IG Group is set to purchase Tastytrade for a cool billion dollars. This follows a record-breaking revenue announcement for the six months ending November 30, 2020.
Home > Strategy > Mergers and Acquisitions > IG Group Acquires Tastytrade for $1 Billion After Record H1 Revenue
IG Group Acquires Tastytrade for $1 Billion After Record H1 Revenue
Tastytrade consists of two brands: the media brand Tastytrade, which provides education for traders on options and futures markets; and the brokerage platform Tastyworks, which boasts 105,000 active accounts and accounts for 1.3% of the US equity options market by volume.
The IG board stated: “Tastytrade collectively provides aspiring retail traders with the education and confidence to trade derivatives, while Tastyworks provides them with a powerful, modern, and user-friendly trading platform to utilize that knowledge.”
IG Group indicated that the agreement – which includes $300 million in cash and 61 million newly issued IG Group shares at $11.47 per share – grants them access to the US, the world’s largest derivatives market, which is estimated to include around 1.5 million retail traders.
Of the total cash required for the deal, £150 million will be sourced from new debt financing, and the remaining £68.3 million will be drawn from existing cash reserves. Upon completion of the transaction, Tastytrade shareholders will retain a 14.1% stake in IG Group.
IG Group declared that the takeover enables them to broaden their offerings, as Tastytrade specializes in options and futures, which are popular in the American market, unlike CFDs and spread betting.
“I am thrilled to welcome Tastytrade to the IG Group family,” said June Felix, chief executive officer of IG. “This acquisition will substantially expand our operations in the American market and diversify our offerings into the exciting, high-growth American retail options and futures market, which complements IG’s core retail trading expertise.
“The American market is home to over 1.5 million retail traders and is the world’s largest derivatives market. Tastytrade has expanded rapidly and proven itself to be an innovative market leader with a passion for serving its customers.
“The financial and strategic justifications for this transaction are compelling. I am confident that with our shared client-centric philosophy and passion for innovation and growth, IG and Tastytrade will be a successful partnership.”
Finally, IG Group stated that Tastytrade has quickly become a major player in the American brokerage market – with average annual revenue growth of 49% between 2018 and 2020, demonstrating its strong business.
The acquisition will also see four Tastytrade members join the IG Group board: chief executive officer Scott Sheridan, co-chief executive officers Tom Sosnoff and Kristi Ross, and chief technology officer Linwood Ma.
Sosnov stated the agreement enables Tastytrade to realize its objective of becoming a worldwide platform.
“We recognized early on that Tastytrade is an exceptional company,” Sosnov clarified. “While we have been dedicated to global expansion, it took us nearly a decade to discover the right partner for a perfect match.
“We will collaborate to empower independent investors and transform the way people perceive and engage in financial markets.”
The agreement is contingent upon competition and regulatory approvals. IG Group indicated it anticipates the transaction to be finalized within three months of the conclusion of August 31, 2021, which marks the first quarter of its 2021-22 fiscal year.
IG Group also revealed its financial performance for the initial half of its 2020-21 fiscal year. Net trading revenue surged by 67.1% year-over-year to £416.9 million.
After subtracting other operating income, such as gambling tax and customer fund interest, its net operating income reached £420.4 million, an increase of 64.8%.
Meanwhile, its operational expenses climbed by 22.1% to £188.2 million. IG Group paid £162.8 million in operating expenses, an increase of 18.0%, and an additional £25.4 million in variable employee compensation, an increase of 63.2% year-over-year.
This resulted in a 131.7% surge in operating profit to £232.2 million.
After subtracting £0.9 million in financial costs, IG Group’s total profit before tax was £231.3 million, an increase of 128.9%.
The group paid £44.2 million in taxes, more than double the amount paid the previous year, resulting in a post-tax profit of £187.1 million, an increase of 127.2% year-over-year.
The company’s financial performance in this period has been remarkable, shattering records for income and earnings. Pre-tax earnings surged by a staggering 129% compared to the previous year, Felix remarked. “This achievement wouldn’t have been attainable without the dedication of our workforce and the impressive flexibility of our technology.
“Our robust brand, commitment to customer support, and enhanced marketing efforts have enabled us to reach a record-breaking 238,600 clients who engaged in trading activities with us during the initial six months of the fiscal year.”
The pandemic has triggered significant shifts within the market, which has contributed to IG Group’s increased profitability. In the fiscal year 2020, the group generated £649.2 million in revenue, with £259.5 million of this amount being realized in the three-month period concluding on May 31, 2020.
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