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UK broker TP ICAP has separated a fast-growing division that sells data to traders as it attempts to respond to pressure from its investors to return capital.
The data unit, Parameta Solutions, was registered in February as a standalone company as TP ICAP prepared a possible sale or listing of it, said two people with knowledge of the matter. Parameta is registered as a separate company on the Jersey companies register.
The decision to separate Parameta follows intense pressure from some of TP ICAP’s biggest shareholders to offload it because of the broker’s sinking share price. One investor said Parameta could generate as much as £1.5bn from an initial public offering, which is more than TP ICAP’s entire market capitalisation of £1.46bn, based on its stock price on Friday.
In 2022, the City of London broker was lambasted by a US hedge fund for its “disastrous share price decline”, and investors had called on the company to either sell itself or Parameta. The separation of Parameta indicated that those plans were now on track, the investors said.
TP ICAP’s share price has recovered about 70 per cent from its 2022 lows but is still depressed, trading flat over the past year.
One shareholder said a listing was the “most likely” outcome for Parameta. They added that in separating the company, the “main goal is tax efficiency in a potential IPO [or] sale”.
TP ICAP declined to comment.
In its first-half 2023 results, the FTSE 250 broker said its Parameta growth strategy was “about harnessing the valuable data generated by our businesses and external partners”. It added that “operationally, Parameta Solutions is already separate from the group with, for example, its own management team”.
Another investor said “it is clear that over the long term, that business probably won’t be sitting in TP ICAP”, adding that Parameta was “a much more valuable business”.
“If you separated those entities legally and [sort out] the tax implication . . . it is easier to then sell it or spin it off,” the investor added.
Parameta’s growth outpaces that of TP ICAP’s global broking unit, in which roughly 2,500 brokers connect buyers and sellers in finance, energy and commodities markets, earning money from commissions on trades.
In the third quarter of 2023, Parameta’s revenues rose 7 per cent, while broking revenues fell 2 per cent. Parameta’s adjusted earnings before interest, taxes, depreciation and amortisation margin was 43 per cent in the same period (the company’s profit as a percentage of revenue), far outpacing TP ICAP on the same measure at 17 per cent.
“That business is very high quality, it continues to grow strongly,” the shareholder added.
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