FNG Exclusive Analysis… The past four weeks have not been kind to NAGA Group.
After the company found a “white knight” in rival Retail FX and CFDs broker Capex.com, which announced plans in mid December to acquire NAGA via a Reverse Merger (plus an injection of capital by Capex.com shareholders into the company), shares of NAGA Group (ETR:N4G) briefly rallied to above €1.12.
However in the weeks that followed NAGA Group reported summary financial figures for 2023 which clearly did not impress the market, while NAGA’s subsidiary in Cyprus, NAGA Markets Europe Ltd, was hit with a €150,000 fine by Cypriot regulator CySEC in settlement of charges that included the obligation to execute orders on terms most favorable to the client.
In the weeks since, NAGA shares have continued to slide, culminating with a 9% decline on Friday (January 12) that saw NAGA stock close at €0.79 after changing hands for as low as €0.75 during the day. That marks a 29% decline from the aforementioned €1.12 closing price of December 22, and a new 52 week (and multi-year) low for NAGA stock.
We also understand from sources at NAGA Group that there is general concern among many employees regarding pending layoffs. The Capex.com-NAGA merger announcement disclosed that the parties have identified up to $10 million in annual operating cost savings from the pending combination of the two entities, in areas that include regulatory overheads, headcount, technology and costs of goods sold.
That will mean layoffs of redundant personnel which are expected to come mainly from the NAGA side, with Capex.com coming in as the effective acquiror, and Capex.com controlling shareholder Octavian Patrascu about to become the new CEO of NAGA Group.
The share price decline seems to mainly surround a new assessment of the value of the combined companies post-merger, which is still likely at best several months away, as NAGA and Capex.com await regulatory approval from the various regulators who license each of the companies’ subsidiaries. The proposed deal will see NAGA issue new shares (to Capex.com shareholders) totaling about three times the number of shares NAGA currently has outstanding, which the result being that Capex.com shareholders control about 75% of the combined company post-merger.
That level of dilution seems to concern NAGA shareholders, who now do not seem to think that the combined company, which will boast annual Revenues of about $90 million (based on the last 12 months), should be worth about 4x what NAGA is now worth (about €47 million).
NAGA Group share price graph, past 6 months. Source: Google Finance.
