Shortly after last week’s iFX Expo in Hong Kong, which binary option provider TechFinancials attended with a large presence at the event, the firm announced a new joint venture (JV) with IBID Holdings Limited. Registered in Hong Kong, IBID Holdings Limited is a company involved in developing growth oriented online companies.
For TechFinancials, the JV follows the creation of a similar one with Optionfortune Trade Limited, also of Hong Kong, that was announced in Q4 2015. Both JV’s are part of TechFinancial’s aim to develop their business in China and other parts of Asia. The region is viewed as a key growth opportunity for many players in the binary options market.
Under the terms of agreement with IBID, TechFinancials will hold a controlling 51% stake in the JV compared to 49% for IBID. Initiating the formation of the JV, IBID will make an initial investment of $300,000. Simultaneously, TechFinancials will integrate their branded trading platform within IBID’s online marketing systems and transfer all other intangible assets related to the traded brand to the JV within an initial three month integration period to end no later than May 1st 2016.
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Following the formation of the JV, IBID has agreed to provide additional working capital if needed, for the JV to achieve its profit milestones goal of at least $100,000 in net profit for three consecutive months. According to TechFinancials, additional investments by IBID are viewed as ‘premium’ payments and won’t increase their ownership in the JV.
Under the terms of the deal, IBID and TechFinancials have agreed that the profit milestone must be achieved by the JV no later than July 31st, 2017. In the event that the profit goals aren’t met, the two firms have agreed to negotiate in good faith with regard to new terms for the continuation of the operation of the JV.
For TechFinancials, since going public on the London Stock Exchange’s AIM last year, their stock has been on the defensive, and is currently trading at 13p after achieving a year high of above 40p in March 2015. The poor showing for their shares is in part attributed to overall negative sentiment on the LSE towards small cap online trading company shares in 2015, which London Capital Group and Plus500 were also affected by.
In addition, following strong revenue and profit growth for 2014, TechFinancials issued a decrease in net profit on tepid top-line revenue growth for the first half of 2015. As such, performing well in China and the rest of Asia is an important factor for the company to reinvigorate interest in their shares. In this regard, Asaf Lahav, Group CEO of TechFinancials, commented on the JV: “The Board believes the JV will improve the long-term sustainability and consistency of our growth prospects while generating extra cash flow.”