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VelocityShares Daily 2x VIX Sho (TVIX) Message Board

baxterjames120 306 posts  |  Last Activity: Jan 28, 2015 5:23 PM Member since: Dec 5, 2009
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  • Looks like we may not get a good report. Apple earnings really move the major markets one way or the other.

  • Reply to

    Leucadia has been BUYING FXCM stocks!!!

    by robbsbeach Jan 24, 2015 1:19 PM
    baxterjames120 baxterjames120 Jan 24, 2015 2:41 PM Flag

    What a bozo-" Leucadia said this, they will be a long-term investors and have put FXCM into their portfolio...
    They also have been the ones buying FXCM shares in Blocks as yesterdays fools have been selling." They said no such thing. Liars deserve the karma that's coming to them.

  • baxterjames120 by baxterjames120 Jan 24, 2015 10:37 AM Flag

    FXCM: This Equity Is Nearly Worthless

    Jan. 22, 2015 7:28 PM ET | 27 comments | About: FXCM Inc. (FXCM)

    Disclosure: The author is short FXCM. (More...)


    Summary
    •FXCM shares have rallied to a valuation far beyond what is justified based on its prior earnings power.
    •Its forward value will be harmed by more regulation and reputational damage.
    •Shares should trade for less than $1/share.

    I'll keep this simple. FXCM (NYSE:FXCM) shares are near worthless. Any quotation above a dollar offers an excellent opportunity for longs to exit gracefully and for short sellers to get a free handout from clueless momentum traders. The Twitter crowd has been pumping FXCM shares to great heights emphasizing its rapid upward movements, the large short interest, and that the stock remains far below its recent trading levels.

    Sure, you can say that. But none of this technical discussion can surmount the elephant in the room: FXCM's capital structure got blown up by the losses following the Swiss Central Bank decision, and the Leucadia deal is punitively expensive debt that will consume what little value remains on FXCM's carcass. Technical analysis won't do a bit of good when the underlying company's business is broken.

    And for what it's worth, it seems the technical reasons for being long FXCM are rapidly dissipating as well. Shares took a mighty tumble from their intra-day high of $3.51 Thursday afternoon, rapidly diving more than 20%. Anyone crying: "Buy the dip," or "Follow the uptrend," was likely muted by the subsequent violent downward movement.

    Once the technical momentum traders are out of the picture, the stock will trade on its fundamental value. And that, my friends, is much closer to $0 than it is to $3. Shares will head back down shortly. The situation instantly brings back the echoes of GT Advanced Technologies (OTCPK:GTATQ) whose shares collapsed from a double-digit price to around a buck following a surprise bankruptcy announcement. GT shares initially rallied sharply from the initial post-bankruptcy price, offering nimble momentum traders massive short-term gains. The rally soon fizzled, however, and shares resumed heading downwards, moving below a buck, and shares, now delisted, languish at 39 cents today.

    Anyone new to FXCM's story must remember the old share price is irrelevant, just as it was in GT's case. Any technical analysis based on chart patterns involving pre-Swiss Central Bank action just isn't relevant to anything. FXCM's value, both as a financial entity, and more generally as a business operation were irreparably harmed in that own shocking decision.

    The math is simple. According to Citi, who slapped a sell rating and 75 cent price target on FXCM, the result of the Swiss fiasco was that the "equity value [is] essentially wiped out". According to Citi, FXCM will attempt to sell itself, probably by April of this year. In the likely event of a sale, Leucadia gets all its own money ($300 million) back first, gets half of the next $350 million, and then 90% of the next $500-650 million. In the (unlikely) event of a sale in excess of $1.2 billion, FXCM would get 40% of the marginal proceeds over the $1.2 billion or so threshold.

    For FXCM, it ends up paying out the 50% of the $350 million tranche it would receive to satisfy its convertible and other debt holders, leaving it only with the 10% sliver of the next roughly $600 million chunk. To summarize: FXCM sells for under $650 million, shareholders get diddly, FXCM sells for $1.2 billion, shareholders get 10% of around $600 million, and only over that do they get anything meaningful. Given there are 80 million shares outstanding (financial websites vastly undercount FXCM's shares outstanding, counting only Class A shares and not holding units), figure a sale price of $1.2 billion, and FXCM gets only 10% of around $600 million, or $60 million in total, which adds up to 75 cents a share. That's a far cry from today's trading. And the final sale price could be well below $1.2 billion, as I explain further along in the article.

