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Interactive Brokers Group, Inc. Message Board

  • ewii27 ewii27 Mar 20, 2008 10:40 AM Flag

    Future for IB not good, read

    Simple - the death of the hedge fund. Leverage is being forcibly taken down. 20, 30, 40:1 is no longer acceptable to the prime brokers that fund these Hedgies. They're being told to cut back to 4:1 or less. This is a serious problem because with the 2 and 20 compensation system they use there is no reason for them to exist unless they can gear up 20:1 or more - their return to the client will approach that of Treasuries!

    If this keeps up, and I believe it will, there will be effectively no hedge funds in a year or two - there will be no way for them to make money any more. This is a major problem for equities because at least half of all volume in fact comes from these institutions and its even worse in commodities!

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    • When will they report? That's a very good question. Maybe when they get their story together?

      When I looked up IBKR using web sites that have such data, I was still unaware of the big loss that became the "claim" because making it a claim and transferring it through a related party transaction means that it is not subtracted from reported EPS. One might easily be deceived.

      There is this same problem with the ownership structure. In a simple lookup, on Yahoo Finance for example, one might easily be deceived and assume that the stock holders of IBKR own 100% of the broker known as Interactive Brokers, LLC. Without digging deeper, and in other places, (not my job - other people do that) one might not realize that the IBKR shareholders only own 10% of the broker business.

      You may consider the big loss as a claim, but in my opinion it is a big loss, not a claim or an asset.

      This confusion might just be an amazing coincidence, but I just don't believe in coincidences. I simply assume there is a reason for things. I would begin my search by following the money. If this were intentional deception, who would be likely to benefit?

      Whatever you thin IBKR is worth, divide by 10.

    • Thanks for your answer again, dottiewest

      Regarding what you have writen let me tell you what i think ( and sorry my mistakes in english ) :

      1 - "Not to mention what will happen if there should be a major news story regarding what went wrong at IB. Suppose there were a major, in depth news story in print, or on TV, or a book or film."

      Well, it could happend, but that is more a speculation that a fact, don´t you agree?

      2 -" It's a cover up of this one loss. It is not reflected in the publicly reported earnings. Since it was removed from the reported numbers, it is not priced in to IBKR. That is the whole point. The idea of this incident, and the structure in general is to keep the stock trading at an artificially high price for when the CEO sells more of the company into the publicly traded IBKR. If you were him, you would prefer to get $40 a share rather than $1.60.Letting you know that 100% of the shares of IBKR equals only 10% ownership of Interactive Brokers, LLC would not server his purpose either."

      If the loss is real and if is not allready reflected in the publicly reported earnings, you are right in this mather. That´s ok, i must admit. But i can not say if it is allready reflected or not. I realy can´t.
      The point where i agree the most with you is about the EPS. It´s completly different to have one specific profit that you must divide for 40 million shares or to divide the same profit by the double of shares. But the question that i present to you is this : When the analyst stablish the estimated EPS for the future quarters, they have allready counted with the duplication of the amount of shares after May or not ? Because i supose that everybody allready knows for long time ago that the company is gonna introduce more shares in the capital market next May, dont they ? In this particular case, the analysts divide the earnings for 40 million ( 10% ) or for 400 million ( 100% ), when they estimate the EPS ? It´s just that that mathers, i think.

      4 - And finishing, can you tell me the day that IBKR will present it´s results of 1Q2008, please ? I thank you a lot if you do so.

      P.S. - I am more concerned about the liquidity of IBKR that the price of the share, because i am not long either short. I have no shares of the company.

    • "No hedge funds in a year or two"? Ha. This is the fastest growing segment of financial services. If that is your criteria for shorting IB you better just go ahead and cover cause you don't know your elbow from your asshole. What a joker.

    • Ur post raises a major issue in the industry.
      What's sad is that a serious company as IB will pay for the unresponsible and devastating actings of hedge-funds who thought they are the master of the world.
      I share ur view this mess is long not finished!
      I think one year from now,the finance industry will look much different!

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