IG Group is to buy US-based online brokerage tastytrade for $1bn in its largest ever acquisition as the British spread betting company seeks to gain a stronger foothold in the booming retail investor market.
IG is acquiring one of the fastest growing retail investor businesses in the US futures and options market, while tastytrade will be able to use IG’s global infrastructure to expand its services internationally.
US options trading volumes have grown significantly, with record levels in 2020, according to Jefferies, which advised on the deal. That included the highest volume month ever in December. This was in part because of the growing numbers of retail investors keen to bet on the volatility in the market.
June Felix, chief executive of IG, which is the largest listed spread betting group in the UK, said that the deal would allow the company to diversify into the high growth market of US exchange traded options and futures, which has an estimated 1.5m retail traders. IG has a small retail investor business in the US.
“This acquisition will materially expand and scale our business in the US and see us further diversify into the exciting high growth market of US retail options and futures, a market which is adjacent to IG’s core retail trading skill set,” said Ms Felix.
The acquisition comes after a period of record trading for IG in the six months ended November 30.
The pandemic has created fertile conditions for spread betting among day trading punters often trapped at home with time on their hands and a wildly swinging market to play with.
Net trading revenue rose two-thirds to £416.9m, while profit before tax more than doubled to £231.3m, from £101.2m last year. Active clients rose 55 per cent to 238,600 in the six-month period.
Ms Felix said: “We delivered record revenue and profit, made excellent progress against our strategic growth objectives and continued to build a more sustainable and diversified global business.”
The deal will be funded with $300m in cash and the issue of 61m IG shares, the company said on Thursday. The transaction reflects a valuation for tastytrade of about 18 times 2020 earnings before interest, tax, depreciation and amortisation.
Founded in 2011, Chicago-based tastytrade also provides eight hours of free trading information and advice daily that has 900,000 subscribers across 190 countries via YouTube and iTunes.