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Citi Sees Higher 'Going Concern Risk' For FXCM

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FXCM Inc (NYSE: FXCM) sudden troubles stemming from the Swiss franc could raise doubts about its ability to remain in business, an analyst said Friday.

The foreign exchange broker said late Thursday that the Swiss franc's rapid upswing this week resulted in a negative equity balance of $225 million.

FXCM also said it may be in breach of regulatory capital requirements.

Citi's Neil Stratton said the development increases the risk to FXCM's ability to continue as a going concern.

Stratton cut his rating on FXCM to Sell/High Risk and lowered his price target by 70 percent to $5.

FXCM was unavailable for trading Friday, but had fallen more than 25 percent this week.

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

Stratton, who published his note prior to the report, said FXCM will need to raise $100 million in equity.

As of September 30, FXCM had $100 million regulatory capital and $288 million in consolidated capital according to Stratton.

"We believe strategic options are being considered and likely will be announced in short order," Stratton said.

Separately, New Zealand foreign exchange dealer Global Brokers NZ Ltd. closed due to losses incurred Thursday, while the broker Alpari UK filed for insolvency, according to Reuters.

Deutsche Bank AG losses from the debacle topped $150 million while Barclays lost tens of millions, according to The Wall Street Journal.

The crisis developed after Swiss banking authorities de-coupled the franc from the euro.

Latest Ratings for FXCM

DateFirmActionFromTo
May 2015Keefe Bruyette & WoodsMaintainsUnderperform
Mar 2015CitigroupMaintainsSell
Mar 2015Keefe Bruyette & WoodsDowngradesMarket PerformUnderperform

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View the Latest Analyst Ratings

 

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Posted-In: Citi Neil StrattonAnalyst Color Downgrades Price Target Analyst Ratings

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