Is someone looking to buy London Capital Group?

LCG shares shoot up 11% on Monday with no apparent new news.

After we saw shares of ICAP and IG Group rise last week following some healthy January volume reports, today’s turn for a buying frenzy goes to London Capital Group. LCG shares traded up more than 11% on Monday, now sitting at £0.40. The company’s trading volume Monday, however, was high but not overly unusual — 313,000 shares traded Monday versus an average daily volume of 134,000 shares for LCG.

There were some rumors circulating that the rise in LCG’s share price was driven by the potential acquisition of the company, perhaps by Betfair — but with Betfair’s recent exit from LMAX, and its retention of a small residual holding in LMAX, that seems unlikely to us (but certainly not impossible). LMAX is more of an institutional FX firm, and Betfair’s strength has been peer-to-peer retail, so a reentry of Betfair to the FX and financial spreadbetting business via LCG is certainly not out of the question.

Another possible explanation is simply the fact that LCG is “undervalued”. LCG’s market value, even after the  share price rise, sits at just £21.3 million. LCG has on its balance sheet (as of June 30, 2012) cash of £20.5 million, and no debt to speak of — meaning that LCG is trading right around the value of its cash on hand, with no additional value given to the “business”.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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