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FOREIGN EXCHANGE

Retail moves mainstream with Gain IPO

The evolution of the still relatively juvenile retail FX market took another step forward this week with Gain Capital’s announcement that it is to hold an initial public offering.

The company is planning to offer around $125 million of shares, with the proceeds to go to the company’s existing shareholders. Gain has declined to say what percentage of the company the IPO represents.

Inevitably, other retail platform providers and their shareholders will be watching how the IPO unfolds. Several have expressed surprise. “I don’t understand the timing and approach – deteriorating results and all money to the shareholders, not the company? It will be a hard sell in my view,” says one rival executive.

In its IPO prospectus, Gain says its annual net revenue grew from $22.2 million in 2004 to $190.8 million in 2008, representing a compounded annual growth rate of 71.2%. The company’s adjusted net income – a non-GAAP [Generally Accepted Accounting Principles] financial measure, which represents net income excluding the change in fair value of an embedded derivative in its preferred stock – increased from $7.1 million in 2004 to $49.6 million in 2008, representing a compounded annual growth rate of 62.6%. Gain’s net revenues for the six months to the end of June fell 12.2%

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