FNG Exclusive… It looks like some Retail FX brokers are taking advantage of the amazing rise in industry trading volumes (and revenues, profits…) they have seen over the past few months of market volatility, to raise capital to help drive continued growth.

After we reported exclusively last week that Estonia-based Admiral Markets was making preparations to raise €10 million in a notes offering, FNG has learned that Hamburg, Germany-based and CySEC licensed social trading focused broker NAGA Group AG is planning to raise €5 million in additional capital, as the firm continues on a rapid growth trajectory in 2020.

Regarding the financing, NAGA made some preliminary filings in its native Germany indicating plans for issuing subscription rights to shareholders. Up to 2 million new shares are to be issued at a subscription price of €2.50 per share. Shareholders can subscribe to two new shares for thirty-nine old shares. The subscription period is expected to begin on 03 July 2020 and is expected to end on 16 July 2020. In addition, the new shares are to be offered to qualified investors at the same placement price of €2.50 as part of a pre-placement starting today. Hauck & Aufhäuser is acting as Sole Global Coordinator and Sole Bookrunner for the offering. The new shares will initially be offered for sale as part of a private placement to qualified investors in Germany and other select jurisdictions (outside the United States).

NAGA shares, which closed yesterday on the Frankfurt exchange at €2.88, reacted negatively and traded down this morning by 13% to the rights subscription price of €2.50.

And regarding company results, after disclosing that NAGA had a fairly disappointing 2019 year with Revenues down by 8% to €3.9 million and a net loss of €13.4 million, NAGA noted that it earned more Revenue in Q1-2020 (€7 million) than in all 2019, and the company turned profitable with positive net profit of €2.1 million. Q2 is going even better, with NAGA now saying that the number of new customers and trading volumes have grown significantly with an increase of over 50% since Q1.

Benjamin Bilski, CEO of The NAGA Group AG stated:

“With the recovery of the financial markets and despite weakening volatility, we were able to continue on our growth path. Our new customer registrations and trading activity are developing positively. In April and May alone, we were able to exceed the trading volume of the entire first quarter with a total of EUR 24 billion, and welcomed more new customers than in the first 3 months of the year together.”

NAGA also reported its first customers and sales from China. After months of preparation, the company said that operational business started on 7 June 2020 and first customers were accepted.

“Offering our service in China has been our goal for a long time. We anticipate healthy and sustainable growth and will focus heavily on the project in China. The potential is extremely large in this market”, commented Bilski.

Furthermore, NAGA’s upcoming challenger bank app “NAGA Pay” met with what the company called “a lot of interest” recording 5,000 pre-registrations just weeks after the announcement of its launch for Q4 this year, which supports the company’s strategy to enter the mobile-banking segment.

Mr. Bilski added:

“After last year’s very exhausting restructuring, we managed to get NAGA back on track. The greatly improved and focused marketing strategy, combined with a significant reduction in costs and the focus on new markets, made the major difference compared to the years before. Our cost base is now stable and growth can be controlled through fully digital, global and scalable marketing initiatives. Based on the performance of the NAGA share this year and the outlook for the next 18 months, this capital raise is a logical step to accelerate NAGA’s growth. The proceeds from the capital increase will be invested mainly in Marketing & Sales, since we are able to plan with clear return on investment. We expect that this will lead to positive effects on our overall earnings figures in the near future.”

As noted above, NAGA Group AG is licensed in Cyprus, with its Cypriot subsidiary NAGA Markets Ltd acquiring the CySEC license originally issued to AvaTrade nearly a decade ago. AvaTrade had made parallel license applications in the early 2010’s in both Ireland and Cyprus, receiving both, but decided to stick with the Central Bank of Ireland license as its EU base, making the CySEC license expendable. NAGA Group also has an offshore entity set up in Saint Vincent & the Grenadines.