GAIN Commits to $50m Buyback after GTX Unit Sale

GAIN Capital has just committed to purchase a substantial chunk of its own shares. The company its institutional GTX unit for $100 million. The move enables the firm to protect shareholder value at a time when the capitalisation of retail brokers is declining fast.
GAIN will purchase $50 million of its own shares in a Dutch auction tender. The CEO of the company, Glenn Stevens outlined that the brokerage remains committed to executing a balanced capital allocation strategy.
“Given our strong capital position, we believe the offer is a prudent means to return capital to shareholders,” Stevens said. The company’s net proceeds from the sale of GTX totalled to about $85 million. 

GAIN Capital’s CEO also highlighted that the primary drivers for the move are the company’s solid balance sheet position after the sale of GTX and the current market price of the firm’s shares.
“Our strong capital position allows us to make appropriate investments to pursue growth initiatives, consistent with our goal of delivering long-term value,” said Stevens.
Dutch Auction
GAIN Capital will purchase its stock via a “modified Dutch auction” which starts today. The tender offer is for $50 million worth of stock.
The price at which GAIN intends to purchase its shares if no less than $7.24. The maximum bid the company is putting on the market will be no more than $7.94 per share.
Yesterday’s closing price of GAIN’s common stock was $6.91 per share. The buyback offer by GAIN starts with a 5 percent premium. The company will end its commitment on the 6th of November 2018.
GAIN Capital is enabling its investors with an opportunity to exit from their positions. The firm is providing significant liquidity at a time when the market cap of retail brokers is declining rapidly.
Stock Performance
Shares of GAIN Capital are trading by a third lower when compared to the start of 2018. The company’s brands Forex.com and City Index have been actively exposed to Europe.
Back in the beginning of August, the European Securities Markets Authority (ESMA) started a new regulatory framework for retail brokers. The move has affected the retail harder than expected.