TD Ameritrade to buy Thinkorswim for $606 million!!!!!!
NEW YORK (MarketWatch) -- TD Ameritrade Holding said Thursday that it will acquire
online brokerage firm Thinkorswim Group for more than $600 million in a deal that
combines the online industry leaders in retail stock and stock-option trading.
TD Ameritrade leads the industry in the number of stock trades placed each day,
while Thinkorswim is the industry leader in retail options trades, the companies
said.
Ameritrade shares fell 2.1%, and Thinkorswim shares soared 45%.
The acquisition of Thinkorswim at a substantial price reflects the growing
importance of options in the online brokerage world, Celent analyst Robert Ellis said
Thursday.
"Options are currently the most profitable part of the online brokerage world, and
dedicated firms like OptionsXpress and Thinkorswim have been doing well even through
the markets' declines," Ellis said. "Options clients trade more, therefore adding
more revenue to the brokerage firm."
Ameritrade Chief Executive Officer Fred Tomczyk said in an interview with
MarketWatch that the firm had been looking at Thinkorswim for a couple of years, but
only now were factors right to make a deal.
"They have a much more advanced options trading platform, with things such as
multi-legging, that our active traders have been asking for," Tomczyk said. "We think
we're now the best front-end trading platform in the country."
The deal, which puts a substantial premium on Thinkorswim, highlights the growing
sophistication of retail traders and the skyrocketing demand for options among retail
investors.
Options, which are one of the simplest forms of derivatives, allow investors to
acquire the right to buy or sell shares of stock at a set price and time in the
future.
Options allow investors to buy a form of insurance on stock holding they already
own. They also can provide investors who sell them an income stream in the form of
premiums.
The current volatility in the markets also has heightened investor interest, as it
has raised the profitability of some options strategies.
Ellis said Thinkorswim, with about 94,000 clients and $2.9 billion in client assets,
has clients who trade, on average, 450 times a year. He said that drives about 60%
of Thinkorswim's revenue.
"Each trade runs between $10 and $20 per leg, and the typical options trade has 3
legs in the chain," he said.
In a related action, rating agency Standard & Poor's said that its
'BB/Positive/--' counterparty credit rating on TD Ameritrade will not be affected by
the acquisition.
"We believe the acquisition will be neutral to the company's debt and leverage
metrics. Strategically, the addition of ThinkorSwim will add scale by further
expanding TD Ameritrade's range of services," S&P said.
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