Teddy Sagi's foray into the retail Forex market seems to be heating up. Finance Magnates has learned from several independent sources that the Israeli entrepreneur's group is negotiating for the business of IronFX, a global broker with various offices and licenses across different jurisdictions.
It is understood that the sides are in the midst of a due-diligence process, after Sagi's visit to the firm’s headquarters in Cyprus. IronFX CEO, Markos Kashiouris, is expected to remain at the helm for the foreseeable time.
Any potential deal may not come in the form of a traditional cash-offer acquisition, but could rely on revenue share agreement
Yesterday, Finance Magnates revealed that Playtech held similar talks with AVA Trade. Playtech’s quest for broker’s client base or trades could be explained in the recent acquisition of the emerging Markets.com. The latter, using a proprietary trading platform and maintaining a high profile partnership deal with Arsenal F.C, will probably absorb the business of up-and-running 2-tier players in order to enhance floating prospects in a future IPO.
It is worth noting that any potential deal may not come in the form of a traditional cash offer acquisition. In the past, when acquiring Forex Yard via his CySEC regulated investment firm Safecap, Sagi was believed to have paid a small upfront nominal amount for that business, with the bulk of the purchase price coming in the form of an aggressive revenue split on future profits from Forex Yard's business.
In that deal, Safecap provided dealing and compliance support to Forex Yard customers, with sales and marketing continuing to be managed by Forex Yard. At the time, Forex Yard was operating as an unregulated broker, the deal providing them with a regulatory umbrella to service their customers.
Now, Teddy Sagi and Safecap may be 'kicking the tires' with IronFX to understand if a similar type of acquisition arrangement can be consummated with little upfront cash, but the opportunity for future revenues. In return, IronFX will receive a boost to their image as accounts will be transferred under Safecap's license.
Mixed Baggage
IronFX claims to have been a victim of a group of “abusive traders”, employing “abusive trading strategy to manipulate our promotions”
IronFX makes an interesting candidate for Sagi’s group. The firm is aggressively boasting a fast pace growth and growing global foothold. After Alpari UK’s demise, IronFX was dubbed a potential buyer, and the WSJ published a questionable report about a confidential IPO in the US.
On the other hand, IronFX is widely believed to be in dire straights in terms of capitalization. Reports of massive layoffs keep haunting the firm, and Mr. Kashiouris, in a much awaited interview to Finance Magnates, has confirmed “a normal cycle of talent refreshment and structural reorganization." According to the CEO, after the SNB crisis “some positions and roles were deemed obsolete whilst others were deemed more necessary.”
But on top of the industry-wide hit inflicted by the SNB crisis, IronFX is facing major hurdles in China, culminating in a lawsuit filed in a Cypriot court. Last year, an investigative report on criminal fraud investigation was launched on air. The company expressed surprise by the "false report", and added that its lawyers were "taking the necessary legal steps against the TV station." Later on in January, local traders and IBs stormed the firm’s offices vandalizing the premises and demanding their funds.
IronFX, for its part, is claiming to have been a victim of a group of “abusive traders”, employing “abusive trading strategy to manipulate our promotions”. Withdrawal requests by such traders, referred to as “hedgers” in leaked internal documents, were denied or withheld as the company maintained it was holding an internal investigation. So far, IronFX has failed to inform the public or its clients about any results.
Finance Magnates recently received several complaints relating to withdrawals by non-Chinese traders and IBs. However, it should be noted that none of the authorities which are regulating IronFX have issued an official warning.
IronFX has declined to comment.
