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SIMON BROWN: I’m chatting with Charles Savage, CEO of Purple Group. A disclaimer upfront – I hold shares in Purple. They are of course EasyEquities. Charles, appreciate you time on Monday afternoon, with the announcement coming through around an acquisition of Telescope AI – $10.75 million. We’ll get to the Ts & Cs in a moment.
The first question: What is Telescope AI, and why the acquisition?
CHARLES SAVAGE: How’s it, Simon? Thanks for taking the interest. Telescope AI essentially provides AI investment services to investors in a regulated and compliant way. We use one of their services, and in fact we were their first client.
If you’ve used the platform, as I know you have, then you would have come across it in AI Baskets, which is the ability to have a conversation with AI to construct a portfolio across the world, the globe.
That’s just one of their products that they deliver. They’ve got a whole stack of products from research to portfolio insights, to portfolio construction. They’ve been working on AI advisory, compliance advisory, compliance service and a whole host of other things.
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But fundamentally, if you like, they’re using AI to make investing more insightful and rewarding and easier – educational for everyone. We think that that’s going to be an important part of the future landscape of all brokers and businesses like ours.
Hence we’ve taken the opportunity to acquire them, having worked alongside them for over two years.
SIMON BROWN: Part of this – and in fact, I’m reading a tweet – is you talk around ‘AI at scale’. This very much is, to a degree, AI at scale. It’s investing at scale, which for Purple Group with one million-plus clients, is the name of the game.
CHARLES SAVAGE: Exactly. And a lot of these AI services are operating outside the house, if you like. So they’re building products and services from the boardrooms of their own businesses.
What we want to do is build products and services from the insights of our customer data and behaviour, which are now over a decade old. We think that if you do that at scale you’ll create better products and services faster than if you do it outside the house, if you like.
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Our bet is that working with this extraordinary team we’ll be able to do three things. One, accelerate our product capabilities. Two, introduce better products and services at all customer touchpoints by using AI. And three, come up with new products and services that are impossible for us to predict.
But we think we’ll emerge with a better understanding of AI in the context of our customer data and behaviour.
And if just one of those things does well, then the opportunity which looks, if you like, expensive on the surface, is really cheap in execution. A $1 million product line, and this is a very cheap acquisition.
And I think we’re going to produce multiples of $1 million product lines as a result of this transaction.
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SIMON BROWN: I take your point – stuff we can’t even dream of at this point in time will come through.
Is the team going to stay on, because I imagine something like this is intellectual property within the individuals as much as what they have already created?
CHARLES SAVAGE: Yes, it’s a five-year term. So the balance of the transaction vests over a five-year period, and the team have signed five-year contracts that keep them around for that period at a minimum.
But I think this is a team we’ve worked alongside. They understand the culture of that. We understand the culture of the business as well, and I think this is a team that will work well together long beyond just a five-year period.
SIMON BROWN: Telescope AI have worked with other customers as well, most notably [global trading platform] IG. Will they continue with third parties, or will they now be sort of exclusive and bespoke to the broader Purple Group?
CHARLES SAVAGE: No, we’ve done the transaction in two levels. Purple Group buys 50%, and EasyEquities the other 50%. That’s to ensure there’s proper segregation of function and duties. So the partnership business will be retained and kept.
We actually think that by building products for EasyEquities they’ll build better products for their customers. And then the business will also be integrated into the EasyEquities ecosystem.
So the two businesses will be kept apart. As you know, we run really good partner businesses across competing business lines, if you like – Capitec, Discovery, et cetera.
So the intention is to do the same here, to make sure that the partnerships are maintained and that we build better products and deliver them to their customers in time.
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SIMON BROWN: As I said upfront, what, $10.75 million – this is US dollars – some shares, almost 20 million shares. That’s not giant in the world. You’ve got 1.4 billion, so that’s not a significant number of shares, $5 million in cash – you’ve got the cash.
Are there any things to be fulfilled, or is this just, I don’t know, getting the signatures and making it happen?
CHARLES SAVAGE: The signatures are all in place. We just need Sarb [South African Reserve Bank] approval and then this transaction will go ahead. And I think there’s no reason for it not to go ahead. It’s just a formality.
SIMON BROWN: We’ll leave it there. Charles Savage, CEO of Purple Group, I appreciate the time.
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