More Tradestation Interbank FX acquisition details
The announcement of the Tradestation - IBFX acquisition deal obviously generated much interest and discussions in the industry. Main question
The announcement of the Tradestation – IBFX acquisition deal obviously generated much interest and discussions in the industry. Main question was whether indeed the price was a mere $17 million. Several of my sources mentioned that Gain may have eventually withdrawn from the deal I announced 2 months ago because there is a pending NFA fine against Interbank FX. Apparently IBFX may be soon fined for some execution flaws – however this has not been announced by the NFA yet so we have no way of knowing whether this will eventually happen.
I managed to speak to Salomon Sredni – TradeStation’s CEO – who was nice enough to find time to chat with me over the phone. The price TradeStation will pay IBFX owners is indeed about $17 million. However the previous owners will also take home all the cash that was in the company – about $24 million.
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So eventually Todd Crossland and Spectrum Equity will share about $41 million between themselves. It would be very interesting to see how exactly they will split this – but we may never know. Spectrum invested $40 million in IBFX few years ago and probably put a protection mechanism in place giving them the first $40 million back. However when IBFX hit the losing streak and a decision to sell the company was made it’s a safe bet to assume that this protection mechanism was altered. Spectrum probably won’t take the full $40 million otherwise it wouldn’t have made sense for Todd to sign off on the deal.
In any case, TradeStation and Monex have big plans to expand and they view the American market as a great opportunity. The smaller the market gets due to consolidation the more accounts each of the remaining brokers will be getting.
TradeStation will keep offering its own platform as well as Interbank’s MT4 and clients will be able to choose which platform they prefer.
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Amazing how things change quickly! Just last year as your article said Ibfx was trying to differentiate itself or taking advantage from Gain capital’s problem after the NFA complaint…and then now we see that GCAP was looking at them as a possible acquisition candidate (but then withdrawn the offer after some disagreements or a possible NFA fine)… and then Monex pulled the trigger and bought it for a relatively good price.
When a VC invests it usually gets preferred shares. Usually they get paid first in case of sale. Then they participate again, after conversion to common stock, proportionally , to the remaining money. Also they usually get 1x liquidation preference, in case the company sells for less then what they put in. Also they usually get interest on the money they invest (5-10%/year) and that gets paid at exit too. And if the company is in trouble like here, they can usually force a sale, and the CEO and the other owners can’t do anything about it. So long story… Read more »
My sources indicate that George is spot on in terms of who will be paid. Todd’s hands were tied and must have cringed through the whole process. but he is doing the right thing by employees and clients.
I think Ibfx and tradestation is an excellent matchup, highly complimentary.
I think what George is saying makes sense, but considering the money is still in the company … theoratically its not possible for Spectrum to take away $41M I think because the money was invested as equity and to the money out of the company they would need to declare dividends. Even if Spectrum has preference shares and I am sure they would ( Typical VC) Todd would still get some dividends. Though Loss making institution giving dividends is another story but lets not get into that. So I guess spectrum gets lets say 2 X the dividends taking home… Read more »
George is probably right in his analysis… and that can be also one of the reasons why BT opted for debt financing 😉 ..however it is very strange the drop in revenues Ibfx experienced from 2009 and the fact that they were not able to return to profitability… the burdens of the new regulations in the U.S (fifo, hedging, leverage etc), the fierce competition from other players in the U.S like Fxcm, Oanda, Gain Capital etc…ok, but it is still very strange… and I think nice “marketing/transparency moves” like this one, http://blogs.wsj.com/marketbeat/2011/11/16/oanda-to-clients-stay-out-of-currency-markets/, can hurt some other US or non-US brokers… Read more »