Global Brokerage Inc. (GLBR)

[Sooah]

The Citi post in re of $FXCM is not only wrong but is irrelevant because FXCM is not selling itself. Per the update from the CEO released AH, $FXCM is live and well.

The key points to understand regarding the future of this company are as follows:

As of 1/22/2015, FXCM still has strong operating metrics with retail customer trading volume, which includes all retail FX and CFD volume, is $406 billion* with 30% coming from the last 5 days alone, which included a U.S. bank holiday. Average retail customer trading volume per day during this period is $27 billion not including those accounts that cannot trade (negative balances). As of January 22, tradable accounts were 224,547, and client equity was $1 billion.

Client equity lost ~$332 million due to the CHF cap surprise, but it is important to understand that these are stated in $FXCM's books as offsetting entries, meaning client equities are stated as assets and liabilities. If the value of client entity reduces, the liability side reduces correspondingly, hence this change in client asset -- for now-- is not a loss to $FXCM.

The loan from Jeffries/Leucadia for $300MM this month was used to cover losses in clients accounts due to regulatory reasons, but the covered amounts are also receivables from clients that still owe money on their accounts. It becomes problematic for $FXCM only if clients are unable to recoup the losses in their accounts and bring them to levels where margin/losses are settled allowing them to trade as usual.

If customers with negative balances aren't able to bring their account up, $FXCM is insured...

The cost of this loan adds an expense of $40 million adjusting shareholder equity down to $600 million. From this adjustment, the company will most likely start to make provisions for unrecoverable accounts. If we set the maximum unrecoverable to $332 million (change in client equity), the change to shareholder equity is $268 million.

The new shareholder equity per share looks like this then:

$268 million / 47 million shares = $5,70 per share

To this, let's say $FXCM isn't able to reduce the loan to $250MM, this will cost another $60 million in expense. The math for shareholder equity looks like this then:

$208 million / 47 million shares = $4.42 per share

The most important thing to keep in mind is that the trading volumes for 2015 are on pace to set a record and this is key to $FXCM.

The only thing I will agree w/Katz is that $FXCM does not deserve a market capitalization of +$1 billion. Its correct market cap is closer to $250 million, IMHO.

Good luck, all.