BROKERS yesterday urged investors to take advantage of any fall in IG Group’s share price following the news that three former clients of bankrupt Scottish firm Echelon Wealth Management are suing the spread betting firm for more than €25m (£21.2m).
Echelon, a Glasgow-based contracts for difference (CFD) broker which went into liquidation in October 2008, used IG group’s trading unit IG Markets to hedge its exposures.
Clients of Echelon were covered by the Financial Services Compensation Scheme, which paid out losses up to £48,000.
IG yesterday dismissed the claim as “speculative” and “without foundation” pledging to “defend itself vigorously.” It said it did not expect the case to have any material impact on the group.
Brokers Numis and Panmure Gordon were equally dismissive of the case yesterday, reiterating their “buy” ratings and both suggesting investors capitalise on any share price weakness.
“This is a speculative claim which may not even go to trial. Buy into any weakness following today’s news,” said Panmure Gordon analyst Vivek Raja.
Numis analyst James Hamilton also said he expected the case to be dismissed without reaching court, but pointed that even if it did reach court that the cost was immaterial.
“IG held £22m of cash balance as of 31.05.2010 and so a €25m loss would have next to no impact on the group. Any share price weakness should be seen as a buying opportunity,” he said.
IG’s shares yesterday closed 1.3 per cent lower at 490.9p.