Britain's IG to buy tastytrade for $1 billion in U.S. foray (updated)
21/01/2021 11:46
* Tastytrade deal is IG's biggest to date
* IG shares down in early trade
* Deal comes as IG posts surge in H1 profits
(Adds details from statement, background on trading)
By Muvija M and Indranil Sarkar
Jan 21 (Reuters) - Britain's IG IGG.L said it plans to buy
U.S. trading platform tastytrade for $1 billion, venturing into
North America after a stellar year for the new breed of retail
investment brokerages.
Coronavirus-driven volatility has fuelled a surge in revenue
and profit for IG and British rivals including CMC Markets
CMCX.L and Plus500 PLUSP.L , while Robinhood.com and its
app-based trading have risen to prominence in the United States.
IG, which dates back to 1974, said on Thursday that
tastytrade shareholders will get $300 million in cash and 61
million IG shares, valued at $700 million, in the London-listed
company's biggest deal to date.
News of the planned acquisition, part of June Felix's
diversification strategy since becoming IG Chief Executive in
late 2018, saw IG shares fall 2.3% by 0812 GMT.
The company, which also reported a 129% increase in
first-half earnings, said it expected the deal would be low
single- digit accretive to its adjusted earnings per share in
the first full year after closing.
Half of the cash portion of the purchase would be funded
through company resources and the rest through new debt
facilities, IG said.
IG's expansion into the United States coincides with the
arrival of President Joe Biden, who was sworn into office on
Wednesday.
Wall Street is awash with speculation about the kind of
financial sector regulatory changes his administration might
seek, while Janet Yellen, Biden's Treasury Secretary nominee,
has also raised the possibility of taxing unrealized capital
gains. urn:newsml:reuters.com:*:nL1N2JU22H urn:newsml:reuters.com:*:nL4N2JT36V
UK regulators have already tightened certain rules to ensure
"mom and pop" investors are protected from big losses when
betting on complex financial instruments some retail traders do
not fully understand.
Massachusetts securities regulators have accused Robinhood
of engaging in aggressive tactics to attract inexperienced
investors. urn:newsml:reuters.com:*:nL1N2IW1ES
'10-YEAR WAIT'
Tastytrade, which was founded a decade ago, has more than
105,000 active trading accounts and some 900,000 unique
registrations, while its YouTube channel boasts 206,000
subscribers and 8 hours of live programming a day.
By comparison, Robinhood, which had 13 million user accounts
in May and was valued at $11.2 billion as of December, has 3,560
subscribers on the video sharing platform.
The retail share trading boom seen in 2020 has not shown any
signs of waning in 2021. urn:newsml:reuters.com:*:nL1N2JV1MV
Illustrating the pent-up demand, Signal Advance's SIGL.PK
share price skyrocketed to $70 from 70 cents in under a week
after it was mistaken for a similarly named unlisted texting app
used by billionaire mogul Elon Musk.
Tastytrade's senior leadership will stay on after the
takeover, which the companies expect to close in the first
quarter of the next financial year.
"While our long-term goal has always been to go global, we
waited almost 10 years until we found the right partner and
perfect match," Co-CEO of tastytrade Tom Sosnoff said.
(Reporting by Indranil Sarkar and Muvija M in Bengaluru;
Editing by Krishna Chandra Eluri, Patrick Graham, Alexander
Smith and Sinead Cruise/Emelia Sithole-Matarise)
((Indranil.Sarkar@thomsonreuters.com; Mobile: +91
7022132226;))