Shares of GAIN Capital Holdings are Falling Today and This is Why

On August 16, after the market closed, GAIN Capital (NYSE:$GCAP) announced that it plans to offer $80 million of 5.00% convertible senior notes. With this, purchasers have the option to buy an additional $12 million above this target. This is significant as it means the total debt issuance has the potential to hit $92 million.

The convertible senior notes will mature August 15, 2022, and will be convertible at a price of roughly $8.20 per share into GAIN Capital common stock.

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As mentioned in the news announced yesterday and today, it seems investors aren’t too thrilled about the company’s decision, as the stock is down by approximately 10%, as of 10:30 a.m. EDT.

What Does the Future Look Like?

A few weeks ago, Glenn Stevens, Gain Capital CEO, announced that the company plans to expand through acquisitions and mergers. “Strategic M&A remains the cornerstone of our going forward plan,” Stevens said to FinanceFeeds. Elaborating further, Stevens said the goal of these mergers and acquisitions is to diversify the company’s revenue stream and to increase its market share.

So What?

As of right now, it is unclear as to whether the M&A activity that GAIN Capital engages in with the proceeds from this debt offering will add any value for shareholders. However, for the time being, the market appears to be pricing in added risk from the brand new debt load.

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