    FXCM's valuation prior to the events in Switzerland didn't exceed the $1.2 billion threshold that results in a 75/cent a share end price, meaning that even when things were going well, this business was not likely to get a buyout valuation sufficient to justify anything near today's $3.10 quote. To justify today's market price, FXCM would have to sell for roughly $1.7 billion (every $100 million beyond $1.2 billion adds 50 cents/share of value). An FXCM share price of $4, should the stock get there, would be figuring a near-$2 billion exit price. And this simply doesn't make any sense. Do you think FXCM's enterprise will end up being worth hundreds of millions of dollars more than it was prior to self-destructing its own business and becoming a national laughingstock?

    Any share price forecast north of a buck for FXCM assumes that the operating company will be worth more in the future than it was before the Swiss event. This is, in my view, a ludicrous view to hold, as the company has seen its future prospects dim notably in the fallout from the Swiss debacle. Its reputation is shot, it probably can't collect the debts it is theoretically owed from its busted customers, and the whole OTC Forex industry is likely to face crippling regulation in the aftermath of last week's events.

    First off, FXCM's brand is shot, quite possibly permanently. It was previously North America's leading Forex broker but already competition such as OANDA and Interactive Brokers (NASDAQ:IBKR) are making swift efforts to steal customers from FXCM. OANDA, for instance, isn't going after customers who ended up with margin debt as a result of bad Franc trades. And FXCM looks pretty stupid as a result of the events.

    When potential trading clients are deciding who to invest with, they are likely to pick a firm such as OANDA or GAIN (NYSE:GCAP) that got through the crisis fine rather than one that required life support. When the next crisis rolls around, it's better to be with a solid broker than one that is just moments away from the precipice. Retail Forex is an industry that has been known to be full of scam firms and dodgy brokers; customers of RefCo and other failed Forex brokers that caused untold losses and emotional turmoil have learned to only do business with the most trustworthy. FXCM is definitively off that list now. As a retail Forex trader, I can assure you I'd never open an account with FXCM after last week's activities.

    FXCM also faces the reputational hassle of potentially suing its own customers to reclaim the debts it ran up as the Swiss Franc gapped skyward. FXCM in theory has $225 million of recoverable debts from its clients. In practice, I believe very little of this will be collected. For one, FXCM says on its own (UK) website that: "It is FXCM's policy to credit accounts to a zero balance when debit balances occur as a result of trading." Furthermore, it continues: "At FXCM, your maximum risk of loss is limited by the amount in your account." It seems likely to me that FXCM would get laughed out of court if it tried to sue clients to pay up losses when its website clearly says maximum risk is limited to your account balance.

    That assumes FXCM would even try to go to court to collect these claims, which is unclear, as it would be extremely damaging to the company's reputation. When companies sue their own clients, it almost always leads to utterly ruinous losses of goodwill. Anyone remember how people felt when the music industry started suing children and grandmothers accused of file sharing? It was outrageous. Sure, they shook down a few dollars from plaintiffs but in the process turned a whole generation of music consumers into boycotters of their product. Similarly, if FXCM gets the reputation as the firm that sues its customers, you can be sure that OANDA, GAIN, and others will have a field day taking market share in the industry.

    And all that assumes there is much of a retail Forex industry left to dominate. In the United States anyways, it appears that more regulation is on the way. Already I received a notice from my Forex broker, OANDA, that margin requirements are being dramatically raised for the Swiss Franc and other European currencies due to rule changes by the National Futures Association (NFA). I wouldn't be surprised if all the other major currencies get hit by similar restrictions shortly. This will likely kill trading volume and lead many clients to shut their accounts. FXCM and others warned previously that these sorts of margin raises would kill their business, reducing trading volumes and making it harder for small traders to operate. Well, prepare for that future, as retail Forex is under a most watchful regulatory eye now.

    FXCM did $100 million in EBITDA in 2014, and was forecast to grow to $105 million in 2015. Valued at a straight 10x EBITDA, that gets you to $1 billion, which as noted above would fall short of the $1.2 billion or so threshold where FXCM shareholders can achieve significant leverage (no pun intended) to a higher sale price. Assuming 2015 EBITDA is roughly flat from 2014, and a buyer arrived at 10x EBITDA, FXCM shares would be worth under a dollar.

    Given that FXCM now has a reputational black eye, faces the Catch-22 prospect of either suing its customers or taking yet more losses, and has placed its entire industry under heavy regulatory industry scrutiny, it's hard to see either EBITDA or buyout premiums rising from pre-Swiss event levels. The Forex industry as a whole likely shrinks going forward, and FXCM's share of that shrinking industry almost certainly diminishes as well. As such, FXCM's future valuation is heading downward. It won't be sold for north of a billion dollars, and shares won't be worth more than a dollar when the deal is consummated.

