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Equity And Earnings Per Share | 9 Months Ended
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Sep. 30, 2020
Equity And Earnings Per Share [Abstract] |
Equity And Earnings Per Share | 4. Equity and Earnings per Share In connection with IBG, Inc.’s initial public offering of Class A common stock (“IPO”) in May 2007, it purchased 10.0% of the membership interests in IBG LLC from IBG Holdings LLC (“Holdings”), became the sole managing member of IBG LLC and began to consolidate IBG LLC’s financial results into its financial statements. Holdings owns all of IBG, Inc.’s Class B common stock, which has voting rights in proportion to its ownership interests in IBG LLC. The table below presents the amount of IBG LLC membership interests held by IBG, Inc. and Holdings as of September 30, 2020.
|  | IBG, Inc. |  | Holdings |  | Total
| Ownership % | 19.0% |  | 81.0% |  | 100.0%
| Membership interests | 79,057,622 |  | 337,670,642 |  | 416,728,264
These condensed consolidated financial statements reflect the results of operations and financial position of IBG, Inc., including consolidation of its investment in IBG LLC and its subsidiaries. The noncontrolling interests in IBG LLC attributable to Holdings are reported as a component of total equity in the condensed consolidated statements of financial condition. Recapitalization and Post-IPO Capital Structure Immediately prior to and immediately following the consummation of the IPO, IBG, Inc., Holdings, IBG LLC and the members of IBG LLC consummated a series of transactions collectively referred to herein as the “Recapitalization.” In connection with the Recapitalization, IBG, Inc., Holdings and the historical members of IBG LLC entered into an exchange agreement, dated as of May 3, 2007 (the “Exchange Agreement”), pursuant to which the historical members of IBG LLC received membership interests in Holdings in exchange for their membership interests in IBG LLC. Additionally, IBG, Inc. became the sole managing member of IBG LLC. In connection with the consummation of the IPO, Holdings used the net proceeds to redeem 10.0% of members’ interests in Holdings in proportion to their interests. Immediately following the Recapitalization and IPO, Holdings owned approximately 90% of IBG LLC and 100% of IBG, Inc.’s Class B common stock. Since consummation of the IPO and Recapitalization, IBG, Inc.’s equity capital structure has been comprised of Class A and Class B common stock. All shares of common stock have a par value of $0.01 per share and have identical rights to earnings and dividends and in liquidation. As of September 30, 2020 and December 31, 2019, 1,000,000,000 shares of Class A common stock were authorized, of which 79,187,067 and 76,889,040 shares have been issued; and 79,054,435 and 76,750,110 shares were outstanding, respectively. Class B common stock is comprised of 100 authorized shares, of which 100 shares were issued and outstanding as of September 30, 2020 and December 31, 2019, respectively. In addition, 10,000 shares of preferred stock have been authorized, of which no shares are issued or outstanding as of September 30, 2020 and December 31, 2019, respectively. As a result of a federal income tax election made by IBG LLC applicable to the acquisition of IBG LLC member interests by IBG, Inc., the income tax basis of the assets of IBG LLC acquired by IBG, Inc. have been adjusted based on the amount paid for such interests. Deferred tax assets were recorded as of the IPO date and in connection with subsequent redemptions of Holdings member interests in exchange for common stock. These deferred tax assets are included in other assets in the Company’s condensed consolidated statements of financial condition and are being amortized as additional deferred income tax expense over 15 years from the IPO date and from the additional redemption dates, respectively, as allowable under current tax law. As of September 30, 2020 and December 31, 2019, the unamortized balance of these deferred tax assets was $107 million and $116 million, respectively. IBG, Inc. also entered into an agreement (the “Tax Receivable Agreement”) with Holdings to pay Holdings (for the benefit of the former members of IBG LLC) 85% of the tax savings that IBG, Inc. actually realizes as the result of tax basis increases. These payables to Holdings are reported as payable to affiliate in the Company’s condensed consolidated statements of financial condition. The remaining 15% is accounted for as a permanent increase to additional paid-in capital in the Company’s condensed consolidated statements of financial condition. The cumulative amounts of deferred tax assets, payables to Holdings and additional paid-in capital arising from stock offerings from the date of the IPO through September 30, 2020 were $506 million, $430 million, and $76 million, respectively. Amounts payable under the Tax Receivable Agreement are payable to Holdings annually following the filing of IBG, Inc.’s federal income tax return. The Company has paid Holdings a cumulative total of $205 million through September 30, 2020 pursuant to the terms of the Tax Receivable Agreement. The Exchange Agreement, as amended, provides