"Oh wait, you meant BUY… not bye?" Pic via Getty Images
Experts
When a crop of stockbrokers listed on the ASX in quick succession in 2007, the cynics quipped that the end of the bull market must be nigh.
It’s a bit like the hoary old one about getting out of the market when bellhops impart share tips.
Sure enough the market crashed – big time – and most of the firms did not survive in their current form.
In a fresh omen for the market, the ranks of the remaining listed brokers are thinning further.
On Wednesday Bell Financial Group (ASX:BFG) – a survivor of the 2007 cohort – lobbed a $51 million, 22 cents-per-share non-binding offer for the low-cost, fixed-fee online brokerage SelfWealth.
On Thursday, private rival bidder AxiCorp emerged from the ether with a 23 cents-per-share offer.
Meanwhile, shareholders in E&P Financial Group (ASX:EP1) this month voted narrowly in favour of a motion to privatise the hitherto strife-prone entity.
Both actions highlight how listed brokers have never won investor support – and why such volatile businesses are best operated as unlisted entities away from the public gaze.
One reason is that the brokers are more like independent deal-chasers working under the one shingle and are hard to corral under a corporate structure.
(Old timers also have the reputation of being permanently out to lunch, although these days, as with journalism, it’s more a case of mineral water and an earnest Powerpoint presentation.)
In the case of SelfWealth, Bell Financial’s 22 cents per share offer was friendly, but with AxiCorp’s emerging the board merely is telling shareholders they need not take any action.
The offers are generous in the context of SelfWealth shares being valued at 11.5 cents ahead of the news, but not so flash considering that SelfWealth listed at 20 cents a share in November 2017.
As is the way with most takeover offers, the bids look opportunistic given SelfWealth’s improved performance in the face of stiff competition from other low – or no – fee brokers.
In the year to June 30 2024 SelfWealth posted a $3.4 million net profit compared with a maiden $100,000 surplus last time round.
But at least there’s a competitive auction afoot to ensure the best price.
An amalgam of Melbourne blue-blood broker Evans & Partners and self-managed super fund specialist Dixon Advisory, Evans & Partners listed in May 2018, raising $130 million at $2.50 apiece.
At the time of writing the stock traded at 49 cents.
At the company’s November 1 EGM, CEO Ben Keeble pleaded the company’s shares persistently had been undervalued, despite the resolution of the scandal’s surrounding Dixon Advisory’s 2022 collapse.
He noted the stock was beset with poor liquidity and had no chance of being included in a valuation-boosting market index.
Shareholders concurred – but only just – with 76% of voting holders approving the privatisation compared with the requisite 75% threshold.
A descendant of the revered Bell Potter, Bell Financial is the only survivor of the class of 2007, with alumni Wilson HTM and Austock morphing beyond recognition.
Bell Financial has had its moments but is now in robust shape, having boosted 2023-24 profit by 50% to $16.6 million, on a 18% revenue boost to $138 million.
Bell’s $416 million market valuation is backed by $111.5 million of net cash.
The moral of the tale is that if investors time it right, listed brokers can be lucrative. But over the long term their performance has been poor and volatile, reflecting the whiles of the market.
On that note, the proudly Perth-based Euroz (ASX:EZL) follows the ups-and-downs of the resources sector.
Euroz reported a 41% profit decline to $5.47 million in the 2023-24 year, in a “mostly lukewarm market”.
Euroz shares have lost half their value over the last five years – another case of investors ‘going for broker’ feeling more broke than satiated.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision
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