    FXCM is a great short sale, and if your broker doesn't have borrow available, you can replicate a short position by shorting FXCM $2.50 call options. At last trade, February $2.50 calls could be sold for $0.80 and will with overwhelming probability expire worthless, offering a fantastic 1-month return. At my broker, anyways, shorting one call requires posting $350 of margin for $80 of profit if the stock closes below $2.50 at expiration, offering a more than 20% one-month return on capital. Given the difficulty in borrowing FXCM and the high borrow fees associated with doing so, this may be the optimal way to play the stock. Although, short positions will capture more downside as shares continue to fall well below $2.50.

    In any case, shares are drastically overvalued thanks to a herd of momentum traders sending the stock way above any plausible intrinsic valuation. Like what happened with GT Advanced Technologies following its bankruptcy, shares here will also rapidly head lower following this initial spike. While they say there are no free lunches on Wall Street, shorting FXCM is about as close as you'll ever come to getting something for nothing.

  • Does not paint a pretty picture for the company

    FXCM Tries To Slip Bad News Past Investors

    Jan. 24, 2015 1:41 AM ET | 2 comments | About: FXCM Inc. (FXCM)

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)


    Summary
    •FXCM slipped in Friday's trading as stockholders digested the idea that little equity may be left for them in a buyout.
    •After hours, FXCM released a "business update" PR.
    •They hid the dirty details in a Form 8-K.

    By Parke Shall

    Friday afternoon is often the time when companies get the bad news out of the way. In hopes that the Wall Streeters here in Manhattan have already moved outside their offices to local bars and restaurants, Friday after-hours is a notorious time for companies to let bad news slip out.

    In the case of FXCM (NYSE:FXCM) today, that news was tucked away into an 8-K while people still lucky enough to be at their offices were treated to a cheery sounding PR.

    After a tough trading day, FXCM released a "Business Update" after hours. The company touted their "Strong Operating Metrics":


    Through Thursday, January 22, FXCM's month-to-date retail customer trading volume, which includes all retail FX and CFD volume, is $406 billion* with 30% coming from the last 5 days alone, which included a U.S. bank holiday. Average retail customer trading volume per day during this period is $27 billion.* As of January 22, tradable accounts were 224,547, and client equity was $1 billion.

    "A week after the unprecedented movement of the Swiss Franc, and our financing agreement with Leucadia, FXCM continues to operate in the normal course of business. All of our entities have capital in excess of regulatory requirements. As our month-to-date metrics show, FXCM continues to be a global leader in retail FX with volumes on pace to set a record. We are especially thankful for our customers' loyalty and support," said Drew Niv CEO of FXCM.

    But what the company failed to disclose was that in the Form 8-K filed at the same time, they amend their original letter agreement's major terms for their bailout money:


    The loan matures on January 16, 2017. The obligations under the Amended and Restated Credit Agreement are guaranteed by certain wholly-owned unregulated domestic subsidiaries of the Company and are secured by substantially all of the assets of Holdings and certain subsidiaries of the Company, including a pledge of all of the equity interests in certain of Holdings' domestic subsidiaries and 65% of the voting equity interests in certain of its foreign subsidiaries.

    The loan has an initial interest rate of 10% per annum, increasing by 1.5% per annum each quarter for so long as it is outstanding, but in no event exceeding 20.5% per annum (before giving effect to any applicable default rate). Under certain circumstances, a default interest rate will apply on all obligations during the event of default at a per annum rate equal to 2% above the applicable interest rate.

    The Amended and Restated Credit Agreement requires the Borrowers to pay, in accordance with the Amended and Restated Fee Letter, a deferred financing fee in an amount equal to $10 million, with an additional fee of up to $30 million becoming payable in the event the aggregate principal amount of the term loan outstanding on April 16, 2015 is greater than $250 million or the deferred financing fee of $10 million (plus interest) has not been paid on or before such date. (emphasis added)

    This rate was thought to be 17% leading up to Friday. Investors had just digested the fact that the interest could skyrocket on the company if they don't keep it under control. Now, it looks like things could be worse than the street had thought.

    As we have done in previous articles, we continue to urge caution investing in FXCM as we believe the company has a tough task in front of them when it comes to collecting on client balances, retaining their name and customers, as well as paying off this newly acquired debt. This move doesn't do much to tout their credibility at a time when they need it most.

  • It will fall quickly once it trades below $2

  • Volume will dry up and the stock will be dead money.

  • Rarely see that much volume on a stock.

  • baxterjames120 baxterjames120 Jan 23, 2015 2:25 PM Flag

    Looks like we are on the way to the Citi .75 price target. If it gets down to .25 I might nibble a few thousand shares for a day trade if a SA pump article comes out and we know there will be more from desperate longs.

