Five major outcomes of the London Stock Exchange acquisition of Refinitiv
Today it was announced that the London Stock Exchange Group (LSEG) will acquire the financial information provider, Refinitiv, in a US$27bn deal.
FinTech shares five facts about the acquisition:
1. Great news Refinitiv shareholders: Major Refinitiv Shareholders such as Blackstone and Thomson Reuters will enjoy approximately 37% economic interest in LSEG, and around 30% of the total voting rights of LSEG.
Additionally, on Thursday afternoon shares in LSEG increased by just shy of 9%.
2. LSEG to face increase of net debt: LSEG has a minimal $1.2bn of debt, but the acquisition of Revinitiv will considerably increase the companies debt to just under $5bn.
3. Increase in international value: According to the LSEG, one of the major benefits to emerge from the transaction is the creation of a "global multi-asset capital markets business."
Schwimmer emphasised that this was not a result of a no-deal Brexit: “LSEG has been prepared for whatever may come through Brexit,” he said. “We are already diversified across regions and by currencies. This transaction helps us become more global. This is not about Brexit.”
4. A return to the public market: Refinitiv was privatised by Reuters in 2018. The acquisition of the company marks a return to the public market.
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5. The rise of a financial empire: The expansion of the LSEG following after the acquisition will situate the financial institution to rival that of America's Bloomberg LP. Chief Executive of LSEG, Schwimmer remarked: It is a rare and compelling opportunity to combine two world-class businesses and create a global financial infrastructure leader. We will continue to be a global business headquartered in the UK.
As the LSEG increases considerably in size, chairman Don Robert and David Schwimmer will remain in their roles, while Refinitiv Chief Executive David Craig will join the LSEG executive committee.
LSEG expects to complete the transaction by late 2020.
Refinitiv features in our August edition of FinTech
Robinhood faces $35mn fine from New York DFS
The company’s crypto division was issued with a wrist slap in 2020, following the red flagging of several “matters requiring attention”. Robinhood revealed it had reached a settlement with the New York State Department of Financial Services regarding the issues, which related to “alleged violations” of cybersecurity and anti-money laundering rules.
The news follows on from the announcement earlier this week that the trading platform favoured by armchair investors, which almost broke Wall Street earlier this year, has an expected valuation of $35bn following its IPO.
Critics of the platform say Robinhood encourages “risky behaviour” among inexperienced (armchair) investors. The app has also been criticised for not informing customers that much of its profits are generated by routing their trades to Wall Street firms taking the other side, or so-called "payment for order flow."
Robinhood said last month they expected the DFS fine to be at the $15mn mark, adding it would be “the bottom of the range for our probable loss in this matter”. The $35mn penalty is on top of the record $70mn Robinhood incurred from US financial regulator FINRA in June, for “lax vetting and outages.”
However, the settlement indicates the company’s IPO will go ahead as planned, despite initial concerns the investigation could see the float delayed until later this year.
Robinhood floats imminent
Despite the regulatory hiccups, Robinhood priced its IPO between US$38-US$42 per share, giving the platform the US$35bn valuation and analysts predict the firm’s debut on the Nasdaq could occur as early as next week.
Robinhood democratising investment
Launched in 2013 by Tenev and Bhatt, who were Stanford University roommates, Robinhood’s founders will retain most of the voting rights after the IPO. Bhatt reportedly holds 39% of the voting power of outstanding stock, while Tenev holds 26.2%.
The online brokerage, which came under fire for its handling of the GameStop trading debacle, which saw the platform limit stocks to investors, states its mission is to “democratise” investing and is one of the most highly anticipated IPOs of the year.
Robinhood was valued at $11.7bn in autumn 2020 following a private equity funding drive. The new valuation will mean represent a three-fold increase in the company’s market value in less than 12 months.