London Capital Group recapitalization: what the filing didn’t say


LeapRate broke the news earlier today of the proposed recapitalization at FCA regulated online trading firm London Capital Group Holdings plc (LON:LCG), which will see CEO Charles-Henri Sabet and his partners inject £10 million (USD $14.6 million) into the company.

We referenced in our coverage a filing which the company made with the London Stock Exchange giving details of the recap, as well as some insight into what has been happening at LCG the past few months.

However there were quite a number of issues the filing did not address – growth strategy, debt relief, LCG’s new platform, personnel changes at LCG…

We have followed up with a number of people both with LCG and outside the company but involved in what has been going on. Here is what we learned.

Recapitalization

Charles-Henri Sabet, LCG

As indicated above, Charles-Henri Sabet and his partners will be putting about £10 million of fresh money into LCG, and raising their direct interest in LCG from about 20% to over 80%. The recap will, however, rid LCG of its debt of about £8.2 million in the form of Convertible Loan Notes owed to Sabet and his partners. The notes are convertible into LCG stock at a price of 25p per LCG share. With LCG shares now at about 6p, the notes are well ‘out-of-the-money’, and so are effectively debt. But as noted, they will be redeemed as part of the recapitalization.

LCG had apparently tried to raise capital from outside sources by way of a placing of new shares at a discount to the company’s share price. LCG had approached various potential new investors with regard to such an investment. However, the company wasn’t successful in those attempts.

Strategic plans

The plan Mr. Sabet and his team had coming in to totally redo LCG’s brand, personnel, technology base and platform took more time and money to put into play than they had planned. But with most of that now behind them, the current capital raise will be (in part) put to use to effecting Mr. Sabet’s strategic plan for the company.

LCG’s new platform launch has been largely a success, with the vast majority of LCG clients migrating to the new platform in the first five months of 2016. LCG’s challenge is now to leverage its new IT infrastructure and platform and grow the business.

In the near term, we understand that the company plans to significantly ramp up its marketing spend, and open additional offices in both Asia and Europe.

Personnel Changes

Mr. Sabet and his team have totally redone LCG’s management team since taking control of the company 18 months ago. However not all of the changes made have worked out as planned. One thing we’ll sat about Mr. Sabet, is that he is not afraid of making changes. And if the changes don’t work as he hoped he’ll make more changes.

Other than some of the changes we’ve already noted such as former COO Arman Tahmassebi and Head of Institutional Sales Francois Nembrini, some of the key recent changes we’d note include:

Brenda Kelly

Research: LeapRate has learned that senior research analyst Brenda Kelly has left LCG. Like Rosewell, Ms. Kelly joined LCG after a number of years at IG Group. Ipek Ozkardeskaya, who had joined LCG (at around the same time as Ms. Kelly) from Swissquote has taken over senior market research and analysis duties.

Marketing: Mr. Sabet’s main hire in this area soon after taking control of LCG was of Ollie Rosewell, who joined LCG as Head of Brand Marketing from rival IG Group Holdings plc (LON:IGG). Rosewell left earlier this year, and is now Head of Marketing at CySEC and FCA regulated broker AFX Group. Sabet then hired an Israel-based team led by Playtech PLC (LON:PTEC) marketing executive Amedeo Moscato to run marketing.

It was reported erroneously on a number of blogs recently that Mr. Moscato had left LCG after just a few months on the job, based (we believe) mainly on changes made to Mr. Moscato’s LinkedIn page. However LeapRate has learned that Mr. Moscato and his team are still very much involved in planning and executing LCG’s marketing strategy. However he has restructured his arrangement with LCG, such that he is running his own digital marketing firm called Soho Media Ltd and providing services on an outsourced basis to LCG.

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  • Andrew

    I am no company guru, but how can you move forward with your plans if you have so much staff churn. As an investor I would run a mile for lack of clear leadership at the top. Did the same occur when Sabet was in charge of Synthesis bank?

  • NotIG

    Victoria Webb, Kate Valder, Will Hedden and Rahim Nanji, all ex-IG, have also departed. Guess he wasn’t that impressed with the IG’ers.

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London Capital Group recapitalization: what the filing didn't say

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