  • could be a market mover tomorrow

  • baxterjames120 baxterjames120 Jan 22, 2015 5:41 PM Flag

    Your crystal ball is cracked!

  • We could be back to $12 sooner than most people realize. LUK has thrown them a lifeline and they certainly have a vested interest in FXCM's recovery!

  • They look to build value and share price before a possible sale in 3 years, not next week, next month---- 3 years minimum

    "FXCM's deal with LUK is also effectively a delayed sale. FXCM can do little financially without LUK's permission. FXCM's financial priorities must focus in on servicing its debt. LUK can compel FXCM to make prepayments on its loan from financing events like debt or equity issuances. I am hoping the 8K will clarify whether LUK can compel FXCM to initiate such financing activities. Clearly, with the stock closing Tuesday at $1.60/share, an equity deal is off the table for a good while.

    LUK seems to be targeting a sale in about three years. Presumably by that time, FXCM will be a much stronger and more attractive company. The deal includes a multi-tiered distribution plan upon sale of the new company formed to handle the transaction with LUK. The wording suggests that the plan is to sell the new company at the end of this deal. The distribution plan remains in place "until the sale of Newco." There is no duration cut-off beyond which FXCM is allowed to continue to operate without a sale (again, hopefully the 8K filing will provide further clarity).

    In addition, FXCM, Holdings and Newco have agreed that beginning in three years and thereafter, upon the request of Leucadia or its assignees, they will cause the sale of Newco at the highest reasonably available price. Upon the occurrence of such event, Newco will pay Leucadia and its assignees…

    Since Newco has been assigned all the equity interest of FXCM and its subsidiaries, FXCM has strong incentive in the next three years to maximize the value of the company (note that the founders and management owned 44% of the company going into this deal).

  • baxterjames120 baxterjames120 Jan 22, 2015 2:34 PM Flag

    Here is a positive overview from a SA article out today-

    "FXCM's deal with LUK is also effectively a delayed sale. FXCM can do little financially without LUK's permission. FXCM's financial priorities must focus in on servicing its debt. LUK can compel FXCM to make prepayments on its loan from financing events like debt or equity issuances. I am hoping the 8K will clarify whether LUK can compel FXCM to initiate such financing activities. Clearly, with the stock closing Tuesday at $1.60/share, an equity deal is off the table for a good while.

    LUK seems to be targeting a sale in about three years. Presumably by that time, FXCM will be a much stronger and more attractive company. The deal includes a multi-tiered distribution plan upon sale of the new company formed to handle the transaction with LUK. The wording suggests that the plan is to sell the new company at the end of this deal. The distribution plan remains in place "until the sale of Newco." There is no duration cut-off beyond which FXCM is allowed to continue to operate without a sale (again, hopefully the 8K filing will provide further clarity).

    In addition, FXCM, Holdings and Newco have agreed that beginning in three years and thereafter, upon the request of Leucadia or its assignees, they will cause the sale of Newco at the highest reasonably available price. Upon the occurrence of such event, Newco will pay Leucadia and its assignees…

    Since Newco has been assigned all the equity interest of FXCM and its subsidiaries, FXCM has strong incentive in the next three years to maximize the value of the company (note that the founders and management owned 44% of the company going into this deal).

  • Reply to

    Up 19%

    by togmundus2003 Jan 20, 2015 1:40 PM
    baxterjames120 baxterjames120 Jan 20, 2015 5:39 PM Flag

    look again in after hours

  • baxterjames120 by baxterjames120 Jan 20, 2015 9:53 AM Flag

    Went up on India News and now heading back to recent lows.

  • Once shorts cover- down it goes to $1`

  • baxterjames120 baxterjames120 Jan 16, 2015 10:45 AM Flag

    just tell her to read this and start packing your bags- basher idiot

    FXCM could be out of business, says Credit Suisse
    Jan 16 2015, 08:14 ET | About: FXCM Inc. (FXCM) | By: Stephen Alpher, SA News Editor Contact this editor with comments or a news tip
    "Details are sparse," says Credit Suisse, downgrading FXCM two notches to Underperform, "but we believe FXCM's liquidity providers stopped making markets in the Swiss franc, leaving the company unable to close losing client positions" as collateral was wiped out.Time is the key factor, says Credit Suisse, as regulators "tend to be impatient once capital requirements are breached." Absent an overnight capital raise, FXCM will not be able to conduct business, meaning the stock is probably worth tangible book value, or $3.15 per share.The stock's currently lower by 83% to $2.16 in premarket action.

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