Interactive Investor is considering an IPO in the near future according to sources quoted by Sky News, The Evening Standard and the Daily Mail.
Interactive Investor is backed by US Private Equity firm JC Flowers and has grown organically and through acquisition, in recent years though it has also sold divisions that it felt no longer matched the business model. It made two disposals in 2019 for example. It made its most recent acquisition, the £48.50 million purchase of EQi, the direct-to-consumer business of Equiniti in March 2021.
How much will Interactive Investor be valued at when it IPOs?
The popular retail investment platform could fetch a valuation of £2.0 billion or more
That compares with the 7.0 billion market cap of rivals Hargreaves Lansdown and the £1.75 billion valuations attached to AJ Bell, the other major player in the space.
According to the firm’s website, Interactive investor has almost £55.0 billion of assets under administration (AUA) and more than 400,000 customers.
II differentiates itself from its rivals by charging a monthly membership or subscription fee to its clients, much of which it then rebates back to them in the form of free trade or commission credit.
City Investors may prefer that model as the firm’s income is not directly related to client activity as is the case in more traditional brokerage models, although both Hargreaves Lansdown and AJ bell enjoyed significant first-day trading premiums to their IPO prices.
When will the Interactive Investor IPO be?
Any IPO is thought unlikely to go ahead before 2022
Interactive Investors reported a rise in revenues of 19% in 2021 compared to those seen in 2020 with turnover reaching £76.10 million the firm captured just under 32, 000 new customers in the first half of the year. Despite its Private Equity ownership Interactive Investors carries no debt and has been fully funded through equity investment only.
CEO of the firm Richard Wilson has (alongside his peers at Hargreaves Lansdown and AJ Bell) lobbied for greater retail client participation in IPOs and if a floatation is to go ahead, then it seems likely that the firm’s customers would get the opportunity to invest in the business. Which at the £2.0 billion figure, will be floating at a valuation that’s less than 5.0% of the firm’s AUA.
The question for prospective IPO investors might be how can II add further value?
Unlike many of its rivals, II does not offer an advisory fund management service and it has no exposure to the world of cryptocurrencies either, both of which could present future opportunities for growth. AJ Bell currently trades on a PE of 37 times earnings, whilst Hargreaves Lansdown trades on 23.60 times, having disappointed the markets in its most recent set of figures, its shares are down by -9.50% over the last month as result.
Darren is a veteran of the financial markets with almost 36 years of experience under his belt. He has worked in trading, sales, analytical, and research roles, he has been a regular guest & commentator on financial television channels and publications. During his career, Darren has been fortunate to act for and advise major hedge funds and investment banks as well as HNWI. Darren analyses the markets using a blend of technical and fundamental analysis