Interesting video blog on figuring a sound valuation for IB versus its peers at www.momoneytv.com/vlog/momoney/20070506.html IB seems rather richly priced at these levels, especially when you compare it to a stock like Goldman Sachs with all its clout trading at around 10.5x forward earnings.
No shit, I didn't think he could look more foolish after the IBKR short position claim, and he follows it up with that....how much more busted can you get?
This may explain the selloff......... Interactive Brokers' IPO Gains 4.3%; Unusual Options Surges May Hurt It By YVONNE BALL May 4, 2007; Page B3 Automated options-trading firm Interactive Brokers Group Inc.'s eagerly anticipated stock offering racked up solid gains on its first day of trading Friday. The Greenwich, Conn., company's initial public offering closed at $31.30 on the Nasdaq Stock Market, 4.3% higher than its offering price of $30.01, set by WR Hambrecht & Co. and HSBC Securities (USA) Inc. Interactive Brokers raised $1.2 billion after overwhelming demand enabled it to sell 40 million shares, well above its target of 34.5 million. Big Footprint The only IPO larger than Interactive Brokers this year was that of Dallas-based cellphone carrier MetroPCS Communications Inc., which raised $1.32 billion last month. The Interactive shares were priced at the high end of the estimated range of $27 to $31 through an auction process, which sets a price through investor bidding rather than through the traditional customer allocation process followed by most investment banks. In theory, auction IPOs don't exhibit a first-day price "pop" on the first day of trading. The number of shares offered for sale and the price range had been upgraded earlier in the week from 20 million shares at $23 to $27, doubling the size of the deal. In 2006, the company accounted for about 15.9% of exchange-listed stock options volume traded world-wide, according to the Futures Industry Association. Pre-Merger Surges In an interesting disclosure amid the surge in merger activity, Interactive said its market-making operations were affected in the first quarter by "unexpectedly heavy options activity" ahead of certain corporate announcements. "While we are unable to detail the exact frequency of these announcements in a given period and their exact financial impact on our results of operations, in the quarter ended March 31, 2007, there were a greater number of surprise or unexpected announcements preceded by heavy options activity than in prior quarters," the firm said. "This impacts us as, when we trade with others who have different information than we do, we may accumulate unfavorable positions preceding large price movements in companies." Write to Yvonne Ball at yvonne.ball@dowjones.com
The average of weekly ratio of DJIA/NASDAQ is gradually declining during last weeks, which on chart looks similar to before 2/27 sell-off. Though it is not clear at exact what date, but the inevitable correction seems like is coming... The question is how this IPO will whether it out assuming that volatility is their major source of revenue.
I think the exchange stocks are a good analog for IBKR, not the ibanks. You have to assume IB is flat to long vol, and commish revs won't hurt. I'd imagine a good corr to CME, excluding the recent risk-arb losses in the shares. How the street takes it is another matter.
Somebody posted this before the IPO went through. So it is old news and probably not the reason for the selloff.
FYI, the part about the unusual options volume hurting them... is in the prospectus. So that had no effect on the price.
I'm very happy after moving last year all my accounts from Scottrade to IB. The savings on commissions and quality of order fills make huge difference, plus, I opened an adviser account for managing multiple accounts (IRAs in my case) what is very convenient placing one order and have positions distributed to accounts automatically according to your rules. Time will tell, but so far they are most effective. I can't say their customer service about which some folks are complaining was bad to me, but when you call you have to know what you are asking for and avoid waisting time on phone with them.
What hurt the pop here was increasing this twice to an absurd 40 million shares, and promising to sell another 40 million every year for the next 500 years.