FXCM Shows It Is a Survivor

Earlier this year, FXCM customers generated negative equity balances of roughly $276 million due to the unprecedented volatility in the Swiss franc when it unpegged from the euro in mid-January. The very next day, the company entered into a $300 million financing transaction with Leucadia National. Since this time, FXCM has repaid $12 million of the facility.

The Leucadia deal was a $300 million cash investment in exchange for $250 million two-year secured notes that carry a coupon of 10%. If FXCM is sold, Leucadia gets 75% of the proceeds.

In the wake of the Swiss central bank removing its cap on the franc against the euro, the Swiss market saw nearly a 10% sell-off almost immediately. This skyrocketed the value of the franc against the euro. After the peg of 1.20 was removed, the Swiss franc went from 1.20 euro to almost parity on the news. Loans that were financed across Europe using the franc immediately became a loss for the lenders. Foreign exchange (forex) trading on the day ultimately yielded a stronger franc as well.

Shares of FXCM were up 27.5% at $2.74 Friday morning. The stock has a consensus analyst price target of $1.56 and a 52-week trading range of $1.28 to $17.44.

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