the g spot
The big Easy (Equities)
Easy Equities, the trading portal that has arguably done the most to democratise share investing on the JSE, reckons it’s at the tipping point of profit after years of hard slog
Easy Equities, the trading portal that has arguably done the most to democratise share investing on the JSE, reckons it’s at the tipping point of profit after years of hard slog. It’s good news for listed owner Purple Group, but could it all be undone by the Covid-19 crisis? We asked CEO Charles Savage.
CS: Textbooks would have taught us that people were going to sell all their assets, take all their cash and put it under the mattress. But the evidence at Easy Equities is that it’s been anti-fragile in this environment. We’ve literally quadrupled all aspects of the business since Covid-19 and that’s continued into lockdown.
It’s crazy. I like data and I like facts, so I’m trying to understand what are the things that are different about this consumer base that were so ingrained in us 20 years ago. I think there are a couple of things that are playing into our hands. The first is that today’s investor is just much savvier. They don’t have any excuses in terms of access to information or low-cost platforms. So they’re much more empowered. The second is that our biggest force for new customers is customers themselves. More than 50% of our business is referrals. Historically we averaged around 40% and this month we’re sitting at 60%. And that power is a snowball rolling downhill: the more customers you get, and keep happy, the more customers you get. And there’s one other factor playing into our hands: the average age of our customers is under 35, so these guys have an appetite for risk and a time horizon that doesn’t care about what’s happening today.
It seems that Easy Equities doesn’t want to just confine itself to equities. For example, you’re looking at fractional investment in property now. How will that work? And does that not distract you from your core business?
CS: No … We see ourselves enabling fractional ownership to everything our customers want to own. About 18 months ago, we did a survey and said: "We understand that equity markets give you access to a range of asset types, but what’s missing?"
We were expecting that cryptocurrencies would be the thing that everyone would say please add, [but] 60% of our customers said [they] want access to residential property. And it caught us all off-guard. And the insight, which is so obvious in hindsight, is that people want to live and work closer together. They don’t want to spend three hours in traffic because they can’t afford properties in Sandton.
So how do you create access points other than by saving and waiting until you can afford one? Interestingly, at exactly the same time, the biggest residential owner of property in SA — a company called Narrative, which is part of the Buffet group — approached us and said: "Have you thought about fractional property?" So we created a joint venture with them.
In the US, guys are fractionalising classic cars and I laugh because I’ve got no interest, but for someone who wants to drive a 1965 Porsche once a year because he owns one-365th of it, I get it. Why wouldn’t you?
If you think about it: we’ve got lots of customers who could never afford a whole Naspers share at R2,500. But five years ago they started a journey towards owning that stock and now they own a few. And if we’d said to them five years ago "Just go and save the money and put it somewhere until you’ve saved enough" … what do you think they would have done?
CS: Exactly. I’m the same. [But] fractional access is like a lockable piggy bank: I’m just going to drop a little in and I can’t get it out. And it’s amazing how people are protecting these assets. With a financial crisis now, what we expected was that people would sell their assets. They’re not doing that. They’re saying: "That’s my store of wealth, I’m not going to touch it, I’ll find the money in other places to get through."
Sanlam took a 30% stake in Easy Equities over two years ago. Is Purple Group, as parent, ripe for a takeover?
CS: If I had R400m in my bank account I’d buy the whole group now. I’m obviously biased — I’ve built this thing — but when I get other people to look through the lenses we are looking through, they all go: why is it trading at 35c?
Companies like ours are starting to get taken out and delisted, but I think those businesses are better understood than we are.
I guess if I was better at managing the understanding of Purple Group then we probably would be ripe for a takeover, like 60%-70% of all the small caps on the JSE. I’ve never seen asset prices so cheap. Key for me is that for a business to be aligned with its customers you have to have shareholders that are aligned and there is an incredible sense of purpose among our shareholders, from the Lubner family to Mark Barnes to Sanlam. They believe in what we do wholeheartedly.