IBKR is the featured IPO at Renaissance Capital (ipohome.com):
ipohome.com
ipohome.com
Over the past decade, sophisticated institutional and individual investors have turned increasingly to options and other derivatives to control portfolio risk, enhance income and just plain speculate. These investors once relied on the major brokerage houses to execute their trades. But smaller firms became more adept at harnessing the power of technology, giving investors powerful tools to devise strategies and help keep transaction costs down.
Founded by a visionary Hungarian entrepreneur, this electronic market maker and broker has built a proprietary platform that integrates pricing and risk exposure, allowing it to make markets profitably and efficiently in multiple financial instruments simultaneously. Its fully computerized approach has allowed it to become the number one liquidity provider on the three largest US options exchanges and won it a 16% share in worldwide listed equity options. On the brokerage side, it delivers low cost advanced order management and trade execution. The company expects its proprietary technology and low-cost will drive the brokerage side of the business to 40% of revenue in three years.
In our opinion, Interactive should be viewed as a technology provider offering broker/market making services that give customers transparency into multiple global markets. The biggest risk is the anticipated introduction of 1 cent option spreads over the next two years, which the company expects will reduce profits in this area by 60%. In its 30-year history, Interactive has been adept at anticipating price reductions in its markets, which have benefited the firm with increased market share and hurt competitors. Some investors may be turned off by the CEO’s ongoing plans to sell stock, but we concluded that it is a logical way to transfer ownership. Given the above risk, we believe that the proposed valuation is reasonable.
The IPO is being conducted as an open auction by WR Hambrecht, so investors will need to have an account open with Hambrecht or one of the other underwriters to participate. |
