Interactive Brokers (NASDAQ:IBKR) ended June with $182.4 billion of uninvested client cash, up 27% year over year. Not only did the pile grow, but it was bigger still two months after the quarter closed, reaching $185.6 billion at the end of August. And until clients put that money to work, the automated global broker collects interest on it.
They may soon get a big occasion to put some of it to work. Anthropic’s initial public offering (IPO) prospectus could arrive as soon as this week. In late August, The Information reported that the artificial intelligence (AI) company planned to release it just after Labor Day, with a market debut following as soon as the end of this month.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Investors project the Claude maker’s valuation could land at about $2 trillion, CNBC has reported. They also expect the offering itself could top the largest on record — the $85.7 billion SpaceX (NASDAQ:SPCX) raised in its June debut.
Anthropic’s timing is a plan, not a scheduled event. There’s no public prospectus, no price, and no share count yet.
But I think the setup is worth examining, because the broker just lived through a version of it. What does a huge listing do to this business?
Image source: The Motley Fool.
A cash pile that pays
Interactive Brokers earns money on client cash in a straightforward way. It segregates customer cash as regulators require and invests the majority of that segregated cash in short-term U.S. government securities and related instruments. Clients earn interest on qualifying U.S. dollar balances, and the company keeps a spread for itself: half a percentage point below the benchmark federal funds rate.
At today’s scale, net interest income is the company’s biggest revenue line. It rose 23% year over year to $1.06 billion in the second quarter, helped by growing customer credit balances and a 67% jump in customer margin loans. That was more than half of the quarter’s $1.9 billion of total net revenues. Notably, the growth came from bigger balances. The company’s net interest margin narrowed to 1.93% from 2.07% a year earlier as interest rates declined, yet net interest income climbed anyway.
In other words, the cash isn’t idle from the broker’s perspective. Every uninvested dollar earns the company a little interest, and clients added about $39 billion of those dollars over the past year.
