FXCM continues its corporate restructuring as it announced plans to fill two needs with one deed by adopting rights issues to compensate shareholders by declaring “dividend distribution of one right on each outstanding share of the Company's Class A common stock.”
This move serves a dual purpose as it is intended to prevent any hostile takeover effort by vulture firms or individuals through open market activities, as well as to ensure that stockholders enjoy the maximum value of stake in the company and in no way restricts ordinary investors from gaining stake in the company.
In summary, we highlight below the main points of the Rights plan as stated by FXCM:
- For each outstanding share of the company’s common stock held on February 9, 2015, a right entitlement of 1/1000 of a share of a new Series A Junior Participating Preferred Stock of the Company (the "Rights") at a price of $11.20.
- Under the terms of the Rights Plan, the Rights will initially trade together with the Company's Class A common stock and will not be exercisable.
- In the absence of further action by the Company's Board of Directors, the Rights will generally become exercisable and allow the holder to acquire the shares of the Company's common stock at a discounted price if (a) a person or group acquires beneficial ownership of 10% or more of the Company's outstanding common stock or (b) any person or group commences a tender or exchange offer, the consummation of which would result in such person or group acquiring beneficial ownership of 10% or more of the Company's outstanding common stock. Rights held by the person or group triggering the rights will become void and will not be exercisable.
Furthermore, the mode of trading the company’s Class A common stock will not be affected; neither will the issuance of Rights be taxable.
FXCM learnt the hard way, after trading on shares of the firm was halted in the aftermath of the Swiss National Bank debacle causing it to almost declare bankruptcy, only to get relief funds from Leucadia.