FXCM’s shares rose almost 11% in an intra-day trading yesterday and closed the day with a %7.7 gain on a speculation that FXCM may be an acquisition target. A speculative analysis published on Seeking Alpha by someone called Rougemont was responsible for this jump as the author cited FXCM among several potential takeover targets. Seeing this report and finding it completely laughable I ignored it until I saw the result of it – it’s amazing how mere speculation can drive huge movements in public companies’ share price. No wonder that pennystock promoting schemes are so popular.
The author of the report compiled a list of several companies and speculated that all of them are viable acquisition targets. You don’t need to be an expert to know that any company with solid business and sound financials is always an acquisition target for someone bigger. I can make such a report anytime of the day, it’s all about name dropping and a catchy title. In fact I’d like to break the following news: Facebook, Twitter and Groupon are acquisition targets too. Why? Just because I felt like writing it.
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This speculative list was published following Charles Schwab’s acquisition of optionsXpress for $1 billion and FXCM is mentioned there with no apparent reason except that it trades at a discount relatively to other trading firms. The funny thing is that FXCM has completed its IPO only three months ago and I’m sure that it received quite a few acquisition offers prior to being listed and obviously rejected them all. Knowing a bit about the company and its management I know that they do not intend to sell out that quickly especially after liquidating some of their investments already. They are not hungry for cash right now. FXCM, as it announced, intends to be a consolidator in the retail forex business not a ‘consolidatee’.
Other analysts have expressed similar opinion to mine with regards to this acquisition list though using much more delicate wording, Citi’s analyst called this takeover talk ‘misguided‘ pointing out to facts, which obviously didn’t stand in Rougemont’s way, such as that “directors and executive officers, which own roughly 44% of FXCM, are locked-up through May 30, 2011, and we believe cannot sell ahead of that lock-up based on public filings.”