BATS Calls Off IPO; Trading Glitch The Cause

March 23, 2012

Let's call the whole IPO thing off, BATS tells the world, after a rough morning of weird trades.

 

BATS Global Markets, the third-biggest U.S. stock exchange, called off its plans for an initial public offering Friday in the wake of a slew of aberrant trades that involved Apple Inc.'s and, more importantly, its own stock.

The Kansas City, Mo.-based company, which first announced plans to go public in May 2011, actually had begun the IPO yesterday, with more than 6 million class A common shares pricing at $16 per share, the company said then in a press release. The IPO was scheduled to be wrapped up by Wednesday, March 28.

“Although our affected market has reopened, in the wake of today’s technical issues, which affected the trading of certain stocks, including that of BATS, we believe withdrawing the IPO is the appropriate action to take for our company and our shareholders,” Joe Ratterman, chairman, president and chief executive officer of BATS, said in a separate statement the company issued today.

Another company official confirmed that Ratterman meant to convey that the IPO was being called off rather than postponed, but declined to discuss the exact reasons behind the decision or whether BATS might have another go at an IPO at some time in the future.

The crux of the decision seems to have been the fact that BATS' stock was affected by the computer glitch, apparently the failure of a server. The stock briefly traded down near a penny, completely undermining the credibility of the exchange, which more than any other has staked its future on so-called high-frequency trading.

Had its ticker been, say, "KATS" or "RATS"—that is, outside of the alphabetical range of tickers affected by the glitch—it's quite possible the IPO would still be on, industry sources said.

The planned IPO appears to have been an attempt by existing private shareholders to monetize the central role exchanges now play in a burgeoning world of electronic trading in which ETFs and other exchange-traded securities have a large and growing place. Industry sources say ETFs now make up about a third of the value of all equity trades in both the U.S. and Europe, and that that number can rise to 40 percent on days of high volume.

Might-Have-Beens

Top executives such as Ratterman and Chief Operating Officer Chris Isaacson would have been sold most of the stock in the IPO, according to the S-1 filing detailing the company’s plans.

Other listed businesses that stood to benefit from selling shares, according to the company’s filing, included entities linked to Citigroup, Credit Suisse, Deutsche Bank and even Lehman Brothers. The list also included Tradebot Ventures Fund 1 LLC.

BATS would not have received any proceeds from the sale of any shares by the selling stockholders.

Morgan Stanley, Citigroup and Credit Suisse were acting as joint book-running managers for the offering.

Also, Deutsche Bank Securities, Wedbush Securities, J.P. Morgan, Bank of America Merrill Lynch, Raymond James, Sandler O’Neill & Partners L.P., Rosenblatt Securities Inc. and Nomura were all acting as co-managers.

 

 

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