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Interactive Brokers Group, Inc. Message Board

  • franksteiner51 franksteiner51 Mar 30, 2008 4:15 PM Flag

    THE IBKR SHUFFLE

    THE IBKR SHUFFLE

    Over the course of the nearly 11 months that IBKR has traded publicly, this writer has observed a very clever fraud on the part of IBKR, and the gullibility of the investing poublic with regard to it. That fraud concerns the "minority interest" that receives 90% of IBKR income after taxes. An example of the public's gullibility concerning IBKR stock is shown in this text taken from an IBKR-oriented message board:

    "The "minority interest" line represents the money that the founder will cash in his pocket."

    Actually, as any sophomore accounting student knows, it is illegal for any member of a "minority interest" to be a majority common shareholder (as the founder of IBKR currently is). It also would be highly improper for such an individual to be an officer or board member (as they could vote themselves more money).

    Attempting to justify his incorrect understanding of the economic structure of IBKR, that misinformed trader posted two eleven month old quotes from IBKR Edgar filings:

    "Minority interest reflecting IBG Holdings LLC's ownership of approximately 90% of the IBG LLC membership interests outstanding immediately after the IPO"

    and this one...

    "The Exchange Agreement also provides for future redemptions of member interests and for the purchase of member interests in IBG LLC by IBG, Inc. from IBG Holdings LLC, which is expected to result in IBG, Inc. acquiring the remaining member interests in IBG LLC that it does not own. On an annual basis, holders of IBG Holdings LLC member interests will be able to request redemption of such member interests over an eight (8) year period following the initial public offering..."

    Clever, clever. Actually, there is nothing in the quoted Edgar filings (or any other filing by IBKR) that says that the minority interest will ever stop receiving 90% of income after taxes. In addition, there is nothing in an "exchange agreement" that "provides for future redemptions" and is "EXPECTED to result..." that forces the minority interest to give up their 90% in exchange for shares, which given that they are falling would be completely stupid. If the minority interest says "no, I don't want falling stock in exchange for real money," then no exchanges will occur, even if they were ever "EXPECTED" to occur.

    The reality here is that someone other than the founder of IBKR is receiving 90% of IBKR income after taxes. Further, the identity of that individual has never been revealed by IBKR in any filing. That this is an intentional fraud on the part of IBKR is illustrated at this page on the firm's own website:

    http://individuals.interactivebrokers.com/en/general/about/about.php?ib_entity=llc

    On that page, IBKR claims that "public stockholders" receive "100% of economic interest." THAT IS IMPOSSIBLE! The minority interest receives 90% of income after taxes, said payout occurring before the accounting of net income to the common shareholder. Open and shut fraud.

    To those who are long common shares of IBKR, or planning to bid for more in the next round of issuance, I have this to say: PT Barnum would point out that nobody ever went broke underestimating your intelligence either.

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