After CFD Capex.com announced its merger with NAGA Group, shares briefly rose to over €1.12.
However, NAGA Group's strong report on its 2023 financials failed to impress the market, and the stock moved lower. Also, a €150,000 fine imposed by the Cyprus Securities and Exchange Commission on NAGA Markets Europe Ltd., NAGA's subsidiary in Cyprus, for settling charges that included an obligation to execute orders under the most favorable terms to the client, only accelerated the stock's decline.
NAGA Group's share price plummeted to €0.79 on January 12 and €0.70 on January 15, a drop of more than 30 percent since December 22, when it reached €1.12.
According to details posted on the FNG portal, many NAGA Group employees are concerned about the upcoming layoffs, as the merger announcement between Capex.com and NAGA includes up to $10 million in cost reductions in areas such as regulatory overhead, headcount, technology, and the cost of goods sold.
The workforce reductions are expected to primarily affect NAGA Group employees. Along with that, Capex.com's controlling shareholder, Octavian Patrascu, is expected to take over as CEO of NAGA Group after the merger.
Many experts speculate that the drop in NAGA Group's share price is due to a post-merger revaluation of the combined companies, which could occur in late Q2 or early Q3 2023 as NAGA and Capex.com await regulatory approval.
As part of the proposed transaction, NAGA would issue new shares to Capex.com, representing approximately three times the number of NAGA shares currently outstanding. This means that Capex.com shareholders will control approximately 75% of the combined company after the merger.
The decision has caused concern among NAGA shareholders, who do not believe that the combined company, which will have annual revenues of about $90 million, should be worth about four times NAGA's current price of about 47 million euros.
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