Internet Financial Services(A. B. Watley)files for IPO
By Bloomberg News
Special to CNET News.com
February 5, 1999, 4:30 p.m. PT
Internet Financial Services, operator of online trading systems that cater to "active traders" who frequently buy and sell stocks, filed to sell a 23 percent stake to new investors through an initial stock offering.
The New York-based company, formed in 1996 to acquire the brokerage firm A.B. Watley, filed with the U.S. Securities and Exchange Commission to sell 1.7 million shares for $6 apiece. At that price, IFS would have a market value of $44 million, based on 7.3 million shares to be outstanding after the offering.
The money-losing company has transformed itself into an online broker through two services, UltimateTrader and WatleyTrader, that offer stock quotes, news, and order execution services on a real-time basis over the Internet. IFS, whose founders include brothers Steven Malin and Robert Malin, also executes block trades for institutional investors.
Online trading is the fastest-growing part of the securities industry as more people buy and sell stock online. From a total 1.5 million online accounts at the end of 1996, the market is expected to grow tenfold to 14.4 million online accounts in 2002, according to data cited in the IFS filing. The company hopes to take advantage of the online trading boom by offering what it describes as a premium service aimed at the high-end of the market.
"We look at where we can mine the top 2 to 5 percent of the online trading industry because no one really offers this kind of premium service," said Anthony Huston, executive vice president at IFS.
IFS competitors include E*Trade, Charles Schwab, Quick & Reilly, Waterhouse Securities, Fidelity Brokerage Services, and Datek Online Brokerage Services.
"It's an uphill battle for any new entrant into this market because of the type of investment needed to be successful,'' said Michael Chung, an analyst at New York-based Williams Capital Group.
IFS will use $2.5 million in proceeds from the stock sale to build its brand name through marketing, and another $2.3 million to expand and upgrade its network. IFS said it also may devote money to setting up its own clearing operations, expanding its institutional sales desk, to repaying debt and for other general corporate purposes.
IFS has narrowed its losses and increased its revenue over the past year. The company reported net losses of $632,410 in the year ended September 30, 1998, compared with net losses of $1.1 million in the year ended September 30, 1997. The company had revenue of $9.1 million in the year ended September 30, 1998, compared with revenue of $4.5 million in the year ended September 30, 1997.
IFS makes most of its money -- about 67 percent of 1998 revenue --from UltimateTrader. The system provides access to bid and ask prices, charts, research and other stock information. Traders can use the system to route orders directly to market makers, electronic communications networks, the Nasdaq Stock Market and exchanges such as the New York Stock Exchange. Fees start at $16.95 for each transaction. Real-time data costs extra and can be free depending on how many trades a customer executes each month. The WatleyTrader system costs $9.95 per transaction and provides order execution through a trading desk.
Chief Executive Steven Malin, 41, will hold a 22.5 percent stake in IFS after the stock sale. Harry Simpson, chief operating officer, will hold a 7.6 percent stake and Huston will hold a 6.8 percent stake after the IPO.
Whale Securities will underwrite the stock sale. The company expects to trade on the Nasdaq SmallCap Market under the symbol IFSX. |
