What happened
Foreign exchange trading technology company GAIN Capital (GCAP) announced after the market closed on Wednesday, Aug. 16, that it intends to offer $80 million of 5.00% convertible senior notes. Purchasers have the option to purchase an additional $12 million above this target, meaning that the total debt issuance could potentially reach $92 million.
The notes will mature Aug. 15, 2022, and will be convertible at a price of approximately $8.20 per share into GAIN Capital common stock. (The stock trades for about $6.20 as of this writing.)
Image source: Getty Images.
It appears that investors aren't too happy about the news, as the stock is down by roughly 10% on the morning after the announcement was made. (Note: This was written at 10:30 a.m. EDT on Thursday, Aug. 17, 2017).
Now what
A couple of weeks ago, GAIN Capital CEO Glenn Stevens said that the company planned to expand via mergers and acquisitions. "Strategic M&A remains the cornerstone of our going forward plan," Stevens told FinanceFeeds. Stevens explained that the goal of its mergers and acquisitions ambitions is to diversify the company's revenue stream and grow its market share.
So what
It remains to be seen whether any M&A activity that GAIN Capital engages in with the proceeds from this debt offering will ultimately add value for shareholders, but for the time being, the market seems to be pricing in added risk from the new debt load.
