It's risky and the upside is not as high as some ppl think. This is the same company that flushed Knight Capital a few years back. But the deal leaves a very juicy payday for LUK if they can sell for a decent price. If FXCM is able to stay afloat I don't think it's unrealistic to see something like 3.80 a share making it down to investors. Any amount FXCM pays down on the loan helps. If the loan is so crippling that they are forced to sell quickly, a good price is doubtful. Any signs that they are struggling under the loan and I think risk goes way up. The fact that LUK makes a lot more money off a decent sell price makes me willing to risk it for now.
btw this company should be worth a lot more than 300M right now. The market knows about the deal with LUK and this is trading at a reasonable price right now, discounted for risk. A buyout of 700M would give about 3.80/share to FXCM, for example. That's about where the mkt cap was 2 weeks ago
There's a schedule in the deal that explains how much money goes to LUK in a sale. I worked up the numbers and posted it here yesterday. First the loan gets covered, but it doesn't stop there. The next 350M after the loan is split 50/50. $5 a share doesn't even cover the loan.
You should take a look at the deal they made. Share price does not translate to buyout price, nor does it translate to how much shareholders would get in a buyout. If someone bought them for $5 cash, shareholders would get zero. But they won't sell that low, because LUK would lose money and wouldn't allow it
It's similar but I think FXCM deal is potentially better for shareholders. LUK could take all in a fire sale right now, depending on how low the price was, but LUK has a strong incentive to let FXCM recover and sell it for a better valuation. Fire sale only happens if FXCM is so crippled that they can barely stay afloat. Knight was actually in much worse shape. Other than taking on this loan, as of today FXCM's business is as good or better than prior to the crash. So a potential buyer would theoretically get a good price even if buying at the same valuation they had 2 weeks ago. People who bought Knight after the bailout got screwed because the ultimate buyout was terrible. Here, LUK is well protected, additional capital is not needed, and LUK has an upside of hundreds of millions if they simply allow FXCM to continue operations and stabilize. If you look at the breakdown in the deal that is laid out, you'll see LUK get's 90% of any price above around 650M. FXCM was valued around 700M mkt cap prior to crash. LUK's juiciest payout starts just below that price range. They covered their risk well and set up for a big windfall if the bailout succeeds.
I understand that you are clueless and your post makes no sense. They don't know how much they can sell, any estimate is worthless so I'd prefer they don't make up numbers out of thin air that they will then have to meet.
I normally trade for small gains over a short period of time. I'm up huge here but my plan is to go long. If this crumbles that will hurt, but I'm trying to stick to my plan and hold :D
It's standard in business to look at Total Addressable Market. Nobody but you thinks they are claiming to be able to lock up the whole market in a single day.
they get paid well on a buyout. likely will wait for FXCM to be back on it's feet in terms of business operations and sell it for 700M or more. That would give LUK better than 100% return when you add in the fees and all.
What a dumb reply. They might have announced such an intention, it was an honest and legitimate question. If you don't know the answer just don't reply. Argumentative jerk
Yes I left out any paydown, thinking to look at the here and now and keep it simple. Lot of assumptions as it is. Thanks for your input, a lot of the same thinking I have.
the sign they are hurting is that they gave 75% of equity to LUK in order to get a loan. The fact that they have assets they can use to pay down the loan is a good thing. Combined with cash from operations they should be able to swing it, which of course LUK already knows or the loan never would have happened in the first place.
any cash they have goes to paying down the loan, not to saving your share price. sorry :D