Ailing LCG to delist from London Stock Exchange? Company prepares to list on NEX Growth Market

Trading of LCG shares on NEX Growth Market starts today at 8,00am GMT. Watch out for imminent LSE delisting. Here is our full analysis

London

For the refined and knowledgeable FX industry executives in London, it did not take long before those who joined LCG (formerly London Capital Group) shortly after its 2014 acquisition to either realize that there are far better names to be associated with and places to apply their abilities, thus moving on of their own accord, or for them to be part of the rash decisions that have become an LCG trademark, one particular example being the mass hiring and then mass redundancies.

LCG’s controversial and high profile ‘revolving door’ dynamic following its acquisition by GLIO Holdings led by Charles-Henri Sabet in 2014 had been a very poignant matter for discussion among senior FX industry executives in London, considering that LCG, a publicly listed company on the London Stock Exchange’s Alternative Investment Market (AIM), has been in existence for three decades and has had every possible opportunity to be part of the top quality electronic trading sector that has flourished and in many cases led the way in the world’s most highly respected and advanced financial markets capital.

Management woes, organizational struggles and lack of commercial direction have plagued LCG for several years.

Under its previous leadership, the firm, then operating under the moniker London Capital Group, became the target of acquisition largely due to its balance sheet having been in the red for some time. In early 2013, several companies examined the possibility of purchasing the company, however GAIN Capital and Cantor Fitzgerald (Europe) soon dropped their interest. By that time, the company’s share values dropped by 20% to 34.50p, with further decreases in value occurring throughout the ensuing five years.

Two other suitors had pulled out, leaving London Capital Group to struggle on independently until its purchase by Charles-Henri Sabet and his consortium in 2014.

Today, the company has announced its intention to list its stock on the NEX Growth Market. This signifies a substantial likelihood of an imminent de-listing from the London Stock Exchange’s AIM, as dual listings, whilst are legitimate, are very very unusual indeed, especially under circumstances such as this.

Trading of LCG shares on NEX Growth Market starts today at 8,00am GMT. Watch out for imminent LSE delisting

If it chooses to do so, a company can list its shares on more than one exchange, which is referred to as dual listing – although few companies do. However, there are some companies that are listed on both the NYSE and Nasdaq. Charles Schwab, Hewlett-Packard and Walgreens, for instance, all have dual listings on both exchanges.

One reason for listing on several exchanges is that it increases a stock’s liquidity, allowing investors to choose from several different markets in which to buy or sell shares of the company. Along with the increased liquidity and choice, the bid-ask spread on the stock tends to decrease, which makes it easier for investors to buy and sell the security in the market at any time.

Multinational corporations also tend to list on more than one exchange. They will list their shares on both their domestic exchange and the major ones in other countries. For example, the multinational British Petroleum trades on the London Stock Exchange as well as the NYSE.

None of these factors apply to LCG, especially when considering who actually owns the shares. Unlike the successful companies in London, which have vast market capitalization figures and whose shares are genuinely in the hands of the public, percentage of LCG securities in public hands (as defined in the NEX Exchange Growth Market Rules for Issuers) is 18.56 per cent. The percentage of securities not in public hands is 81.43 per cent – ie, the vast majority of shares are owned by the directors of the company, a status quo that has applied since its purchase in 2014, and prior to that with its previous management structure.

Ergo, it may well be a publicly listed firm on paper, but its shares are not traded, there is no liquidity and as over 81% of them are in the hands of just a few board members, it does not behave as a publicly listed firm.

Speaking today to a mergers and acquisitions litigation specialist in London, FinanceFeeds gleaned that “it can be considered very unlikely that this will be a dual listing, in fact it appears to be a move which will be followed by a removal of listing from the London Stock Exchange. The company’s ordinary Shares will remain admitted to trading on AIM following admission, however I suspect that will be reversed” said the litigation specialist.

Controversy continued to surround LCG’s operations during the period post-acquistion.

