The biggest IPO in the forex industry this year, conducted by London headquartered CMC Markets, has been a massive success for the company. That said shares of the company are trading close to the IPO price in February after yesterday’s trading update issued by management, which promoted a 12% decline.
The move lower represents certain over-reaction to the company’s statement that the trading volumes in the first five months of the year have declined despite its growth in customer deposits and new and active clients.
Market volatility has been relatively lower this year when compared to last year, especially in August, when multiple companies from the industry have posted lower trading volumes. CMC Markets is well positioned for future growth and its revenues and profits will be impacted more heavily by future market volatility.
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Future Volatility Key to Share Price
Looking ahead, the referendum in Italy on the outcome of the Brexit talks are going to be key for the retail trading industry and for CMC Markets as a company which is heavily focused on this line of business.
Back in May, the firm also started its institutional offering, aiming to expand its services into the institutional space by launching CFDs, which are differentiating points for CMC Markets with an FX offering in the pipeline in the near future.
Commenting on recent market moves, CMC Markets’ analyst Peter Lenardos stated in a note: “This is a bump in the road — not a detour … The shares are likely to overreact (on the downside). CMC remains a coiled spring that awaits the return of market volatility.”
We couldn’t agree more, since the market should have already discounted the market moves.