IB (IBKR) IPO auction

L

lwlee

I just bid for 400 shares at $25 and 500 shares at $20. Personally I think $20 will be too low and would be a great bargain.

At $25, the company is being valued at $10 billion, right out of the door, they're priced very close to their competitors.

What did you bid?
 
how can ib be worth anywere near amtd who has 20 times the assets of ib and 40 times the accounts. i was stunned to see ib only has 80k accounts. thats so few accounts its icnredible. i know the avg ib account has way more assets and tradeds 20 tiems as much but it should be valued at 1/3 amtd or 3 bil max. i really thought ib had at least 500k accounts. i opened a 3rd account last month and the account #'s only 300k pplus which means in the last 7 years ib's only opened 300k plus total accounts and thats including the 150k or so that have been closed or never opened after getting an account #
 
The number of accounts is not that important but I still would like to clarify something.
Quote, "Since launching this business in 1993, we have grown to approximately 80,000 institutional and individual brokerage customers."
So, we are talking about number of customers, not accounts in the prospectus.
 
IB valuation was probably based more on revenues and profits than total number of accounts.

IBKR total 2006 revenue: 1.736 billion
IBKR total 2006 net income: 734 million

AMTD total 2206 revenue: 1.96 billion
AMTD total 2006 net income: 554 million

IB's profit margin and revenue growth seems to be very healthy, better than AMTD.
 
ok so amtd has 3.5 million accounts and at least 2 million customers as few have over 1 account. but ids 80k customers is still extremely small for a a broker as well known as ib. but maybe ib only known in more hard core trading circuit. no question ma and pa with 500k and mutual funds wants a much more well known broker and maybe even wants check cashing. i've been with ib for 6 years and enver a problem but ib's not worth anywere near 10 billion. age edwards which has about the same capital as ib but tons more accounts and assets than ib only has a 5 bil cap
 
According to the prospectus 46% of revenue is TRADING GAINS and 10% from COMMISSIONS (in 2006). So with IB you're not really buying a broker, you're buying a trading company that has a brokerage branch.


Q1
 
I've read a number of articles saying the better brokerages are taking more controlled risk with their own capital to maximize their PnLs. GS comes to mind.

IB has shown their prowess with their marketmaking abilities.

Trading gain as a percentage of total revenue.

2002: total revenue: 599, trading gains: 472, percent: 78%
2003: total revenue: 651, trading gains: 488, percent: 74%
2004: total revenue: 621, trading gains: 423, percent: 68%
2005: total revenue: 1099, trading gains: 640, percent: 58%
2006: total revenue: 1736, trading gains: 805, percent: 46%

It appears IB has become less reliant on their trading to grow revenues. But it also shows that they seem to be very good at it.
 
Quote from joeyata1:

how can ib be worth anywere near amtd who has 20 times the assets of ib and 40 times the accounts. i was stunned to see ib only has 80k accounts. thats so few accounts its icnredible. i know the avg ib account has way more assets and tradeds 20 tiems as much but it should be valued at 1/3 amtd or 3 bil max. i really thought ib had at least 500k accounts. i opened a 3rd account last month and the account #'s only 300k pplus which means in the last 7 years ib's only opened 300k plus total accounts and thats including the 150k or so that have been closed or never opened after getting an account #
More...

I'd say the right way to value IB is to put one value on the brokerage side, another value on the trading side. When you think about it, these two businesses are completely different.

What I would never do is derive a value based on the number of accounts. This is an irrelevant number in my mind. Some brokers do business with a customer who buys mutual funds. Commission derived from that customer is low. Versus another broker (like IB) that doesn't offer mutual funds, but offers services that appeal to active traders. Active traders create a much larger income stream. You would have thought that would be obvious.:D Evidently not.

OldTrader
 
Remember, the shareholders only receive 5% of the company. That's 5% of any earnings. They have to earn a lot to make your share valuable.

If you were to account for the minority interest (see page 15 of prospectus), you will see that if you were one of the lucky 5%, you would have earned $1.21 per share.

Well, if you do calculate the stock price from the P/E ratio in reverse, let's say 15, then 1.21x15= $18.15

Even if you are optimistic about IB's future and you give it a high P/E of 20, then you arrive at $24.20

But look at IB's competitors:

Ameritrade 18.4
Etrade 14.4
Knight securities 12.3
AG Edwards 16.9
Goldman Sachs 10.6 (!!!!!)

So the $23- $27 price range is really rich. You might be better off buying 10 shares of GS for every 100 IBKR.
 
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