During the iFX Expo Cyprus last week, one of the brokers being discussed by attendees was IronFX. Rumors being circulated were both positive and negative. The negative ones were about a large round of layoffs taking place, a freeze on account withdrawals, and the firm potentially closing or selling portions of its business. There were also upbeat statements, as several partners (including a Chinese partner) noted that they continue to have normal relationships with IronFX.
Overall though, sentiment was that the broker’s future is a bit murky as we soon head into the second half of 2015. In regards to IronFX themselves, while the firm wasn’t an exhibitor or sponsor, employees did attend and had the ‘business as usual’ appearance at the show.
Reorganization
Among the rumors, what has been confirmed is that IronFX did in fact initiate a large round of layoffs. According to a company representative, 50 non-front office personnel were let go, including support people, representing less than 10% of their global staff, which the firm claims to remain above 500. While a large number, the stated amount was below the 100 or so employee figure which had made the rounds at the iFX Expo.
(Worth noting that the CEO stated to Finance Magnates that they have 800 employees as of late February, which may include personnel from partners or indicate the recent wave of layoffs follows larger ones that took place in March and April.)
Explaining the decision to Finance Magnates, the company representative said that the layoffs were the result of restructuring taking place at IronFX as the broker adjusts to the challenging market conditions of 2015. The representative pointed out that in 2015 “the industry has been going through the biggest turmoil/changes/consolidation since the retail Online Trading industry started in the late 90s, including the SNB crisis as well as recent challenges of publicly listed global FX brokers.”
The prevailing market conditions the company has decided to execute a planned restructuring of its global operations
As a result, the company representative stated that due to "the prevailing market conditions the company has decided to execute a planned restructuring of its global operations”, adding that “This restructuring is primarily aimed at all functions and excess capacity created as a result of its own planned IPO, but affected predominately non-Front Office departments and functions.”
The Future
In regards to the future, IronFX has been reported to have had talks with external investors, most notably Tedi Sagi, whose firm, Playtech had recently purchased Markets.com. On the potential of a sale, the IronFX representative confirmed that “we have investor approaches underlying the intrinsic value of the business” as well as adding that they may be acquiring themselves, stating “we are in discussion with various parties to maximize consolidation opportunities in the market following the demise of large competitors”.
One cloud that continues to hang over the broker and could prevent a sale is an ongoing case against IronFX that was filed in Cypriot courts. Filed by customers and partners, the case was brought after the IronFX froze account withdrawals, claiming bonus fraud took place.
Primarily affecting Chinese partners and account holders, the withdrawal freeze has customers to storm IronFX offices in China. While activity outside of IronFX’s global headquarters in Limassol, Cyprus, looked normal to Finance Magnates last week, Forex industry professionals working near the office have reported that an increase of security has been seen at the building.
In addition, some have questioned the earnings power of IronFX. Focusing on rapidly expanding its business, the broker is believed to have sacrificed margins for growth, which led them to possibly have surpassed $100 billion in monthly volumes during 2014. However, the model also makes them vulnerable to one or two bad months having the ability to affect their overall annual performance. The alleged bonus fraud that took place in the later part of 2014 and the millions of dollars being claimed in courts to be owed, would have been such a case that could have knocked all of IronFX’s previous success of the year.
