TechFinancials (LON:TECH), a UK-listed trading technology provider for the financial industry, today announced it has finally moved away from the binary options industry, having sold its OptionFair brand which is run through the company’s subsidiary in Cyprus, B.O. TradeFinancials.
TradeFinancials, which first entered the space in 2009, has also divested itself from its Seychelles-regulated subsidiary MarketFinancials Limited. Since January 2015, MarketFinancials has operated as a liquidity provider, providing binary options and forex market maker services as well as risk management to the group.
Both entities were sold to a Cyprus based company called S Win Holdings Ltd, which according to the filing is held by Roy Shagan, Roy Winzelberg and Daniel Winzelberg.
Despite cementing a leading place within a crowded industry, including going public as the first listed binary options company, TechFinancials has fallen victim to many of the same problems plaguing competitors in the industry. The sector has become fairly saturated and overly competitive while continuing to grapple with toughening regulations. Difficulty breaking into new markets has driven many companies to look for alternatives.
Survival attempts have all been for naught
TechFinancials has been retooling throughout 2017, parting ways with COO Jeremy Lange, restructuring the company, and reassigning and laying off workers, but it seems to have all been for naught.
Also in July, Finance Magnates reported on the firm downsizing in Asia and Israel as part of its restructuring process. It also moved some positions to Ukraine where employment costs are lower. Additionally, all board and senior management team members took a 20% salary reduction.
According to its filing, the company will focus on its other variety of products and the more competitive sectors of its business. The group is focusing on bolstering the B2C business, and in Asia, the company is shifting its focus from binary options to forex and CFD products. Still, its exit from the binary options industry is certainly another troubling sign for the sector at large.
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So after nearly eight years, TechFinancials has reversed course and finally left the industry that it had hoped to dominate. The company’s binary options division ran into trouble as a result of internal difficulties as well as broader forces affecting the whole industry.
Internally, the company decided to terminate its relationship with 24 option, a leading binary options broker and its largest software licensee.
Although TechFinancials has been successful in onboarding more new customers over the past years, it’s clear that 24option represented the lion’s share of the group’s platform revenues. The actual percentage was unknown but TechFinancials often states that it derives a “substantial proportion of such white-label partnerships”.
The financial cost of the deal, which is subject to CySEC approval and closing adjustments, was reported at $400,000. TechFinancials states that the agreement covers its CySEC license for OptionFair brand, including the broker’s client balances as of the closing date.
Additionally, the company’s assets in the CFI investors compensation fund ($50,000) and the fixed tangible assets ($300,000) will revert to the buyer and will be payable upon the closing date of the acquisition deal.
TechFinancials further explains: “The Buyer will pay to the Company any surplus net working capital in BOT as at the closing date along with the loan amount owed by BOT to the Company which, as of the date of this announcement, was approximately US$200,000. Under the SPA relating to MF and conditional the consent of SFSA, TechFinancials will sell its entire shareholding in MF to the Buyer for a purchase price of US$100,000, along with any working capital surplus. In addition, accumulated retained earnings as at the closing date will be distributed as a dividend to the Company. The retained earnings as at the 30 June 2017 were US$411,000.”
“BOT activity (operating OptionFair) continued to shrink in 2017 due to the tightening of regulations in the Binary Options industry. For the six months ended 30 June 2017, BOT’s revenues were €164,000 (For the financial year 2016: €1.38m) and the loss for that period was €105,000 compared to a loss of €231,000 for the financial year 2016. Net assets at 30 June 2017 were €244,534,” the statement concludes.
Commenting on the news, Asaf Lahav, CEO, said: “As a consequence of the regulatory changes which have impacted the binary options sector, these subsidiary holdings have become non-core to future business growth strategy. The Company intends to use its expertise to develop its Forex and CFD solutions and target the rapidly growing blockchain-based products and technologies market, and will use the proceeds of the sale to help build its presence in these new areas.”