Exchanges operator Bats plans second attempt at IPO

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Bats Global Markets, the US exchanges operator, is planning a second attempt at listing on its own market in a move the market hopes will herald a thaw in US initial public offerings.

The Kansas City-based company, the second-largest US equity exchange and rival to the New York Stock Exchange and Nasdaq, will look to erase memories of a botched listing four years ago with a new push.

Several of the exchange’s bank and trading shareholders are planning to sell a combined 11.2m shares at between $17 and $19 apiece. That would give Bats a market value of up to $1.8bn, more than double the $760m valuation it had in its attempt to float in 2012.

Bankers and corporations will be watching closely as Bats is one of the first major companies to test the US listings market after a quarter marked by more high-profile delays than successful listings.

IPOs have been few and far between as the broader market sold off sharply at the start of the year, but a rebound in March has raised hopes for new listings in April.

“Bats is a strong case for being the ice breaker: it is a significant player in its industry and profitable,” said Matthew Kennedy, an analyst at Renaissance Capital, an IPO-focused ETF provider. “IPO launches should start to pick up but people will be looking at how Bats actually prices and trades to determine whether they should launch their own deals.”

The Bats IPO is expected to price this month after a marketing blitz that will last about two weeks, a person familiar with the deal said.

“There might be some question about whether it can handle trading execution on its own exchange because of the cancelled IPO,” Mr Kennedy said.

Broker-dealer Instinet, Citigroup, Bank of America Merrill Lynch and KCG Holdings have indicated they will sell down parts of their stakes, according to a regulatory filing with the Securities and Exchange Commission.

Founded in 2005 by a group of banks, brokers and high-speed traders, Bats immediately put pressure on incumbents with faster technology and competitive fees. It accounts for about a fifth of daily trading by volume in US equities and about 10 per cent of US options markets.

Bats abandoned its 2012 listing when a software glitch caused its shares to plunge after they began trading, an embarrassing technical failure for an exchange that rose to prominence with the electronification of the US stock market.

Since the last attempt, it has merged with rival Direct Edge and branched out into foreign exchange trading with the $365m acquisition of Hotspot in 2015.

If successful, it would become the first corporate listing on the Bats exchange. Morgan Stanley and Citigroup will lead the offering, as they did in 2012. Including net debt, the new deal values the company at more than $2bn.

For the year to December, Bats reported net income of $83.3m on revenues of $1.8bn. It had long-term debt of $687.5m.

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