Valuing Interactive Brokers IPO

Quote from scriabinop23:

the question is how do i get in on this auction? what brokers will let me get the action..

(IB, nah I assume).
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IPO Underwriters

E*Trade Securities Co Manager
WR Hambrecht Lead Manager
 
Quote from just21:

Can someone, who can read a balance sheet, work out the market making net income from the prospectus? We can then add $7.6 bilion valuation of the broking business to the value of the market making business and use Knight Capital, which trades on a trailing pe of 12.01, net income of $150.2 million, market cap of $1.83 billion as a benchmark.
http://finance.yahoo.com/q/ks?s=NITE
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Why would use Knight as a point of comparison?

Market Cap < 1 billion...
And shares that went from $75 to $3 only a few years ago.
Which is total mismanagement on top of a shaky business model.

IB is still very much a growth firm...
And their management and strict business model is the anti-thesis of NITE.

IB has a culture that verges on Cult Religion...
Something you can only build from scratch over a long period of time.

IB is actually unique... not unlike GOOG...
And it's PE will be unique.
 
But can the market making in options make as much as they move to penny pricing and hedge funds (carlin) enter the business?
 
Quote from just21:

...
IB 77,000 customers make 124 trades a quarter at an an average of $4.49 equals $42,870,520
Schwab 676100 customers trade twice a quater for an average of $12.89 equals $174,289,580.
...
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I suggest you check your math. I am surprised noone else did. Recompute your quarterly revenue figure for Schwab. You used this figure to support the rest of your post.

-Raystonn
 
Quote from just21:

On page 53 of the prospectus they break down net income from market making and brokerage.

So in 2005 they made $505 million from market making, multiply by Knight Capitals PE of 12 equals $6060 billion. Add to this The brokerage net income of $59 million multiplied by the trailing PE of Schwab 24.97 and you get a value of $1473 billion.

This gives a 2005 market cap of $7523 billion.

Using the 2006 figures for the first 9 months and assuming growth continues in the fourth quarter at the same rate as the rest of 2006 gives us $696 million for market making and $102 million for brokerage. Multiply $696 million by 12 trailling PE of Nite equals $8.352 billion. Multiply $102 million by trailling PE of schwab equals $2.547 billion. Add them together and remember we are assuming that the 4th quarter is a s good as the other three quartes of 2006 gives us a market cap for IB of $10.899 billion.




So if you can buy shares of IB in the IPO at $10 billion valuation you may make 8.99% on your investment.
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6.060 billion not 6060 billion
1.473 billion not 1473 billion.

total = 7.533 billion for 2005
 
Everything old is new again: At the Hambrecht login page

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Quote from just21:

But can the market making in options make as much as they move to penny pricing and hedge funds (carlin) enter the business?
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Markets change all the time.

Look what happened to NITE with decimalization.
Specialist firms are all down 80-90% in spite of owning all that NYX stock.

IB, meanwhile, has been almost completely unaffected by industry changes.

The thing about IB...
And what makes them similar to GOOG...
Is that they have a unique, ** lowest cost ** infrastructure.

IB can provide almost any service cheaper than anyone else...
Just like GOOG can provide any service cheaper than anyone else.

If you are not an engineer...
This cannot be explained adequately in layman's terms.

What gives IB and GOOG a big competitive advantage... is that this:

You cannot "evolve" your culture and infrastructure to be like IB or GOOG...
You have to build a company like this from scratch.

Old line companies try to evolve towards the "leading edge" ** all the time **...
But they usually fail because the "leading edge" keeps moving faster than they can modernize.
 
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