FXCM Downgraded in Wake of Swiss Franc Surge

By on January 21, 2015

At the market close on January 20, shares of FXCM (FXCM), the largest retail foreign-exchange broker in the U.S. and Asia, fell by 87% from $12.63 to $1.60, resulting in a market cap loss of over $500 million.  FXCM fell after the firm reported a negative equity balance of approximately $225 million.  FXCM attributed the decline to extraordinary volatility in the euro against the Swiss franc and indicated that it was working to bolster its capital.

Analysts at numerous firms including Raymond James, Credit Suisse and Citigroup downgraded and reduced price targets for FXCM to between $4 and $5 per share.

FXCM stated the, parent of investment bank Jefferies Group LLC, Leucadia, reportedly agreed to bail out FXCM with a $300 million loan at interest rates ranging between 10% and $17% during the relevant period.  Leucadia may force a sale of FXCM and is entitled to at least half of the proceeds beyond repayment of the $300 million loan and fees.

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