FX: Gain still on track for 2010 IPO
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FX: Gain still on track for 2010 IPO

Business model new to market; So valuation remains uncertain

Glenn Stevens, Gain

"Being a public company gives us the ability to use our stock as a currency to make future acquisitions and to potentially act as a consolidator in the industry"

Glenn Stevens, Gain

It is inevitable that Gain Capital’s decision to contemplate an initial public offering has attracted attention. The official S1 form that companies listing in the US file with the SEC can make for brutal reading, disclosing a frank assessment of the company’s past and potential financials. Gain is no exception. Its tentative plans for an IPO have led some to claim that the company’s shareholders are seeking to cash in at the top of the FX retail market.

The filing has also raised questions about Gain’s business model, particularly from those who have no understanding of the way a principal-based trading operation works.

The S1 filing discloses that Gain netted or internalized about 95% of the flow it received from customers in H1 2009, which has led some commentators to claim that the company primarily makes money when its clients lose.

Gain’s willingness to try to increase its profits by holding on to some risk is at odds with the current business model in vogue in retail FX, where the latest marketing fad is to have no dealer intervention.