On April 7 last year, retail FX brokerage ACFX, an acronym for Atlas Capital, was the subject of a license suspension by Cypriot financial markets regulatory authority CySec. A generic rationale was provided in a public report by the regulator as to why this action was taken.

A litany of complaints surrounding this matter now adorn public forums, indicating that the tardiness with regard to withdrawal requests made by customers of ACFX is no longer limited to Chinese introducing brokers and their clients, but is now widespread across many region in which ACFX conducted its business.

The vast majority of the company’s senior management subsequently left the firm. FinanceFeeds recently interviewed staff, former employees, and clients with balances ranging from $1,500 to over $80,000 as withdrawals remain outstanding following the mass exodus from the firm by its management.

At that time, FinanceFeeds made contact with sources close to the matter to establish the whereabouts of certain members of the senior management who were at ACFX, as they have, according to our sources, been hired by LCG, a company which, as previously mentioned has had a revolving door approach to senior management recruitment since it was acquired by GLIO led by Charles-Henri Sabet in 2014.

LCG hired former ACFX management as yet more LCG officials leave

In April last year, one source very close to the matter explained to FinanceFeeds “LCG has recently hired the management that lead ACFX to bankruptcy. This will be the final blow for LCG.”

LCG placed over 20 professionals on gardening leave in one fell swoop in 2015, most of whom had joined the company just a matter of months earlier from senior positions within some of London’s top level firms that they had excelled in and had been highly respected by firms of far greater standing.

This occured following our report earlier that year that a further exodus from LCG of senior management had taken place, with Legal Counsel Kate Valdar having gone on gardening leave recently, Peter Wells, who spent 28 years at British interdealer broker ICAP before joining LCG post-acquisition having left LCG to take time out from the city, Nicola Penn, the Executive Assistant to the Directors having moved on, and the firm shutting its LCG digital operations in Tel Aviv just 6 months after establishment.

One particular senior ACFX executive explained to FinanceFeeds:

“Please do continue your investigation and I hope you will do your job to the best standards and you will reveal who hurt ACFX and why those who did all went there (LCG). For now that’s it from my side.” [sic]

At the time, FinanceFeeds contacted Andreas Michaelides, former Head of Investment Research at ACFS (Atlas Capital Financial Services division of ACFX) for his comments on the hiring of certain key ACFX staff by LCG, who said “I have nothing to add.”

FinanceFeeds has reached out to LCG’s legal department by telephone during several days in April last year in order to clarify this matter, however the firm did not provide comment, saying that they were not able to make any statement one way or another.

When contacting ACFX’s head office in Cyprus, a spokesperson explained “We are under license suspension at the moment and therefore I cannot answer any questions of this nature.”

The company also went through a very rash period of expensive new directions, only to can them soon afterwards.

The company established a digital marketing entity in 2015, which went West (literally) very soon afterwards.

Setting up an entirely new entity, in a different country to the main operations of a loss-making company whilst its balance sheet has been in the red since 2011 and then canning it just six months later could be construed as a very unusual step to take.

In the beginning of 2015, LCG’s losses ran at approximately £7 million for the first quarter, by the end of the year, the hole in the bucket had increased so much that the firm had made a £13.9 million loss for 2015.

In spite of such losses, LCG moved its operations from Devonshire Square in the heart of the City of London’s financial district to the highly exclusive 1 Knightsbridge in London’s West End, and underwent a rebrand, part of which involved the purchase of the LCG.com domain for $175,000.

In June 2016, FinanceFeeds made contact with Amedeus Muscato, who left his position as CEO of LCG Digital to pursue his business, Soho Media which provides boutique traffic to firms across web, video and mobile advertising, however no comment on the matter was provided.

With almost every key hire having left the firm after a very short time, when peers in London with equal length of time in establishment are renowned worldwide for high quality, have long standing client bases and executives who are wholly committed to their cause, often remaining in their position for between 15 and 25 years, there is a clear disparity between LCG and the stalwarts that maintain London’s excellent reputation as the leading and most respected FX industry center in the world.

As the adage goes, “A wise man once said, when you come to the last page, close the book”. And rightly so.

 

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