Sunday, 8 November 2015

ITG - good recovery

The earnings call, capital management, and spin from ITG has been working well. The share price settled on Friday at $20.60 which is 63% up from the recent low.

Google finance link
The spin has been a little over the top on the so-called recovery, but that represents good work from ITG as it is their job to do exactly that.

POSIT numbers from the Finra stats, two weeks delayed, have not really recovered. Quite a bit of their loss of market share has been masked by dramatically higher market volumes across the industry assisting the revenue side of the equation. ITG mentioned on the call that the second half of October saw improvement which is not in the Finra stats yet.

We don't know if they have stopped their prop trading of US/CAD interlisted stocks as they simply stopped mentioning it, or breaking it out, in their reporting a couple of quarters ago. You'd be hoping there was no-mingling of their prop trading with their new interlisted stock service they've recently started marketing ;-)

The energy research sale was a good result. Obviously earnings going forward will be affected but they need the cash. As was pointed out on the call, the other research would be a neg profit line so it remains to be seen how that will be managed.

There remains uncertainty from the business with respect to legals with two class actions and various staff/ex-staff legal issues. This was the quote from the call,
"In connection with the SEC settlement, two shareholder lawsuits have been filed against ITG and certain current and former executives seeking unspecified damages. Separately, ITG's former CEO has filed a demand for arbitration claiming that his termination for cause represents a breach of his employment contract. This arbitration demand seeks an award of damages in equity totally approximately $8 million plus an additional $5 million in punitive damages. The Company intends to defend itself vigorously in all of these matters and we have not set aside any reserves in connection with these matters."
That Gasser remains on the board whilst suing the company is an interesting legal conundrum.

There are a lot of good staff at ITG so the recovery is good news for those deserving staff. However, how the board members responsible for authorising the SEC prop trading fiasco remain raises questions. It seems it is OK to mislead and defraud your customers as the obvious apathy in ITG's case means they don't mind too much.