The German online broker was put up for sale when its parent Schmidtbank ran into financial trouble. So far, mainly because of the negative climate in online investment, it has failed to attract a buyer. This is a wasted opportunity: someone willing to take the risk of buying Consors and riding out the downturn could dominate the market in the future.
Consors has reported a 24% rise in share trading for Q4.
To put it mildly, the online investments market was unprofitable last year. Indeed, for many online investment providers it was a catastrophic year and the current market scene does not promise a quick recovery. Online brokers such as Schwab Europe, Comdirect and DAB posted losses for 2001. Strong competitors such as Comdirect are reportedly trying to get rid of their unprofitable business units.
Schmidtbank, meanwhile, put its online broking unit Consors up for sale in November 2001. The main driver was the parent bank’s financial crisis, although poor results from Consors’ first three quarters were also a factor. Since then, it has shown signs of recovery: share trading was up by 24% in Q4, bettering the 12% rise achieved by rival DAB. The number of executed trades rose to 1.7 million in Q4 from 1.39 million in Q3. These upbeat figures are likely to help in attracting potential buyers. But is Consors a good buy in the long term?
Without doubt, the sale of Consors will create a dominant player in the market. The company holds the second position in terms of customers in the German market, as well as having a strong presence in a number of European countries. Its likely buyer will be a strong company with big pockets that has displayed the ability to survive in the negative current online investment environment. The buyer would gain an instant competitive advantage in the market.
Consors is up for sale because of its parent’s failings, not because of its individual performance. As a result, a prospective buyer who is strong enough to absorb the downturn in the market will be favourably positioned to take advantage of any stock market upturn.