Mixed messages me thinks on IG Group (IGG, 183p)

January 20th 2009 saw a presentation and announcement by IG Group for the six month period to end November 2008  (can be found on company website), from which I have copied the following phrase:

‘trading since the period end has continued to be strong’

This was supported by presentations and discussions with investors and brokers, in the vein that activity continued to be strong due to the high level of volatility in the market.

March 10th 2009, in an ‘Interim management statement’ , IG Group said that

‘growth against very strong comparatives, is challenging (in UK and Australia)’

‘overall growth of the Group is impacted by a very strong comparative period’

‘UK has been affected by the implementation of more stringent risk controls in October’

‘The uplift of revenue that the group typically experiences on a higher volatility day is becoming progressively less marked’

The FT commented : ‘IG yesterday said revenue in both the UK and Australia – its two biggest markets – had fallen by 7 per cent to £31.5m and £6.4m respectively during its third financial quarter’.

FT article.

Times article.

And not surpisingly, the share price falls by more than a third, from 260p to 180p.

So what happened? January 20th was already 51 days into the quarter.

Either trading collapsed since January 20th, or the company hadn’t detected a deterioration in trading when they announced Interim results on January 20th.

But wait! Somebody must have had an inkling of the risks inherent in the shares. Maybe the COO, Peter Hetherington believed the shares to fully reflect the positive news, with risk on the downside. He sold on January 28th and 29th 700,000 shares, reducing his position in the group by almost 40%.

We commented on Hetheringtons sale on February 2nd, when the share price was 280p.

View on IG Group – close negative view with 34% absolute and 32% relative (to FTSE 250) return.