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Now on this week’s article…

“Anything can happen in life, especially nothing” – is a line I’ve stolen from Houellebecq and used a few times to start this newsletter before.

And when nothing happens, it’s always fun to go over a listed company’s results. IG Group published their H1 update last week, so I figured why not go through those.

There were a few interesting tidbits of information in the results, so let’s dive in and take a look.

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IG is going to add crypto

I thought about giving this section the title ‘will IG add crypto?’ but it seems pretty much a given that they’re going to do it.

There are a couple of interesting points to note here. One is that IG currently has a new product roadmap-style picture in its presentations that more or less tells you what they want to do…

…as you can see, crypto is the least developed product and it would be odd for IG to list this as an implied weakness and then do nothing to change it.

In fact, IG CEO Breon Corcoran said on the analyst call that was held alongside the results that the company “must have a crypto offering”.

He also noted that being pro or anti crypto is not really an option anymore, it’s here and it’s a product that clients want.

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Consequently, it’s probably fair to assume that IG is going to add crypto. The question is more how they will achieve this.

One conspiracy theory I have is that they will merge with some big crypto exchange. This is not based on anything other than hunch, so don’t take it as fact.

However, it’s not implausible that the company will just buy a crypto company. If you look at Corcoran’s career track record, doing M&A is kind of his ‘thing’.

In fact, we saw this earlier this month when the company acquired Freetrade for £160m. Which leads us on to that deal..

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Freetrade

The basic logic of the Freetrade deal was, according to IG, to acquire a good product and brand in the stock trading and investments space.

Again, the fact IG was willing to do this, rather than build internally, suggests they would do it again for crypto. Note that they have the cash to do so, although Trump’s victory will have probably resulted in a big uptick to valuations.

Regarding Freetrade, I would imagine a lot of people don’t appreciate how much ‘stuff’ Freetrade built internally, like marketing tools and some backend systems.

Corcoran noted that the IG Invest app, which didn’t launch that long ago, will continue to run as well. Apparently that reflects “different audiences”. To me that suggests it’s plausible IG Invest will be used as a cross sell app like Trading 212 and Freetrade will be for pure investing.

However, IG’s slide deck notes that they have the ‘optionality’ to add additional products to the app. Corcoran said they will add “all the products a self-directed investor wants” to Freetrade. What are those products? I guess we’ll have to wait and find out.

Are options a tough sell?

One of the brief but interesting points that Corcoran touched on was the tastytrade launch in the UK.

I am not going to quote him verbatim but the basic point was something like…

Tom Sosnoff came to the UK on tour and it was successful. However, that ‘success’ was confined to a small audience of people who are mental about options.

We have looked before, in what was potentially my favourite TradeInformer Newsletter title to date, at whether Sosnoff is an intangible asset.

The more pressing question here though is whether options can be made into a ‘thing’ in the UK and other markets.

This was a hint that it’s proving difficult to do. Other comments on how popular the tasty product has been in the UK since launch did not sound massively upbeat.

It also highlighted the risk that our prior article on Sosnoff looked at, namely it being risky to have a brand tied so much to one guy.

Hey…wait a minute.

Headcount down by 11%

The final detail that stood out in the report was that headcount has fallen over the last 12 months by ~11%.

At the end of November, which was the close of the reporting period, staff numbers totalled 2,440, compared to 2,747 a year earlier.

This will presumably go up again once the Freetrade deal closes.

Two other points are worth mentioning here. One was the company has changed its incentive structure to better reward high performers. This seems normal to me but the suggestion was that people were ‘comfortable’ getting by.

The other was on attracting talent to the company. Corcoran noted that this has meant convincing people to join a ‘turnaround’ play.

To me, the use of this phrase captures a peculiar malaise that affects this industry. IG is not a distressed, failing business – 2023 was its best ever financial year and this half year period was also a record in revenue terms. Many firms would be thrilled to have their margins / cash flows.

And yet there is a sense that things are stagnant and the business can’t grow. This is true for the rest of the industry, even though cumulative revenues have never been higher.

But then if it’s a turnaround play, the suggestion is there is room to grow still. The potential problem is that growth is in emerging markets but, as IG is listed, they can’t really do what companies like XM and Exness do.

This is probably a whole other article, but that reflects a few oddities in this industry. One is that you can get big, but not that big. The other is that it’s great to be a company owner, but not necessarily a company investor. And finally, if you are privately owned today, it’s arguably a much better position to be in than being listed.