BATS Global Markets has been forced to make an embarrassing withdrawal of its own initial public offering, with the high-tech exchange group citing “technical issues” that caused its share price to plunge in the first moments of trading.
A day that was set to mark its debut on its own BATS listings market, which it launched earlier this year, instead served to reinforce lingering concerns about the integrity of US markets following the “flash crash” two years ago.
Duncan Niederauer, chief executive of NYSE Euronext, a BATS rival, told CNBC the broken IPO would have a “huge impact on investor confidence”.
It was only the second time that an IPO on a US exchange has been pulled after it priced and began trading, since 2000, according to Ipreo, a market research firm. A failed IPO in 2007 was related to a lawsuit and one in 1983, to the freak death of a chief executive.
BATS has no plans to attempt another IPO in the foreseeable future, according to a person familiar with its thinking.
The group has seen explosive growth since its founding with a handful of employees in 2005, using the fastest exchange systems to steal market share from the New York Stock Exchange and Nasdaq in the US and the London Stock Exchange in the UK. Its IPO had priced at $16 a share on Thursday night, which would have raised $100m and valued the company at over $760m.
But on Friday morning, the shares were halted soon after they began trading following a series of erroneous trades that put the exchange’s price near zero. Those trades were subsequently cancelled.
BATS said in a “postmortem” trading report that some of its computer code that matches trades encountered a “software bug related to IPO auctions” as BATS shares were beginning to trade.
The erroneous IPO trades coincided with an accidental plunge in shares of Apple. BATS said “stale quotes” in the stock resulted in three erroneous trades, later cancelled. One trade that was nearly 10 per cent away from Apple’s market price caused a circuit breaker to briefly halt Apple trading.
Despite the glitches, BATS intended for its shares to trade again after the software had been patched, but “ultimately made a decision not to reopen the symbol BATS” and cancelled its trades and withdrew the IPO. The initial orders for shares given to underwriters had not settled, so no cash had changed hands.
“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,” said Joe Ratterman, BATS chief executive.
Exchanges have been mired in regulatory scrutiny ever since the “flash crash” nearly two years ago, when the S&P 500 index swung 7 per cent in 15 minutes. BATS disclosed earlier this year that it had received an inquiry from the Securities and Exchange Commission related to communications with its customers, but no charges have been brought.
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