Exclusive FNG analysis… The past four weeks have not been kind to the 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 from Capex.com’s shareholders into the company), shares of NAGA Group (ETR:N4G) briefly rose above €1.12.
However, in the weeks that followed NAGA Group reported summary financials for 2023, which clearly did not impress the market, while NAGA’s subsidiary in Cyprus, NAGA Markets Europe Ltd, was fined €150,000 by the Cypriot regulator CySEC for settlement charges that included the obligation to execute orders on terms more favorable to the client.
In the weeks since, NAGA shares have continued to slide, culminating in a 9% drop on Friday (January 12) which saw NAGA shares close at €0.79 after changing hands for just €0.75 during the day. This marks a 29% drop from the aforementioned closing price of €1.12 on December 22 and a new 52-week (and multi-year) low for NAGA stock.
We also understand from NAGA Group sources that there is general concern among many workers about the pending layoffs. The Capex.com-NAGA merger announcement revealed that the parties have identified up to $10 million in annual operating cost savings from the pending combination of the two entities, in areas including regulatory overhead, headcount, technology and cost of goods sold.
This will mean redundancies expected to come mainly from NAGA’s side, with Capex.com coming in as the actual buyer and Capex.com’s controlling shareholder Octavian Patrascu becoming the new CEO of NAGA Group.
The fall in the share price appears to mainly surround a reassessment of the value of the combined companies after the merger, which is still likely to be several months away as NAGA and Capex.com await approval from the various licensing authorities each of the subsidiary companies. The proposed deal will see NAGA issue new shares (to Capex.com shareholders) totaling approximately three times the number of shares NAGA currently has outstanding, giving Capex.com shareholders control of approximately 75% of combined company after the merger.
That level of dilution appears to concern NAGA shareholders, who now don’t seem to believe that the combined company, which will have annual revenue of about $90 million (based on trailing 12 months), should be worth about 4x the value of NAGA (around 47 million euros).
NAGA Group share price chart, last 6 months. Source: Google Finance.