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IBKR - Interactive Brokers


given2invest

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  • 1 month later...
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Wow just saw the Peterffy 10b5-1 plan.  Looks like will be selling ~8% of ADV (30 day) for longer than any of us will be alive.  I'm gonna go out on a limb and guess this creates a ceiling on the shares...

 

Yeah, I read this in Barron's:

 

"There is a lot of talk about this. People do not want to believe that I am not contemplating selling shares," he wrote in an email. "It occurs to me that if I create a plan to sell 20,000 shares every business day for the next 60 years or so, the issue will go away. So that is what I will do."

 

His logic made very little sense to me.  ::)

 

Edit: BTW, this is the guy who said something like this in the proxy or annual: "If you're not customer of IB, you should sell your shares to people who appreciate this company ...". Pot kettle?  ::)

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Naw you're missing the point.

 

This increases the float which has long been a overhang on the company. He owns something like 75% of shares outstanding. The guy is gonna die he is not calling pots certain colors like you infer, this is just part of his succession planning.

 

Seems likely this gets taken over in the next decade, and even if it doesn't its a wonderful business at a fair price.

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It will create extra supply, but also creates more certainty around his intentions. That should reduce overhang on the stock a bit, or at least provide certainty around how much he is selling.

 

One thought - will the extra free float/liquidity eventually qualify them for any indices they aren't in right now? That could add meaningful share demand at some point if it's the case (on phone on vacation, can't really research...)

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I suppose it clarifies his intentions (vs. what exactly?), but it also is a slight "overhang" in a forced seller in the market every day for the next SIXTY years.  I don't blame him, but it is definitely a wild card in owning the shares going forward.

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  • 3 weeks later...
  • 1 month later...

I looked at some brokers 10-k (IBKR, SCHW) and it’s clear that the recent revenue and earnings gains are mostly due to increased interest income, due to the short term interest rates going higher than zero essentially. I am wondering however, if this tailwind has worked it way already. I am somewhat concerned that we have seen close to the high in interest rates and may eventually going back to zero with the next recession. That would cut IBKR‘s ‘s earnings by half and SCHW would be reduced even more so.

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I think that's a real possibility. And I think it's a real possibility that rates in the USA will turn negative like in Europa if/when there's a new recession which would obviously be bad for these guys. Now, that might or might not happen (or it might take long to play out), and in the meantime IBKR should continue to grow accounts meaningfully. IBKR was my second largest position but I sold out last week (to bridge a funding gap as I'm buying a car as well as a vacation home - negative rates hell yeah!). Anyway, when my financing is in place (I'm actually getting paid 0,2% to borrow - crazy world) I'm not sure whether or not I'll actually plow my funds into IBKR. 10 years into a bull market I think I might like some of my other bets more.

 

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kab, how did you pull off getting paid to borrow?

Welcome to Europe (Denmark) and ZIRP. There's basically (like very basic) two types of real estate loans here (both recourse).

 

At the moment you can either get a loan with a fixed interest at 1,5 pct. for 30 years, or you can take out a loan with variable interest rates (there's different types that reset every year, every third year or every fifth).

 

Since our family is not very sensitive to interest rates (low LTV), and since I expect rates to stay lower for longer, we opted for a loan with variable interest rates (that resets twice a year).

 

It's actually negative atm (like -0,2 pct. I believe) so we get paid a bit to borrow (in reality we pay a tiny amount to the bank that services the loan, so after tax we probably pay around 0,2 pct. or something like that). Basically peanuts. (if there's further questions just drop me a message so we don't clutter this thread).

 

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Wow. I (somewhat) understand negative yields on sovereigns, but negative rate individual mortgage is mind-blowing.  I honestly had to sit here for a second and process that.

 

IB is in interesting spot.  The risk of declining US rates is very real (and scary for IBKR) at some point in the future, but accounts are growing like a weed, TAM is massive and the company seems to be smartly iterating its offering based on feedback from clients/investors.

 

How are others thinking about handicapping the rate risk?

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  • 3 weeks later...

Who knows which security the margin loss of $42m relates to?

https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR

 

As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had

taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans

against the security at a conservatively high collateral requirement. In December 2018, within a very short

timeframe, this security lost a substantial amount of its value. The customer accounts were well margined

and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current

quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts

to liquidate the customers’ positions. For the quarter ended March 31, 2019, we have recognized an

aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend

upon market conditions and the outcome of the our debt collection efforts.

