CINN - Cinnober Financial Technology

[NewbieD]

With all the cryptomania going on this one could be an alternative to investing in financial technology innovation from within existing structures.

 

Market cap is around $250m.

 

The company's legacy product is providing the backbone system to exchanges. Customers include leading players such as NYSE, LME, London Stock Exchange and also a large number of smaller exchanges such as Australian Stock Exchange

 

A few years ago an opportunity was identified in real time clearing for clearinghouses. Developing this is where most of the development resources and costs go. Sold like this

 

"Cross-asset real-time clearing means your clearinghouse can offer competitive and capital-efficient services. The ability to cross margin and net offset client positions reduces collateral requirements, while settlement processes are unified for more efficient cash management.

 

Risk is monitored and managed in real time using multiple algorithms for margin calculation and collateral valuation. This enables intraday margin calls to manage exceeded risk limits instantly."

 

In addition they seem to have the leading product for MIFID II reporting in Europe, which gained 538 customers (most of them probably small banks, fund companies etc) during 2017.

 

I think one reason alone to look at this is they started talking about blockchain technology already in 2015.

 

The guy who founded the company in 1998 is still employed as a dedicated techie with a sizable stock holding.

 

The long contracts and technology buy-in of the customers seem attractive from a pricing power perspective. My back-of-the envelope says that the legacy exchange customers and known MIFID II reporting likely can defend a large part of the current market cap. And the real time clearing offering will be very valueable if the company can realize it's vision.

 

I have a smallish, 2%, starter position in this.

[NewbieD]

This has been a black sheep in my portfolio but today Nasdaq made a somewhat lowball offer to buy this company. Could be interesting to look at for those interested in merger arb type things. It's trading 6% above the offer, keeping my shares for now..