IG Group Shares Fall Up to 27% on a 14% Revenue Drop as Underdog, Its Pending $1.3bn Buy, Doubles

IG's core trading business kept more customers and less of their money in the third quarter, and the London-listed broker has cut its 2026 growth outlook to mid-single digits. The US fantasy and prediction-market operator it agreed in July to buy for up to $1.3 billion more than doubled its revenue, but that deal has not closed and the business is in court with six states.

• IG Group expects third-quarter total revenue of about £240 million, down 14% from £280.1 million a year earlier, after revenue retention on its over-the-counter (OTC) derivatives fell to about 70% from the roughly 80% it had averaged, and now expects 2026 revenue growth in a mid-single-digit range
• Organic first trades rose more than 25% and active customers about 17%, but the shares fell as much as 27.2% on Friday 2 October, Investing.com reported
• Underdog, which IG agreed on 30 July to acquire for up to about $1.3 billion, grew third-quarter net revenue by more than 100% to about $105 million; IG reports it separately because the acquisition has not completed
• Completion is expected in late 2026 or early 2027, subject to US regulatory approvals and antitrust clearance and, according to the July announcement, to "confirmatory diligence and definitive documentation"
• Underdog has sued six states over their attempts to stop its sports event contracts, most recently Connecticut, and two of its entities were among the ten recipients of Ohio's cease-and-desist letters dated the same day as IG's update

Lower Retention, Not Fewer Customers, Took IG's Revenue Down

IG Group Holdings, the London-listed group whose brands offer leveraged trading, stock trading and investments, and cryptocurrency trading, published a third-quarter trading update on Friday 2 October. Group total revenue for the three months to 30 September is expected to be about £240 million, against £280.1 million a year earlier, including net trading revenue of about £210 million, against £249.5 million. OTC net trading revenue fell about 18% to about £155 million, even though OTC customer income, the amount customers paid to trade, rose about 8%.

The gap is retention, the share of customer income that IG turns into net trading revenue. It was about 70% in the quarter, "below the approximately 80% averaged since the introduction of market-making optimisation measures", the company said. Chief Executive Breon Corcoran said that "Growth in first trades and active customers remained strong in Q3 2026. Lower Q3 revenue reflected reduced OTC revenue retention in less supportive market conditions, and I remain confident in meeting our medium-term guidance."

IG now expects 2026 total revenue growth "in a mid-single-digit per cent range". In July, after first-half revenue rose 18% to £642.8 million, it had expected full-year results in line with market expectations and EBITDA margins in a mid-40s per cent range. The 2026 margin is now expected in the low 40s, excluding about £30 million of costs for its redomicile to Jersey and restructuring and excluding Underdog acquisition expenses, "which are contingent on closing".

The shares fell as much as 27.2% intraday on Friday, to their lowest since April 2025, according to Investing.com. They closed on Monday at 971.5p, about 25% below their pre-update level, and RBC Capital Markets and Panmure Liberum cut their targets while keeping buy ratings, Proactive Investors reported; Panmure analyst Barun Singh called the quarter "a retention miss, not a customer miss".

What IG Agreed to Pay for Underdog

IG announced on 30 July that it had agreed to acquire Underdog Sports Holdings, the US daily fantasy sports (DFS) and prediction-market operator, for total consideration of up to about $1.3 billion. The upfront element is based on an enterprise value of about $1.1 billion, 2.4 times Underdog's net revenue for the 12 months to June, an equity value of about $963 million. IG will pay it with about 24.1 million new IG shares, about 6.8% of the enlarged share capital and 60% of the upfront equity value, plus about $380 million in cash, and will repay about $160 million of Underdog's debt at completion. An earnout of up to about $200 million depends on Underdog's 2026 net gaming revenue, paid on a straight line between $533 million and $600 million and only if 2026 EBITDA is positive. A separate management incentive plan, capped at $850 million, pays in full only if Underdog's EBITDA reaches $400 million in 2028 and $700 million in 2029. A bridge facility of up to $950 million from Barclays and Goldman Sachs funds the cash, and IG paused buybacks.

