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Foreign Exchange

FXall shares surge on opening day of trading

Shares in FXAlliance, the FX multi-dealer trading platform, surged on their first day of trading, rising as much as 19%, after the company cut the price on its initial public offering in the run up to going public.

The shares, which listed at $12 a piece, rose as high as $14.25, and were trading at $13.20 at 10:50 a.m. in New York. The company had initially given pricing guidance of $13.50-$15.50, for the first IPO in foreign exchange sector in more than a year, after retail FX brokers FXCM and Gain Capital completed their share sales in December 2010. The company raised $62 million from the sale of 5.2 million shares, with the proceeds going directly to a portion of its shareholders, made up of several banks who helped found the company in 2000, and who made up the majority of shareholders. However, the two largest single shareholders, venture capital firm, Technology Crossover Ventures, who own 28%, and the current chief executive, Phil Weisberg, with 6.8%, retained their existing stakes.

Originally, when FXall filed for the IPO in September, it said some of the proceeds would go to the company, in addition to some selling from exiting shareholders. However, it changed its plans last month, with the entire offering going to the exiting shareholders, instead of using the cash to fund future growth.

“When companies are supposed to be growth companies and want to be priced as such, they typically have to show a story where they need the cash and have a reason to grow,” says Gerald Segal, CEO of LeapRate, an FX markets consultancy firm.

“Clearly, they decided to go to the IPO market with a different story, they were successful with it and all credit to them. But I will be interested to see if they keep throwing out cash rather than make acquisitions or invest in growth.”

In addition, the shareholders will also receive $63 million in the form of a cash dividend paid by the company. Bank of America Merrill Lynch, BNP Paribas, Credit Agricole, Credit Suisse, Citigroup, HSBC, Goldman Sachs, Morgan Stanley, JPMorgan and Royal Bank of Scotland each owned a stake of 5.1%.

Prior to the IPO the firm said that trading volumes fell 7% in the fourth quarter from the previous quarter, to average daily turnover of about $82 billion, down from $89 billion the previous quarter, while revenues fell 8% to $29.3 million. In July, it registered its biggest ever single day of volume, $140 billion.

FXall has more than 1,000 buy side clients, equally split between corporate, asset managers, banks and brokers and active traders, such as hedge funds and CTAs.

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