NEW YORK (TheStreet) -- Shares of FXCM Inc (FXCM) were tanking, sharply lower by 10.85% to $1.15 on heavy volume in midday trading Wednesday, as the company plans a 1-for-10 reverse stock split of its issued and outstanding class A common stock.
Late yesterday, the company announced that its board of directors approved the reverse stock split.
Every ten shares of issued and outstanding class A common stock will be converted into one newly issued share of class A common stock.
"The execution of this reverse split represents an important step in achieving several significant corporate objectives, including FXCM's continued listing on the New York Stock Exchange," chairman and CEO Drew Niv said in a statement.
"The NYSE requires certain standards be met to continue as a listed company on its exchange, and while we currently satisfy all of those obligations and do not anticipate that changing, a reverse stock split will only serve to help strengthen our status and protect the company and its shareholders," Niv continued.
FXCM said it will hold a special meeting on September 21 to gain the approval of stockholders.
About 2.77 million shares have changed hands as of 12:25 p.m. ET today, compared to its average trading volume of about 1.73 million shares a day.
New York City-based FXCM is an online provider of foreign exchange trading and related services to approximately 183,679 active retail customers, offering access to over-the-counter foreign exchange markets through its technology platform and an agency model to execute their trades.
Separately, TheStreet Ratings team rates FXCM INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate FXCM INC (FXCM) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FXCM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, FXCM INC reported lower earnings of $0.30 versus $0.48 in the prior year. For the next year, the market is expecting a contraction of 306.0% in earnings (-$0.62 versus $0.30).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 20649.7% when compared to the same quarter one year ago, falling from $2.08 million to -$426.82 million.
- The gross profit margin for FXCM INC is currently extremely low, coming in at 2.79%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -608.05% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$290.77 million or 852.84% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 90.22%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 41650.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full analysis from the report here: FXCM Ratings Report