Completion is expected to be conditional on "relevant regulatory approvals in the United States" and on clearance under the Hart-Scott-Rodino Act, and is expected in late 2026 or early 2027. IG has not announced completion: its Q3 update reports Underdog separately and treats deal costs as contingent on closing. Corcoran, an early investor in Underdog with about 0.34% of its fully diluted equity, recused himself from the board's formal approval, the July announcement said.

Underdog's figures explain the price. Net revenue was about $466 million in the 12 months to June, up 21%, and the company turned EBITDA-positive in the first quarter of 2026, with about $46 million of EBITDA on about $122 million of net revenue in the second. The third quarter's roughly $105 million more than doubled the prior year but was below the second quarter; the fourth quarter produced more than a third of Underdog's 2025 revenue, IG noted. IG will hold a seminar on Underdog for investors on 8 October and set out its strategy and guidance on 22 October.

Why a CFD Broker Wants a US Sports Business

IG's case is that trading and sports speculation are converging. It describes the deal as "a defining step establishing IG as a leader in US prediction markets", says Underdog is the third-largest US venue by regulated notional volume behind Kalshi and Robinhood, and values its full licence stack: a futures commission merchant, a designated contract market (DCM) launched in July and a derivatives clearing organisation, all regulated by the Commodity Futures Trading Commission (CFTC). On IG's pro forma figures the US would have been about 40% of 2025 group revenue instead of 22%, and more than 58% of Underdog's customers have traded individual stocks, a funnel into its US broker, tastytrade. The announcement is candid about the alternative: as a game of skill regulated state by state, DFS confines Underdog to "a fraction of the risk-taking its customers seek".

That bet has met resistance since July. In September Underdog gave up its fantasy licences in seven states, then sued Ohio, Massachusetts, Wisconsin, New Mexico, Washington and Connecticut, arguing that the CFTC's jurisdiction pre-empts state gambling law. On 25 September the Sixth Circuit rejected that argument in Kalshi's cases against Ohio and Tennessee, and Ohio's letters of 2 October went to Underdog Predict and Underdog Exchange DCM among others. North Carolina also fined Underdog's sportsbook arm $175,000 last month over 38 underage accounts, a business it has already left.

A Retention Miss Is Not a Customer Miss, but It Lands at the Worst Time

Panmure's distinction is fair: more people traded with IG, and they paid more to do so, while IG kept less of that money in what it calls less supportive market conditions. Retention swings with conditions, and a quarter at 70% does not prove the 80% average was a peak. But IG told investors in July that its standalone guidance was unchanged, and it has now cut its own year in the same quarter that it is asking shareholders to trust its judgement on a $1.3 billion acquisition. The 22 October strategy update now has two jobs: to explain the margin reset and to show what Underdog adds once its own fourth quarter, the season that matters most, is in.

The Deal Is Still Unfinished, and the Share Price Is Part of the Price

The July terms were set out as a number of IG shares, not a fixed value, so the fall in IG's share price lowers the worth of the 60% of the upfront equity that Underdog's holders take in stock, unless the terms are revisited. Nothing IG has published says they will be. The July announcement also made completion subject to confirmatory diligence and definitive documentation, and IG has not since announced that either is done. That leaves the earnout as the clearest test: Underdog needs 2026 net gaming revenue of at least $533 million for any of it to pay, and the fourth quarter will decide whether it does.

IG Is Buying a Federal Argument the Courts Are Testing

IG's rationale rests on prediction markets offering "national coverage in place of state-by-state gaming regimes". That is exactly the proposition Underdog is litigating in six states and that the Sixth Circuit rejected for Kalshi in September. If federal pre-emption holds, IG is buying a nationwide, CFTC-regulated sports exchange at an early stage. If the states win, it is buying a DFS operator that has surrendered its fantasy licences in seven states and a sports exchange that may be fenced out of others. IG cited the "evolving regulatory landscape for prediction markets and daily fantasy sports" as a risk in July; three months later, it looks like the main one.

IG is still adding customers, and the business it is buying is growing faster than any part of its own. The investors who took a quarter off its value want to see the deal close on terms that survive both a weaker share price and the US courts.