Will CMC make its big splash this time around? You can bet on it

The biggest UK float of the year so far nearly fell at the last hurdle. The new year tremors in financial markets gave Peter Cruddas, the founder of spread-betting company CMC Markets, and his advisers, a mild case of the jitters.

Goldman Sachs and Morgan Stanley have been working on the float of the former Conservative treasurer’s financial betting empire for six months, but the initial public offering was only signed off by the board on Tuesday.

Mr Cruddas has been here before. There was talk of a float of CMC – which stands for Currency Management Corporation – at the turn of the millennium, and then again in 2006, before market downturns scuppered both these attempts.

Was he tempted to put the whole thing on the backburner again? “There were quite a few days when we were thinking that,” he says. “But in this process you have to go through a lot of due diligence, a lot of work. To be honest, we’ve done around 40 early-look roadshows and they’ve gone really well. We had a very strong response from potential investors so we were encouraged by that.

“We are a very good volatility stock; we’ve had a very good year to date. When there is volatility in the market, firms like us do well – we see an uptick in turnover and clients. We are a good play for a portfolio. We’ve been to New York, we’ve been to Edinburgh, we’ve been all around London. There’s a lot of interest in this stock.”

The timing is slightly inauspicious, as it also comes on the eve of the anniversary of the Swiss National Bank’s shock decision to scrap its currency cap against the euro, which underlined the risks of spread betting – where gains and losses are multiplied – and cost clients millions of pounds. CMC itself wrote off nearly ?4m in client losses.

But the float is the culmination of three years’ work, since Mr Cruddas resumed day-to-day control as chief executive in 2013, after briefly handing over the reins.

In a trading environment becalmed by European Central Bank president Mario Draghi’s “whatever it takes” pledge to protect the euro – bad news for firms depending on volatility to generate returns – Mr Cruddas immediately scrapped staff perks such as free fruit and cornflakes at work and sharpened up the dress code. But he held out the prospect of bigger pay and bonuses if they delivered. Around 550 staff will be eligible for a share-incentive scheme following the float.

Obviously the biggest returns will fall to Mr Cruddas himself, who has been running the business he set up for 26 years. He is selling down his 90 per cent stake to around 60 per cent, potentially earning him a lump sum of around ?240m. Based on the share price of CMC’s much larger rival, IG Group, which trades on around 18 times future profits, CMC could be worth between ?750m and ?800m. That’s less than the ?1bn price-tag mooted for the company in the past year, and about half the ?1.4bn valuation put on the firm in 2007 when Goldman Sachs paid a reported ?140m for a 10 per cent stake.

But the business still boasts 44,000 active clients trading a universe of currencies, stock-market indices and contracts for difference (tax efficient instruments for trading shares without buying them using leverage) and the firm is targeting a 40 per cent rise in revenues to ?250m by March 2020.

The plans for growth include stealing the market share of rivals in its main markets – the UK, Singapore, Germany and Australia – as well as extending its range of trading products and geographies. The company has pumped ?65m over the past five years into a state-of-the-art trading platform; nearly half of all trading is done on mobiles. It is also planning a huge digital marketing campaign to boost client numbers and is sponsoring Sir Ben Ainslie’s bid to win the America’s Cup.

As for Mr Cruddas, the East Ender made good is going nowhere now that CMC has finally made it on to the public markets. “I’m here for the next five years… I’ve got my team to take me through the next five or 10 years.”

When CMC Markets celebrated its 25th birthday at a glitzy London party in 2014, founder Peter Cruddas splashed out some of his estimated ?1bn fortune flying Diana Ross, the US superstar, over to perform at the bash.

Not bad for the son of a humble porter at Smithfield meat market who grew up in post-war Hackney, leaving a Shoreditch comprehensive at the age of 15 with no qualifications.

He began his City career as a telex operator for Western Union, then worked his way through several foreign exchange dealing rooms, eventually becoming head dealer at Jordan’s Petra Bank. In 1989 he left to start CMC with ?10,000 in the bank, building up the firm into one of the UK’s biggest spread betting players.

He stepped back in 2007, but returned as full time chief executive in 2013.

A major Conservative donor, he became treasurer of the party in 2011, but was cut loose by the leadership in 2012 after a “cash for access” sting by The Sunday Times, which alleged that he was involved in offering meetings with David Cameron and other ministers in exchange for donations. He won ?180,000 in libel damages – reduced to ?50,000 on appeal last year – and is now a direct opponent of the PM, as Treasurer and major financial backer of the Vote Leave campaign group for the referendum on EU membership.