UP Fintech: A Unique Opportunity Within The China Online Brokerage Business – UP Fintech Holding Limited (NASDAQ:TIGR)

Founded in June 2014, Up Fintech (TIGR), also known as Tiger Brokers, is an online stock brokerage company operating in China.

Backed by Interactive Brokers Group Inc. (IEX:IBKR), Xiaomi Inc. (XI), ZhenFund, and Wall Street investment guru Jim Rogers, the company was quite a rising star in the industry and was listed in Nasdaq in March 2019.

The primary business for TIGR is to facilitate Chinese retail investors in trading global securities. According to TIGR’s IPO filing, they are the largest online broker focusing on global Chinese investors in terms of U.S. securities trading volume, with a market share of approximately 58.4% in 2017. They achieved RMB1.0 trillion cumulative trading volume on their platform within three years since the launch of Tiger Trade App, representing the shortest time-frame among all online brokers focusing on global Chinese investors.

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Source: IPO Prospectus

The Growing Need of Trading Efficiency and Global Asset Allocation

By end of 2018, TIGR had almost 1.6 MM registered customers on their platform, which is 20x growth within 3 years. The reason behind the rapid customer growth is the increasing need to trade efficiently as well as the demand of global asset allocation. As reported by a third-party research company, the customer base trading through online brokers in China will grow at a faster pace than that through traditional brokers:

  • The market size of online brokerage in terms of U.S. stock trading volume reached US$6,852.4 billion in 2018, accounting for approximately 15.0% of total trading volume in the U.S. stock market.
  • The market size of online brokerage in terms of Hong Kong stock trading volume reached US$149.6 billion in 2018, accounting for approximately 4.1% of total trading volume in the Hong Kong stock market.

TIGR focus their business from global Chinese investors and provide all the services in the Chinese language and offer user-friendly experience that specifically fits Chinese investors’ preferences.

The company generates revenues primarily by charging customers commission fees for trading of securities as well as earning interest income or financing service fees arising from or related to margin financing provided to customers for trading activities.

TIGR’s total revenues grew from US$5.5 million, to US$16.9 million and US$33.6 million in 2016, 2017 and 2018, respectively. In Q1 2019, the company reported a total revenue of $9.6 million. Considering the holiday period of Chinese New Year, this was a very good operating results and we expect a good year for TIGR in 2019 overall.

The fast-growing revenues confirmed the growing demand of online brokerage. As the leading player in this market, we are quite optimistic about TIGR’s growth trend in the future.

Expanding License and Business Landscape

As part of the growth plan of TIGR, they are actively expanding their business landscape and getting more license.

UP Fintech: A Unique Opportunity Within The China Online Brokerage Business - UP Fintech Holding Limited (NASDAQ:TIGR)

Source: TIGR’s Website, Current License Holding

We have summarized the following new business/license expansion for TIGR recently:

  • During the Q1 earnings release, TIGR management mentioned about their IPO subscription business for US market. Since the U.S. IPO process is different from Hong Kong and Asia, normal retail investors don’t have chance to participate, if you are not part of the employee programs. TIGR started to offer IPO subscription service for retail investors a year ago and the business attracted a growing number of retail investors
  • On July 2nd, TIGR announced to acquire 100% equity stake of Marsco Investment Corporation (“Marsco”), through its wholly-owned US subsidiary, Tiger Fintech Holdings, Inc. (“Tiger Fintech”). Founded in 1986, Marsco is a U.S. online brokerage service platform that focuses on empowering self-directed investors with the necessary tools to manage their portfolios. The acquisition will bring in rich broker dealer experience in execution and clearing for TIGR that will further solidify its position as the leading online broker with proprietary technology from front end to back end.

Note to Investors

Overall, we feel that TIGR’s business growth and strategic expansion is very promising. The company will enjoy the growth of China’s growing demand for online brokerage and global portfolio allocation. The shares of TIGR are trading at around $5.2, roughly 70% down from its highest point in April, which poses a good entry opportunity.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in TIGR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.