Global Brokerage Inc. (GLBR)

[Sooah]

Of the $235MM in client equity loss, we have to consider whether all of it needs to be written down. A new equity valuation of $3,90 to $4,20 per share has a 100% write down baked in already. I re-ran the numbers and felt a more reasonable range should be $3,90 to $4,20 per share due to real risks. HOWEVER, due to the record trading volumes that the company reported recently, there stands a good chance that many of the clients who lost equity will be able to recover their losses and replenish the balances needed to keep margin. This means that $FXCM's equity valuation also increases.

If they are able to recover 20% of the $235MM, this adds $0,85c back to equity. If they recover half, that is equal to $2,50 per share. Even if 50% of the $235MM were to be written down, we are looking at equity going to mid/upper $6/share range which makes this $2/share level a very attractive buy on $FXCM. All hell would have to break loose for equity to adjust to $2/share and I do not see that happening at this time.

Shorters must take caution and go long here on $FXCM. With a combination of non-core asset sale, increasing trade volumes and the company's ability (via client's ability) to recoup a significant portion of the $235MM, shorters are taking on more risk to get hit with a very bad surprise.