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Who knows which security the margin loss of $42m relates to?

https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR

 

As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had

taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans

against the security at a conservatively high collateral requirement. In December 2018, within a very short

timeframe, this security lost a substantial amount of its value. The customer accounts were well margined

and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current

quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts

to liquidate the customers’ positions. For the quarter ended March 31, 2019, we have recognized an

aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend

upon market conditions and the outcome of the our debt collection efforts.

 

DVA? ;)

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I guess another client of IBKR is ruined.

 

I think about 15 years ago, I lost my entire savings trading stocks at IBKR. I have never opened account there again. The whole platform/GUI/cheap margins is designed so clients will trade as frequently as possible. It’s very tempting and addictive.  It’s almost evil.

Not buying it’s stock too (but it was a mistake)

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Guest roark33

I bet it was Apple, given the large decline in Apple in December, but I am just guessing. 

 

 

Who knows which security the margin loss of $42m relates to?

https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR

 

As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had

taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans

against the security at a conservatively high collateral requirement. In December 2018, within a very short

timeframe, this security lost a substantial amount of its value. The customer accounts were well margined

and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current

quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts

to liquidate the customers’ positions. For the quarter ended March 31, 2019, we have recognized an

aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend

upon market conditions and the outcome of the our debt collection efforts.

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I bet it was Apple, given the large decline in Apple in December, but I am just guessing. 

 

 

Who knows which security the margin loss of $42m relates to?

https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR

 

As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had

taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans

against the security at a conservatively high collateral requirement. In December 2018, within a very short

timeframe, this security lost a substantial amount of its value. The customer accounts were well margined

and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current

quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts

to liquidate the customers’ positions. For the quarter ended March 31, 2019, we have recognized an

aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend

upon market conditions and the outcome of the our debt collection efforts.

 

It should be some stocks that gaped down/up, so broker couldn’t liquidate immediately.

 

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yes, exactly.  it's not Apple, lol. 

 

and it had to be a pretty large company for them to have lost $40+M because:

 

1) that's only the amount lost by IB customers that cost IB to lose $40M after their accounts went to 0!

2) assume IB customers didn't own more than a few percent of the company

 

the whole thing is very odd.  it reads like IB is still long (or short?) the stock!  why didn't they finish liquidating the position yet???  it all makes no sense.

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yes, exactly.  it's not Apple, lol. 

 

and it had to be a pretty large company for them to have lost $40+M because:

 

1) that's only the amount lost by IB customers that cost IB to lose $40M after their accounts went to 0!

2) assume IB customers didn't own more than a few percent of the company

 

the whole thing is very odd.  it reads like IB is still long (or short?) the stock!  why didn't they finish liquidating the position yet???  it all makes no sense.

 

Would indicate low or no liquidity. Not clear how this was marginable, but I'm not an expert on marginability at IBKR.

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yes, exactly.  it's not Apple, lol. 

 

and it had to be a pretty large company for them to have lost $40+M because:

 

1) that's only the amount lost by IB customers that cost IB to lose $40M after their accounts went to 0!

2) assume IB customers didn't own more than a few percent of the company

 

the whole thing is very odd.  it reads like IB is still long (or short?) the stock!  why didn't they finish liquidating the position yet???  it all makes no sense.

 

Would indicate low or no liquidity. Not clear how this was marginable, but I'm not an expert on marginability at IBKR.

 

They are really tough on margin.  First, anything sub 250m market cap not marginable.  Many under 500m.  All biotech under 5b not marginable. 

 

So yah, they got fooled somehow by a mid cap that was illiquid and imploded.  That's why I'm so interested in knowing what it is.  And how many clients caused the 40m in losses. 

 

EDIT:

Rereading this is INSANE

 

" In December 2018, within a very short

timeframe, this security lost a substantial amount of its value. The customer accounts were well margined

and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current

quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts

to liquidate the customers’ positions."

 

At 12/31, the customers still had positive equity!  The losses to IB all happened in Q1 and they STILL are long the damn stock!!!!  It has to be super illiquid, very good catch.

 

2nd EDIT:

 

That's why they won't tell us the security!  They still long it!  If we knew, people could pressure the stock knowing IB is long it and doesn't want to be and will sell at any liquidity event!

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I don't have a BB terminal, somebody should make a simple screener: biggest losers since December on low volume with a starting mcap > 300m or something. Fascinating indeed. It's 1000% not Apple .. They can liquidate any position in a day there. Probably something like a China / cannabis / resources related mid-cap.

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