IBKR - Interactive Brokers

[KJP]

Thanks. I will try to clarify with IR. It is important to know whether these corporate level expenses are variable (e.g. taxes) or fixed (public company expenses).

Any luck with IR?

[KCLarkin]

Any luck with IR?

No.

[Jurgis]

The amount of stupidity on IB website defies all expectations.

If I could get rid of my IB account, I would immediately.

Who are the idiots who programmed it and why are they still employed.

How does this company survive.

FU********************************************K!

There.

[Spekulatius]

The amount of stupidity on IB website defies all expectations.

If I could get rid of my IB account, I would immediately.

Who are the idiots who programmed it and why are they still employed.

How does this company survive.

FU********************************************K!

What is the issue with IB's website. I don't use it much except at tax time. The standalone apps for the Windows and the ipad are pretty good.

There.

[Jurgis]

What is the issue with IB's website. I don't use it much except at tax time. The standalone apps for the Windows and the ipad are pretty good.

Yeah, tax time.

They don't fcking import to Turbo Tax Online. OK, I knew this already. Sucks.

So they want me to enter tax country and tax country ID. I click on ?-mark icon to see what they want. Instead of opening an explanation popup, this opens a new page that advertises their mobile apps. With no way to close the page. With no back button. With no information even remotely related to what I clicked. I had to close everything relogin and then avoid clicking anything looking even remotely like question mark.

Then I go to their message inbox. It's a fcking internal message inbox. And the message in it says:

Dear IB Customer,

Form 1099 for tax year 2015 is now available for account XXXXXXX. To view your tax form, please login to Account Management:

<login url>

This is in an internal IB message inbox. What are they thinking? That I somehow accessed this message without logging into Account Management? Why give a login URL instead of giving URL to tax form? Who wrote this?


And BTW, this is not the first and not the last time IB website does things that make no sense whatsoever.

[Hielko]

Yes, you can access that message without logging in account management. You can also get those messages emailed depending on your communication preferences.

[Tim Eriksen]

Is part of the issue that common stockholders to not get attributed net income that is proportional to their ownership interest in IBG LLC?  For example, common shareholders have a 15.7% interest in IBG LLC and EPS is calculated based on that number of shares, but they were attributed only 11.8% of net income in 2015 (49/415). 

That is why your adjusted EPS number more than doubles even though your adjusted income number does not.

Yes, that makes a big difference. Thanks. It is not immediately clear why the economic interest and the net income attribution are so different. Presumably, this is because the common shareholders are responsible for more tax? But I can't find an explicit disclosure on this attribution. Actually, I can and it contradicts the income statement:

"Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for 2014 was approximately 14.0% and similarly, outstanding shares of our common stock represent approximately 14.5% of the outstanding membership interests of IBG LLC." 2014 annual report.

But this isn't true. Only 10% of Net Income is attributed to common shareholders.

--
I have asked IR for clarification.

I think there are more moving parts here than most realize.  It looks to me like the pretax number is for IBG LLC as a whole.  But some of the costs are only attributable to IBKR as a public company.  Only IBKR bears those costs (thus they earn less than their ownership % of the reported pre-tax number).  The income tax line appears to include some foreign taxes for IBG LLC but mainly income taxes for IBKR (but not IBG LLC). 

I still don't see an attractive valuation on a fully diluted basis.

[Libs]

Is part of the issue that common stockholders to not get attributed net income that is proportional to their ownership interest in IBG LLC?  For example, common shareholders have a 15.7% interest in IBG LLC and EPS is calculated based on that number of shares, but they were attributed only 11.8% of net income in 2015 (49/415). 

That is why your adjusted EPS number more than doubles even though your adjusted income number does not.

Yes, that makes a big difference. Thanks. It is not immediately clear why the economic interest and the net income attribution are so different. Presumably, this is because the common shareholders are responsible for more tax? But I can't find an explicit disclosure on this attribution. Actually, I can and it contradicts the income statement:

"Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for 2014 was approximately 14.0% and similarly, outstanding shares of our common stock represent approximately 14.5% of the outstanding membership interests of IBG LLC." 2014 annual report.

But this isn't true. Only 10% of Net Income is attributed to common shareholders.

--
I have asked IR for clarification.

I think there are more moving parts here than most realize.  It looks to me like the pretax number is for IBG LLC as a whole.  But some of the costs are only attributable to IBKR as a public company.  Only IBKR bears those costs (thus they earn less than their ownership % of the reported pre-tax number).  The income tax line appears to include some foreign taxes for IBG LLC but mainly income taxes for IBKR (but not IBG LLC). 

I still don't see an attractive valuation on a fully diluted basis.

I don't either, as much as I love this idea. If I take Q1 and take out the "other income" line - which is currency related - I get close to $200MM pre-tax profit in total. But the common, as noted, seems to be getting 10.6% of that. That leaves us with $21MM net. There are 65MM diluted shares O/S, or .32 for the common.

Multiply that by 4 and you get $1.28 run - rate
Current price $37 / $1.28 = 29X.

What am I missing?

[kab60]

Is part of the issue that common stockholders to not get attributed net income that is proportional to their ownership interest in IBG LLC?  For example, common shareholders have a 15.7% interest in IBG LLC and EPS is calculated based on that number of shares, but they were attributed only 11.8% of net income in 2015 (49/415). 

That is why your adjusted EPS number more than doubles even though your adjusted income number does not.

Yes, that makes a big difference. Thanks. It is not immediately clear why the economic interest and the net income attribution are so different. Presumably, this is because the common shareholders are responsible for more tax? But I can't find an explicit disclosure on this attribution. Actually, I can and it contradicts the income statement:

"Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for 2014 was approximately 14.0% and similarly, outstanding shares of our common stock represent approximately 14.5% of the outstanding membership interests of IBG LLC." 2014 annual report.

But this isn't true. Only 10% of Net Income is attributed to common shareholders.

--
I have asked IR for clarification.

I think there are more moving parts here than most realize.  It looks to me like the pretax number is for IBG LLC as a whole.  But some of the costs are only attributable to IBKR as a public company.  Only IBKR bears those costs (thus they earn less than their ownership % of the reported pre-tax number).  The income tax line appears to include some foreign taxes for IBG LLC but mainly income taxes for IBKR (but not IBG LLC). 

I still don't see an attractive valuation on a fully diluted basis.

I don't either, as much as I love this idea. If I take Q1 and take out the "other income" line - which is currency related - I get close to $200MM pre-tax profit in total. But the common, as noted, seems to be getting 10.6% of that. That leaves us with $21MM net. There are 65MM diluted shares O/S, or .32 for the common.

Multiply that by 4 and you get $1.28 run - rate
Current price $37 / $1.28 = 29X.

What am I missing?

I don't think you're missing anything. But they're growing accounts +15% y/o/y, accounts are sticky and they could easily sacrifice some growth for increased profitability. No position but I was very close at buying @ 30. And am still considering.

[Liberty]

Another thing to keep in mind is that a rise in interest rates would help them. From the most recent call:

based on current balances, we estimate that a general rise in overnight interest rates of another 25 basis points would produce an additional $48 million in net interest income annually. Further increases in rates would produce smaller gains, because the interest we pay to our customers is pegged to benchmark rates, less a narrow spread.