A warning that an acquisition completed only in March would produce revenues at the lower end of the expected range sent shares in TP Icap sharply lower yesterday.
The FTSE 250 specialist broker, which matches institutional buyers and sellers of complex financial products, said that revenues from Liquidnet, which manages electronic trading venues known as dark pools, would be at the low end of the £160 million to £180 million range it had suggested previously.
It blamed “lower equity market volumes globally during October” for the setback, which more than offset a booming quarter for the group’s energy and commodity trading desk.
Investors reacted badly, sending shares in TP Icap down 17¼p, or 10.9 per cent, to 140p. The stock has plunged from a high of more than 260p in March, when the business halved the dividend, partly because of a drop in the market volatility on which the company thrives.
As an interdealer broker, TP acts as the middleman between investment banks and other financial institutions, matching buyers with sellers of derivatives linked to interest rates and currencies. It was created in its present form out of the 2016 merger of Tullett Prebon with the voice-broking business of Icap.
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It reported revenue growth in all divisions in the three months to September and an improvement in October, thanks to a pick-up in volatility. Energy and commodities trading was particularly strong, it said.
TP Icap paid $525 million plus a possible earnout payment for Liquidnet in March in a deal that gave it more exposure to digital, as distinct from voice, trading, as well as the chance to cross-sell more services to Liquidnet’s clients of more than 1,000 asset managers.
Liquidnet, based in New York, enables institutional investors to trade large blocks of stocks anonymously and so prevent prices moving against them. In the three months to September, it made revenues of £51 million.
“TP Icap capitalised on improved operating conditions during the third quarter compared with the same period last year, due to increased volatility and higher secondary trading volumes,” Nicolas Breteau, 53, chief executive, said.
Excluding Liquidnet, he expected revenues for the full year to December to be broadly at the same level as 2020, when it made £1.8 billion. Analysts have pencilled in profits before interest and tax of £244 million this year.
