Closing and looking ahead
There is one thing you have to give credit to the old and new CEO of the now renamed Smartbroker Holding AG. While many others would still be busy coming to terms with past events for months, Kolbinger is looking ahead. He is wiping the slate clean and moving on to the next goals. The entrepreneur is fully aware that these are challenging. The Hach era has come to an end. Differing views on the next priorities for Smartbroker 2.0 are said to have been the deciding factor for the separation. Now the new CEO, who, according to his own statements, intends to remain until at least 2025, is relying on internal communications as well as suitable external partners to be able to ensure the launch of the "next generation online broker" including an enormously important smartphone app.
Technology and license in the foreground
On several occasions, the Group communicated that the major project "only" involved significant postponements. The project had by no means failed but had "merely" been pushed back on the timeline. Technically, several individual components have already been programmed, but the complexity of merging them into a single unit was overestimated in the past. After working through the past weeks, management is "very confident" of delivering a new type of proprietary trading platform for private investors and savers, including a smartphone app, by mid-2023.
In addition to the technical challenges, the extension of the KWG license from securities trading bank to securities institution is of great importance in order to be able to operate its own platform. The application had been received by the Federal Financial Supervisory Authority BaFin just over a year ago. According to Kolbinger, the sudden replacement of former CEO Hach had no impact on the extended license application.
"There is no doubt that the product will come. We will be able to implement it both technically and financially."
On the contrary, in order to continue the process to a positive end, the management team of Smartbroker AG has been further strengthened by former Raisin Bank board member Uwe Lüders. In his new role as Chief Risk Officer and Chief Financial Officer, Lüders will be responsible for risk control, finance, legal, compliance and money laundering prevention. This personnel appointment alone and the installation of a full-blooded banker should rather positively accelerate the BaFin decision.
Prompted to revise forecasts
The shift of the "go live" from the end of the current year to mid-2023 inevitably entails a shift in revenue as well as customer growth. As a result, customer acquisition has been scaled down to a minimum and forecasts have been re-sorted. The Company now expects full-year sales at group level to be between EUR 54 million and EUR 57 million. Previously, the capitalists assumed a revenue range of between EUR 62 million and EUR 67 million. Consolidated operating EBITDA remains unchanged at between EUR 10 million and EUR 12 million, but this is only because the Smartbroker's planned new customer acquisition costs have been reduced from EUR 6 million to EUR 4 million. Operating EBITDA before customer acquisition costs is expected to range between EUR 14 million and EUR 16 million.
Smartbroker established in the market
In the wake of the negative events for the Group in recent weeks, the Smartbroker Holding AG share fell by more than 50% to around EUR 8. Thus, the share price is close to the 2019 level, when Smartbroker was merely an idea floating around in the heads of the founders. Whether this level already forms the bottom of the downward spiral is difficult to predict. However, the fact is that Smartbroker has become one of the most successful online brokers in the German-speaking world with more than 200,000 customers. With customer assets under management of over EUR 9 billion, it is also by far the largest neobroker by this metric. In addition, the Berliners deliver the only product in the market that combines the prices of a neobroker with the range of a classic full-service broker.
Significant add-ons with own platform
A prerequisite for Smartbroker to be perceived as a neobroker is, of course, the launch of a mobile app. In addition, the launch of "Smartbroker 2.0" and the establishment of its own brokerage infrastructure would bring significant additional business. Assuming that the technical hurdles are overcome and BaFin gives its positive approval, Smartbroker would no longer simply act as a securities account broker, but would be its own broker in the future and would no longer have to hand over a share to a partner bank. In addition, the planned launch of the smartphone app, its own desktop solution and the establishment of trading with cryptocurrencies are intended to attract new
target groups.
"If you were to ask me if I thought the current price drop was excessive, I would answer yes." (CEO Kolbinger)
By removing the restrictions on marketing, there would also be the possibility to include targeted social media advertising, which would significantly lower the average cost of acquiring new customers. Further, the proprietary broker would generate increasing margins per trade and could benefit from an interest margin. The management's long-term goal is also the further integration and direct trading from the community portals and a front-end usability that should once again significantly outperform the competition.
Financially well equipped
At the recent virtual general meeting, the new CEO ruled out possible further capital increases. On the one hand, the highly profitable portal business generated stable positive cash flow of EUR 17 million last year alone. This surplus will be invested directly in the development of IT, setup costs, staff expansion and subsequent customer growth of Smartbroker. In addition, a capital increase of EUR 10 million was successfully completed only in mid-July. The price at that time: EUR 17.30! What was remarkable was the fact that more than half of the shares were subscribed by the Supervisory Board and the Management Board. Major shareholder Kolbinger alone increased his holding by more than EUR 4.4 million.
Interim conclusion
The events that have occurred in recent weeks, with the sudden departure of CEO Matthias Hach, the postponement of the app and platform, and a profit warning for 2022 and 2023, must be classified as catastrophic from the Company's point of view. On the one hand, however, it is positive that major shareholder and company founder Kolbinger is taking the helm for the next few years and has already put all the facts on the table hard and fast. The consequence was of course a sell-off of the Smartbroker Holding share by more than 50% to a new intermediate low at EUR 8. Whether this means a long-term unique entry opportunity will be measured by whether the management can keep the new plan, the launch of the Smartbroker 2.0 platform including mobile app, by mid-2023.
Kolbinger has already shown twice in his history what he is capable of entrepreneurially. Firstly, he founded wallstreet:online AG in 1998 in a "one-man show", so to speak, and led it to become by far the largest publisher-independent financial portal operator in the German-speaking world, which he later successfully sold to Springer. Three years after the takeover by Springer - the sales fell into the cellar - Kolbinger bought back the crisis-ridden platform, led it back on the road to success and established Smartbroker as one of the largest online brokers in Germany. If the now communicated planning is kept, the current quotations should be seen as a long-term unique buying opportunity. And as it is said in a well-known proverb: "All good things come in threes!".
