OTC Markets- Is Market Data their future?

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OTC Markets Group- OTCM - The OTC Markets Exchange. Is their future to become a bigger and bigger data provider? The company has a market cap of roughly $575m and did $101m in revenue last year. They operate in multiple markets including OTCQX Best Market, OTCQB Venture Market, and the Pink Open Market. Founded in 1904 and headquartered in NYC the company has seen revenue grow at a 5-year CAGR of 12%

The market data business makes up 40% of the Q1 revenue and the bulk data products saw revenue increase by 33%. The increase in the market data business overall grew 2% quarter over quarter, with growth coming from new subscribers and price increases.

All the exchanges have leaned heavily into market data and alternative data sales. Does OTC Markets have an opportunity to lean in more? Make acquisitions or create partnerships? If they take a page out of the Nasdaq playbook, they could acquire a data marketplace like Quandl, and rebrand it. They could then sell other datasets as a partner taking a revenue share. Maybe work with a company like InitialDataOffering.com to find good data assets 🙂

They could follow in the footsteps of TMX, and start acquiring smaller data vendors. TMX recently acquired Wall Street Horizon for a modest amount of money but it allowed them to pick up both hedge fund clients and pro traders. The data gave them the ability to sell historical and forward-looking events, earnings dates, dividend dates, conference dates, and more. There are other events businesses out there like Eventvestor that would likely be a small tuck-in for the exchange.

What about going bigger and acquiring a desktop solution or partnering with one? We at Social Leverage are investors in Finchat.io and Koyfin, but there are many others including Benzinga’s Pro terminal, Money.net, Klick Analytics, and more.

OTC Markets acquired Edgar Online in late 2022 which was a good supplier of some of the basic financial markets data including insider data, ownership data, and financials. They also acquired Blue Sky Data Corp in 2022. They had this to say about the acquisition:

“This acquisition will deliver a fully integrated product suite that provides a holistic, comprehensive view of Blue Sky secondary trading compliance,” said R. Cromwell Coulson, President and CEO of OTC Markets Group. “Our unique data offering will help our broker-dealer subscribers and public companies improve their understanding of and compliance with State Securities Laws.”

With a cash balance of around $30m, continuing to do some small acquisitions in both cash and stock seems to be a good opportunity. If data continues to be one of the most valuable assets, I would think OTC Markets should lean heavily into this opportunity. Maybe think about a transformational acquisition.

Then the next question should be - how do they lean into AI!

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