TP ICAP to separate data unit under investor pressure

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British broker TP ICAP has spun off a fast-growing unit that sells data to traders in response to investor pressure to return funds.

The data unit, Parameta Solutions, was registered as an independent company in February as TP ICAP prepared to sell or list it, two people familiar with the matter said. Parameta is registered as an independent company on the Jersey Companies Register.

The decision to spin off Parameta was taken amid intense pressure from some of TP ICAP's largest shareholders to sell Parameta as the broker's share price fell. One investor said Parameta could earn as much as 1.5 billion pounds from the IPO, which would be more than TP ICAP's total market capitalization of 1.46 billion pounds based on Friday's share price.

The City of London broker was lambasted by a US hedge fund in 2022 for a “catastrophic drop in its share price”, with investors calling for the firm to either sell itself or Parameta. Investors say the spin-off of Parametta shows those plans are now on track.

TP ICAP shares have recovered about 70% from their 2022 lows, but they remain sluggish and have been flat over the past year.

One shareholder said a listing was the “most likely” outcome for Paramita. They added that when separating a company, “the main objective is the tax efficiency of the potential IPO” [or] Sale”.

TP ICAP declined to comment.

The FTSE 250 broker said in its first-half 2023 results that its Parameta growth strategy is to “leverage the valuable data generated by our business and external partners”. “Operationally, Parmeta Solutions is already separate from the group, such as having its own management team,” it added.

“It's clear that the business may not stay in TP ICAP in the long term,” another investor said, adding that Parameta was “a more valuable business.”

“If you legally separate these entities and [sort out] Tax Implications. . . Then it would be easier to sell or spin it off,” the investor added.

Parameta's growth outpaces TP ICAP's global brokerage unit, where about 2,500 brokers match buyers and sellers in financial, energy and commodities markets and earn revenue through trading commissions.

Parameta's revenue grew 7% in the third quarter of 2023, while brokerage revenue fell 2%. Parameta's adjusted EBITDA margin (company profit as a percentage of revenue) for the same period was 43%, far exceeding TP ICAP's 17% for the same period.

“The business is of very high quality and continues to grow strongly,” the shareholder added.