Going To Bat Once More: BATS Global Markets Makes Another Attempt At IPO

| About: BATS Global (BATS)

Summary

BATS is the second largest exchange in the US and largest platform for ETF exchange in the US.

BATS previously attempted to go public in 2012 but withdrew due to a technical glitch; the company appears to have addressed theses issues.

We suggest investors consider BATS, with impressive financials, new acquisition, and powerful syndicate.

We are hearing deal is many times oversubscribed.

Bats Global Markets (Pending:BATS) expects to raise ~$200 million in its upcoming IPO. Based in Lenexa, Kansas, Bats Global Markets is the largest U.S. equities market operator with four exchanges: the Bats BZX Exchange, BYX Exchange, EDGA Exchange, and EDGX Exchange. In addition, the company operates two U.S. equity options exchanges, the pan-European stock market and a global market for trading foreign exchange products.

Bats expects to price its IPO between $17 and $19; however, Bats itself will not issue shares in the IPO, rather it will allow current shareholders to sell up to 11.2 million shares.

Lead Underwriters: Citigroup and Morgan Stanley

Underwriters: BofA Merrill Lynch, Credit Suisse Securities, Goldman Sachs, J.P. Morgan, Jeffries Securities, Barclays Capital, Deutsche Bank Securities, Nomura, Rosenblatt Securities, and Sandler O'Neil and Partners.

Business Summary: Operator Of Several Exchanges

Bats Global Markets operates a variety of exchanges in the U.S. and Europe as well as offering services for financial markets across the globe for traders, issuers and investors. Their proprietary platform facilitates trading in securities and exchange traded products (ETPs) for its U.S. and European equities markets and their two U.S. options exchanges. In addition, the company operates Hotspot, an institutional spot foreign exchange market.

The shares will be listed on the Bats BZX Exchange with the symbol "BATS." Bats originally planned an IPO in March 2012. The shares priced on March 23, 2012 at $16, but a glitch in the Bats trading programs caused the stock price to fall to as low as $.04 per share.

Up To Bat Again, Following Prior Problems

Not only did the glitch cause issues in its own IPO, but three flawed Apple trades tripped a circuit breaker, which temporarily stopped trading in Apple stock. Bats halted trading on its exchange of affected stocks with a range of symbols; the exchange later reinstated trading in those shares, but withdrew the Bats IPO.

According to its SEC filing, Bats considers its proprietary platforms to now be reliable. The company noted that the platforms have "very low operational downtime, as demonstrated by the fact that for the years ended December 31, 2015 and 2014, all of our global markets were immediately and automatically accessible (i.e., fully operational) 99.994% and 99.991% of the time, respectively."

In addition, Bats noted that for 2015, five of their eight global platforms performed at 100 percent for the entire year. The company believes that its customers now trust its platforms to minimize trade execution risk, especially during high market volatility.

Executive Management Highlights

CEO, President and Director Christopher Concannon has served in his positions since December 2014. His previous experience includes senior positions at NASDAQ QMX Futures Exchange, Virtu Financial, NASDAQ OMX Group, Instinet Group, and Morgan, Lewis & Bockius LLP. Mr. Concannon received a B.A. Degree from The Catholic University of America in 1989, an M.B.A. from St. John's University and a J.D. from the Columbus School of Law at the Catholic University of America.

CFO, EVP and Treasurer Brian Schell has served in his position since March 2011. His previous experience includes financial position at H&R Block Financial Advisors, Pollen Inc., JP Morgan, KPMG Peat Marwick and the Federal Deposit Insurance Corporation. Mr. Schell graduated from the University of Notre Dame with a bachelor's degree in business administration He also holds a master's degree in business administration from The George Washington University.

Potential Competition: NASDAQ OMX Group and London Stock Exchange Group

Bats Global Markets faces competition from three primary sources: NASDAQ OMX Group, the London Stock Exchange Group and NYSE Euronext Holdings.

Valuation: Strong And Growing Revenues, Income

Bats Global Markets provided the following figures from its financial documents for the nine months ended September 30:

 

2015

2014

Total Revenues

$1,335,200,000

$1,024,400,000

Net Income

$60,500,000

$30,900,000

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As of September 30, 2015:

Assets

$1,288,800,000

Total Liabilities

$924,800,000

Stockholders' Equity

$364,900,000

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Conclusion: A Strong Company, A Tough Market

We are impressed by BATS' significant and hefty growth. The company appears to have addressed technical issues, which prevented its 2012 IPO from being successful. A large syndicate also bodes well for bringing 11 million+ shares into the public market.

We suggest investors strongly consider this IPO, while keeping an eye on the overall difficult market conditions at present.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in BATS over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.