading interest rate and FX related products, in part due to the mistrust in big banks following the multi-billion dollar fines handed out by global regulators for FX rate rigging.
ICAP share price over past month. Source: Google Finance.
In fairness, ICAP’s share price is exactly where it was a month ago (see graph above), when it began a steady climb leading up to yesterday’s results release. Perhaps investors were hoping for a positive surprise, but didn’t get one. Maybe it was a case of buy-the-rumor and sell-the-news.