FXCM Inc (FXCM) In Talks with Jefferies to Obtain Lifeline [Report]

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FXCM, the largest retail foreign-exchange brokerage in the United States is negotiating with Jefferies to obtain $200 million capital, according to Bloomberg based on information from people familiar with the situation.

According to the report, the people requested anonymity because the discussion between FXCM and Jefferies is private.

FXCM negatively impacted by Swiss National Bank’s latest move

Yesterday, FXCM issued a statement disclosing that “clients experienced significant losses” due to the unprecedented volatility of the EUR/CHF currencies following the announcement of the Swiss National Bank to abandon the franc’s cap against the euro. The Swiss central bank ended its policy designed to protect Swiss economy from the sovereign debt crisis in the European region.

The situation resulted to clients owing approximately $225 million on their accounts.

“As a result of these debit balances, the company may be in breach of some regulatory capital requirements. We are actively discussing alternatives to return our capital to levels prior to today’s events, and discussing the matter with our regulators,” said FXCM.

During the previous quarter, FXCM handled around $1.4 trillion trades by individuals. The stock price of the company declined 15%, which brought down its market cap to approximately $596 million.

According to Bloomberg, the spokesperson of Jefferies declined to comment regarding the issue, while a representative from FXCM did not yet respond to its inquiry. A spokeswoman for Jefferies did not immediately respond to a request for comment from ValueWalk.

FXCM stock plummeted

Today, the trading of the shares of FXCM was halted due to pending news. “We halted the common stock of FXCM – News Pending,” said the New York Stock Exchange (NYSE) around 9:22 a.m. today.

During the pre-market trading, the stock dropped 85% from its closing price of $12.63 per share yesterday.

As of 10:38 A.M. in New York, the shares of FXCM were still halted.

Credit Suisse lowered their rating for the shares of FXCM from Outperform to Underperform and reduced their price target from $18 to $4 per share. According to the firm, “details are sparse but we believe FXCM’s liquidity providers stopped making markets in the Swiss Franc, leaving the company unable to close losing client positions as the cushion provided by client collateral was absorbed.” Other sell side firms also lowered price targets in an effort to play catch up.


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