Breaking: GAIN Capital poised to go on M&A drive as CEO Glenn Stevens heralds the amazing deal in acquiring FXCM customers
M&A is a major priority for GAIN Capital, and the company is launching new services such as a robo advisory solution, with CEO Glenn Stevens having said today that diversification is key, and that keeping the focus on active traders that use advisory services to trade their own accounts is vital. Here is the full detail of today’s information from within
After a massive $19 million loss during the first three months of this year, GAIN Capital, one of North America’s stalwarts and one of only two retail FX firms still providing services to a US client base, has just this hour made its operating metrics public for the second quarter, which rather oddly, appears to be very much on an even keel.
How a very long established, publicly listed retail FX firm which now has a massive advantage due to its captive audience on the home market can make such a massive detour from its usual revenues is something of great interest and most definitely a quandry.
This quarter, the firm’s revenues look very normal indeed, however the company highlights a share buyback scheme in which the company repurchased 761,262 shares at an average share price of $6.24; $15.1 million authorized and remaining for additional repurchases, and returned a total of $15.2 million to shareholders in buy-backs and dividends in first half 2017.
Indeed, that is quite a considerable re-investment into the company, and goes some way toward explaining the previous quarter’s unusual figures.
Speaking this hour on the company’s direction for the coming months, as well as giving a very clear insight into why the figures were upside down in the last quarter was Glenn Stevens, CEO of GAIN Capital, live from New York.
During the conversation, Mr Stevens outlined a speific priority for GAIN Capital, that being the company’s will to engage in mergers and acquisitions in order to diversify its product range and expand its scope.
Mr Stevens, very confident of the company’s position following its acquisition of FXCM’s retail client assets for the US market, stated “The recent acquisition of FXCM’s US client assets make GAIN Captial the number one retail FX brokerage in the United States.”
“Since acquiring those assets, we have experienced an 18% increase in client assets for our retail division.”
“We have a very strong balance sheet, which includes $135 million in liquidity for future acquisition opportunities, and have returned capital through buybacks and shares trading at a discount. For example, we repurchased 600,000 shares at a total of approximately $5 million” he said.
The company stated today that it is now the largest provider in the United States with 70,000 customer accounts. Following completion of the FXCM client base acquisition, a further $140 million in client assets were tansfered to GAIN Capital’s retail brand FOREX.com, which now completes $1.1 billion in average daily volumes.
FinanceFeeds has discussed the absolute masterstroke by GAIN Capital that manifested itself in how the assets of FXCM were transferred.
Mr Stevens reiterated this today by explaining that GAIN Capital was required only to pay for those accounts that were active, and to date the firm has paid $6.5 million, which in our opinion is an absolute bargain.
“This will benefit customers as well as GAIN Capital” said Mr Stevens. “We now have a 50% market share in the US retail sector, and as a result, customers are offered higher consumer protection making the brokerage business more effective in looking after customer needs. In terms of strength, we expect this transaction to add a future revenue of between $15 million and $20 million for 2017 with minimal cost to GAIN Capital” he said.
It is clear that the firm is now in a very strong position to diversify its product range whilst not alienating its captive and very large audience. Mr Stevens elaborated on that by saying “Strategic M&A remains the cornerstone of our going forward plan.”
“Via this method, we can generate diversity of revenue streams, and are well positioned to invest in organic growth. This will be via growing our share in our existing markets which spans across 8 countries, and gives us an opportunity to build on our existing global reach” said Mr Stevens.
“We also wish to launch new products to diversify to new markets for new clients, and have the operating leverage to automate processes and increase the self service aspect of customer interaction in order to lower support costs” he continued.
“Another area in which we are focusing a lot of attention is with regard to the regulatory changes that are currently occurring. Impending regulatory changes will likely cause volatility and affect second and third tier providers.” said Mr Stevens
In summary, Mr Stevens said that during the end of 2016, far before the loss was recorded for the first quarter of 2017, the firm laid out key initiatives to increase customer engagement.
The company redesigned the trading experience, and has been upgrading the mobile application. “Mobile usage now accounts for 50% of trading activity, literally half of all trading is now conducted on a hand held device” he said.
Here in the UK, GAIN Capital introduced its new cross brand affiliate marketing program recently, which was the initial trial before rolling it out globally. The company views this as a lower cost acquisition channel for new audiences.
Very interestingly, Mr Stevens revealed today that GAIN Capital has been developing its own digital advisory system (robo advisor), which will serve clients seeking personal advice for trading.
“This is a new investment area for us, and I believe that how to differentiate from others is to keep the focus on clients looking to actively participate in markets rather than do so passively. A good example of this type of ethos is the launch of the new TradeAlerts service which increases the lifetime value of clients” he said.
FinanceFeeds foresaw this direction by GAIN Capital, and spoke in detail about it in a TV interview recently, which can be viewed below.