for future redemptions of member interests and for the purchase of member interests in IBG LLC by IBG, Inc. from Holdings, which could result in IBG, Inc. acquiring the remaining member interests in IBG LLC that it does not own. On an annual basis, members of Holdings are able to request redemption of their interests. At the time of IBG, Inc.’s IPO in 2007, three hundred sixty (360) million shares of authorized common stock were reserved for future sales and redemptions. From 2008 through 2010, Holdings redeemed 5,013,259 IBG LLC interests with a total value of $114 million, which redemptions were funded using cash on hand at IBG LLC. Upon cash redemption these IBG LLC interests were retired. From 2011 through 2019, IBG, Inc. issued 15,417,157 shares of common stock (with a fair value of $506 million) directly to Holdings in exchange for an equivalent number of member interests in IBG LLC. ‎ On July 27, 2020, the Company filed a Prospectus Supplement on Form 424B (File Number 333-240121) with the SEC to register up to 990,000 shares of common stock, offering the opportunity for eligible persons to receive awards in the form of an offer to receive such shares by participating in one or more promotions that are designed to attract new customers to the Company’s brokerage platform, increase assets held with the Company’s brokerage business and enhance customer loyalty. On August 20, 2020, the Company filed a Prospectus Supplement on Form 424B5 with the SEC to issue 1,000,000 shares of common stock (with a fair value of $52 million) in exchange for an equivalent number of shares of member interests in IBG LLC. As a consequence of these redemption transactions, and distribution of shares to employees (see Note 10), IBG, Inc.’s interest in IBG LLC has increased to approximately 19.0%, with Holdings owning the remaining 81.0% as of September 30, 2020. The redemptions also resulted in an increase in the Holdings interest held by Mr. Thomas Peterffy and his affiliates from approximately 84.6% at the IPO to approximately 89.6% as of September 30, 2020. On October 30, 2020, the Company filed a Prospectus Supplement on Form 424B5 with the SEC to issue 11,710,608 shares of common stock (with a fair value of $557 million) in exchange for an equivalent number of shares of member interests in IBG LLC. This issuance of shares increased the Company’s ownership in IBG LLC from 19.0% to 21.8%. This redemption also resulted in an increase in the Holdings interest held by Mr. Thomas Peterffy and his affiliates to approximately 89.8% as of October 31, 2020. ‎ Earnings per Share Basic earnings per share is calculated utilizing net income available for common stockholders divided by the weighted average number of shares of Class A and Class B common stock outstanding for that period.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
|  | (in millions, except share or per share amounts)
Basic earnings per share |  |  |  |  |  |  |  |  |  |  |  |
Net income available for common stockholders |  | $ | 46 |  | $ | 36 |  | $ | 124 |  | $ | 117
Weighted average shares of common stock outstanding |  |  |  |  |  |  |  |  |  |  |  |
Class A |  |  | 78,509,525 |  |  | 76,742,689 |  |  | 77,542,908 |  |  | 75,909,980
Class B |  |  | 100 |  |  | 100 |  |  | 100 |  |  | 100
|  |  | 78,509,625 |  |  | 76,742,789 |  |  | 77,543,008 |  |  | 75,910,080
Basic earnings per share |  | $ | 0.59 |  | $ | 0.46 |  | $ | 1.60 |  | $ | 1.54
Diluted earnings per share are calculated utilizing the Company’s basic net income available for common stockholders divided by diluted weighted average shares outstanding with no adjustments to net income available to common stockholders for potentially dilutive common shares.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
|  | (in millions, except share or per share amounts)
Diluted earnings per share |  |  |  |  |  |  |  |  |  |  |  |
Net income available for common stockholders |  | $ | 46 |  | $ | 36 |  | $ | 124 |  | $ | 117
Weighted average shares of common stock outstanding |  |  |  |  |  |  |  |  |  |  |  |
Class A |  |  |  |  |  |  |  |  |  |  |  |
Issued and outstanding |  |  | 78,509,525 |  |  | 76,742,689 |  |  | 77,542,908 |  |  | 75,909,980
Potentially dilutive common shares |  |  |  |  |  |  |  |  |  |  |  |
Issuable pursuant to employee stock incentive plans |  |  | 610,923 |  |  | 606,187 |  |  | 700,691 |  |  | 736,407
Class B |  |  | 100 |  |  | 100 |  |  | 100 |  |  | 100
|  |  | 79,120,548 |  |  | 77,348,976 |  |  | 78,243,699 |  |  | 76,646,487
Diluted earnings per share |  | $ | 0.58 |  | $ | 0.45 |  | $ | 1.58 |  | $ | 1.52
Member Distributions and Stockholder Dividends During the nine months ended September 30, 2020, IBG LLC made distributions totaling $304 million, to its members, of which IBG, Inc.’s proportionate share was $57 million. In March, June, and September 2020, the Company paid quarterly cash dividends of $0.10 per share of common stock, totaling $8 million, $7 million, and $8 million, respectively. On October 20, 2020, the Company declared a cash dividend of $0.10 per common share, payable on December 14, 2020 to stockholders of record as of December 1, 2020. ‎

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