EasyEquities owner Purple Group has made few big acquisitions since launching its trading platform more than 10 years ago. Now, with over 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 around 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 wrestled 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 when 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 AI 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 them 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$500,000 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 to 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 JP Morgan or the banks in South Africa. What’s uncertain is when does this future arrive. 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.
They have other customers. Are they OK 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 and Kenya. Secondly, 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 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.