Credit Suisse: FXCM's Franc Market Makers Stepped Away

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FXCM Inc's FXCM market makers stepped away from the Swiss Franc Thursday, leaving the company unable to close losing client positions, an analyst said Friday.

Credit Suisse's Ashley N. Serrao called the fiasco "a tragic turn of events," and said its critical that FXCM raise capital to maintain its solvency.

Serrao downgraded FXCM to Underperform, from Outperform, and reduced her target by 77 percent to $4.

The foreign exchange broker said late Thursday that it may be in breach of regulatory capital requirements and that the Swiss franc's wild upswing this week resulted in a negative equity balance of $225 million.

Related Link: Citi Sees Higher 'Going Concern Risk' For FXCM

Serrao said raising capital will dilute earnings per share. But without such steps, the company will be worth merely its tangible book value of $3.15 a share.

If FXCM goes up for sale, bidders would be interested in the company's brand and "large client footprint," Serrao said.

Bloomberg reported earlier Friday that FXCM was in talks with Jefferies Group LLC JEF about raising $200 million.

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Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsAshley N. SerraoCredit Suisse
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