How is it that a site which hosted over 46 trillion dollars in transactions is sold for less that one billion dollars?

May 21, 2004 6:41 AM

Tradeweb is an unqualified success. Built in collaboration with eight major banks, it's a trading platform to facilitate the sale of bonds and other fixed-income assets. It's hosted over 46 trillion dollars in transactions. Yet this Reuters article says that Thomson just acquired the platform for between 500 million and a billion dollars - which seems like an impossibly low price. How is that possible? (from the give mark-cuban-a-login department)
posted by djacobs to work & money (4 answers total)

Because 46 trillion dollars in transactions is not the same thing as 46 trillion dollars in revenue, I would assume. The article doesn't address how Tradeweb earns it's own revenue. Per trade fees? Margins? It would be entirely possible for TradeWeb to be doing that much business and still be losing money if their pricing model isn't well built.
posted by jacquilynne at 6:57 AM on May 21, 2004

sorry for the _way_ OT, but is any else seeing the stun gun/self defense adsense ads on this post? where did those come from? djacobs did mention mark cuban, but still...
posted by rschroed at 7:08 AM on May 21, 2004

The selling price is less than one one-hundredth of a percent of the volume traded since inception, so I would imagine that the platform must charge an infinitessimaly small price-- either a flat fee, or a hundredth of a basis point.

Because it wouldn't exist without the cooperation of the "member" organizations, and they can abandon it if fees go too high, perhaps they have no pricing power whatsoever.

Since I don't have Morgan or Salomon in my name, I doubt they'll give me a fee estimate upon my request.

But that figure seems really low, nonetheless. I'm curious too.
posted by trharlan at 1:51 PM on May 21, 2004

Thompson's primary business is in providing business (and other) information, which would lead me to believe that this exchange just provides the information about the exchanges and tracks them as a service, and is not the same as a marketplace. I would imagine that the banks pay a fixed fee to participate in the program, which is outsourced to ensure reliability and 3rd-party honesty.
posted by cell divide at 1:03 PM on May 22, 2004