February 24, 2014 6:57 pm

Markit and Virtu race for New York IPOs

Two unique financial technology companies are preparing multibillion dollar initial public offerings, with both Markit and Virtu Financial seeking New York listings in the coming months.

Markit, the UK-based data provider, is aiming to raise at least $500m and seek a valuation of more than $5bn as early as the second quarter of this year, people familiar with its plans said.

At the same time, Virtu, a global proprietary electronic trading company that employs high frequency strategies, is aiming to raise around $300m from a listing that would value it at around $3bn, as it too seeks a market debut around that time, some of these people and others added.

Both companies have filed confidentially under a provision of a recent US securities reform act which allows companies with revenues of less than $1bn to keep the process confidential until nearer the time of an IPO.

While neither company was founded before the turn of the century and neither is a household name, unlike the larger banks and financial services industry constituents which are their clients and rivals, the planned listings highlight the growing power of technology and data in financial services.

An IPO for Markit would come 13 years after its chief executive Lance Uggla founded the company from a barn in St Albans, outside of London. Since then, the company, which is 51 per cent owned by a consortium of 12 banks, has grown to employ more than 3,000 people.

Markit’s business relies on deriving prices and valuations for difficult to obtain financial data, as well as processing and risk management of over-the-counter derivatives.

Along with Thomson Reuters, the financial data and media company, it has launched an ambitious effort, backed by investment banks, to unseat Bloomberg’s dominance in providing chat functions to traders, with the hopes of weaning its rivals’ customers off lucrative terminal contracts.

The company is working with Goldman Sachs on the offering and filing. Markit is expected to appoint JPMorgan Chase, Deutsche Bank and others for its IPO, which is likely to see existing shareholders reduce their stakes rather than an offering of new stock, people familiar with its plans said.

The listing may provide the path for an exit by Temasek, the Singaporean wealth fund that bought 10 per cent of the business for $500m last year, and General Atlantic, the private equity firm that owns 11 per cent. The remainder of the company is controlled by executives and employees.

New York-based Virtu is aiming to raise between $250m-$350m from a listing that would make it the first electronic trading business that trades with its own funds to launch an IPO.

Goldman Sachs is leading the listing along with JPMorgan Chase and Sandler O’Neill. The banks and Virtu, which is part-owned by Silver Lake Partners, declined to comment.

Virtu’s prospectus will provide a rare glimpse into the world of a secretive high-speed trading firm. The company, which employs about 150 people, had earnings of about $275m before interest, taxes, depreciation and amortisation last year, up from about $240m a year before, one person added.

Its listing will be a milestone for Vinny Viola, a West Point graduate and former chairman of the New York Mercantile Exchange, who founded the business in 2002. Virtu’s board includes General John Abizaid, the former commander of the US Central Command, this person added.

Mr Viola, presently chief executive, will assume the role of executive chairman upon the listing and Douglas Cifu will take on the chief executive role, one person said. Chris Concannon, a former Nasdaq executive who joined the company in 2009, will become chief operating officer.

Additional reporting by Philip Stafford in London

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