EasyEquities owner Purple Group has made few big acquisitions since launching its trading platform over 10 years ago. Now, with more than 3-million registered users and R100bn in assets under its belt, it’s going boots in to the AI trade with the purchase of Australian group Telescope, the company behind Easy’s AI baskets, for about R176m. The FM spoke to CEO Charles Savage.
Is this the kind of deal where it’s better to cough up for the company than build its capabilities yourself?
Obviously that’s something we wrangled with, and the truth is that teams like this get out of bed every day to do one thing, and that’s to leverage AI for maximum benefit. That’s all they do. We are not AI natives. We are doing a good job of implementing AI, but we’re playing in the C-league and these guys play in the A-league. There are times where you’re very comfortable playing in the C-league because it’s not core to your business, but I made the call two years ago that it would be the operating system for the future of finance. And if that’s true, then you’ve got to play in the A-league.
When you consider that, you can’t build it. The skills are scarce, and in high demand, and it looks like football numbers when you see some of the moves between AI players, headhunting each other. I guess we had to find a team and capability that was as good as the rest of the world that the rest of the world hadn’t yet discovered.
You’ve been doing business with Telescope for a couple of years – how did you first find each other?
I met Luc Pettett through my horse-racing interests almost 10 years ago when he built something called Punters.com. The Aussies are mad about punting and when they read a good article about a sports event, they typically go to a bookmaker’s site and place a bet. So he decided to hire the best journalists and create the best content around sport and bring the odds into the story, so you could literally read a story and click to the bookmakers. His next thing was AI and investing, and I said: “If you do that, please look me up.” So he came to us with Telescope – and we were his first client.
You’re paying a lot, though? $10.75m for a company that has a net asset value of less than A$500k, and which made a loss of A$88,272 in its first half to end-February …
We’re buying early so you can’t look at this through the lens of the income statement alone. What are we buying? A team that are experts in AI, specifically AI in investing in a compliant and regulated way – and there are not a thousand people who can do that. They’re partnering us with our 1.3-million clients and 10 years of data, and the opportunity is to take everything they’ve built and give it to our client context and distribution.
When you add those two things you suddenly start to see the rails towards millions of clients utilising their product capabilities. I think it’s going to radically transform all of our touchpoints – whether you’re buying a share or considering selling a share or reviewing your portfolio.
What they currently do is sell products and services to brokers like us. Now, if they build better products and services by virtue of living inside EasyEquities, then they’re going to have better products to sell to other brokers. And having an AI-first team inside the Purple Group means that we will develop better products faster, for our own customers. So obviously you try and position it in the income statement because that’s what we’re taught to do, but you have to take a leap of faith on what could be if these things come together.
Could people accuse you of drinking the AI Kool-Aid?
Sure – except is it Kool-Aid? We don’t believe so, otherwise we wouldn’t buy it. The biggest financial services groups in the world are investing heavily in AI – whether it’s JPMorgan or the banks in South Africa. The question that is uncertain is when does this future arrive; and you could accuse us of being early, but I think the best practitioners of AI in investing are going to work at it for a long time – nothing is going to work straight up. You can’t wait to be right-timed. Is it a big number? Yes, but in the context of our NAV it’s only 3%.
You mention that it could allow “multi-language experiences” – is this especially important, given what you want to do in the Philippines?
Yes, but even here at home, language is a barrier. If you’re going to make investing easy for everyone at some point you have to do it in their home language. It’s a critical part and in the old world we would have had to hire multilingual client service agents and that’s not easy to do – especially in a country that has 11 official languages. But can you now serve AI at scale in multiple languages? Yes you can – easily.
The company has other customers – is it okay with you buying the business, given that, presumably, you’re rivals to IG Markets or CMC?
I can’t answer for them, but we don’t compete in any of the markets that they operate in. We’re predominantly in South Africa, the Philippines or Kenya. Second, we’re good at partner businesses. If you look at Discovery, Capitec, Sanlam or Satrix – those are ostensibly competitors, but we’ve managed to hold them together, so I think we’re good at this. My own view is that if I were the CEO of IG or CMC, the counter is true; that as a result of this transaction they will get better products and services.
This story appeared in the Financial Mail. Currency and the Financial Mail are part of the Financial Mail Group.
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