Online CFD (Contracts for Difference) broker Plus500 recently announced it had attained the membership interests of both Cunningham Commodities as well as Cunningham Trading Systems. Cunningham Commodities is a regulated FCM (Futures Commission Merchant), while Cunningham Trading Systems, LLC is a platform provider for technology trading.
According to Plus500, the acquisition is expected to bring forth a significant opportunity for leveraging its technology. It represents a step forward in the company’s transition to a global financial technology group with a broad and diversified portfolio. The company’s goal is to access future growth potential through a combination of targeted acquisitions as well as organic investments.
The Acquisition Rationale
The acquisition of Cunningham Commodities represents a significant opportunity for growth in the United States. Plus500 will instantly enlarge its geographic footprint in what is seen as a region promising substantial growth, but, as yet, unpenetrated retail trading market in futures as well as options on futures.
The acquisition is expected to ensure access and licenses guaranteeing a base of operations in a growing market, a market yet to be served by Plus500. Other expectations include:
- Opportunity to leverage its technology, providing market access to the massive base of retail investors looking for new opportunities.
- Expand the product offering of Plus500 in the United States market, allowing the company to diversify its sources of revenue.
- The acquisition represents a large step in Plus500’s shift towards being a multiple asset fintech group on a global scale.
- Alignment with the group strategy of developing future growth via organic investment and targeted “bolt-on” acquisitions.
Plus500 has considerable technological and financial strength that it will employ, as well as marketing expertise and resources. The objective is to deliver long-term shareholder value as it develops the acquisitions.
The cost of the acquisition is approximately US $30 million. The funding will come from existing cash balances. The monies will be paid on completion and are subject to certain adjustments. A portion of the acquisition cost will be maintained in escrow for two years from the completion of the acquisition.
Cunningham, during the year ending December 32, 2020, generated gross revenue of approx. US $19 million, PBT (profit before tax) of approx. $600,000 along with assets of US$ 70 million. The acquisition brings with it a license to operate U.S. futures and options on futures market.
During the current pandemic, Plus500 has performed very well with a surge in users. The platform reported levels of usage unprecedented in the past. Customer trades grew from 35 million in 2019 to 82 million in 2020.
Long-Standing Track Record
Cunningham is based in Illinois and is registered as an FCM with the Commodities Futures Trading Commission. Cunningham is also a member of NFA (National Futures Association) as well as a clearing member of the Chicago Board of Trade.
The company has a long track record in the futures and options markets in the U.S., which includes, amongst others, strong client relationships with the CME (Chicago Mercantile Exchange, Eurex, and ICE, the International Exchange.
On the other hand, CTS is a company that has developed and operates a highly sophisticated tech platform that is recognized by leading futures exchanges. CTS supports Cunningham and other FCMs, helping to assist their clients as they trade futures and options on futures contracts.
Both Cunningham and CTS are under the guidance of experienced management teams. The teams, led by the founders, will continue to guide the businesses upon completion of the acquisition.
Plus550’s Technology to be Leveraged
The planned integration of Cunningham and CTS into Plus500 will leverage several elements of Plus 500’s technology. The objective is to enable future growth and development of the business over the long term.
The market for futures and options on futures represents a significant opportunity for growth for Plus500. This is especially true as a result of an increase in focus on futures exchanges. There has been an 84 percent growth in retail trading volume since 2017. The retail market is estimated to be worth approximately US$ 2 billion globally.
The retail investor base in the United States is expanding. Investments from equity markets are driving growth in the futures and options on futures market. The market, which today is predominantly driven by institutional investors, is seeing an increase in retail investor interest.
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