Shares of CBOE rise in debut after raising US$339.3m
NEW YORK, United States — SHARES of options exchange CBOE Holdings Inc jumped in their trading debut, logging a double-digit, first-day gain — albeit not as robust as previous exchange IPOs.
CBOE Holding’s initial public offering of 11.7 million shares priced at US$29 per share, the top of the expected range. Some analysts had worried that the price might be too high in a tepid IPO market, but others said the company’s history of rapid growth, exclusive products and acquisition potential justified a premium price.
The Chicago Board Options Exchange, based in Chicago, is the country’s largest options exchange and the last major US exchange to go public. It is famous for creating products such as the VIX, a popular gauge of risk known as the market’s “fear index.” It is also the only exchange for investing in options linked to the Standard & Poor’s 500 index.
The shares, trading on the Nasdaq Stock Market under the symbol “CBOE,” soared US$3.62, or 12 per cent, to US$33.62 in morning trading.
Still, CBOE’s first day of trading pales in comparison to previous exchange IPOs. The New York Mercantile Exchange more than doubled on its first day of trading in 2006. Intercontinental Exchange Inc rose 51 per cent, and Chicago Board of Trade Holdings Inc. rose 49 per cent when they debuted in 2005. CME Group Inc rose 23 per cent in its IPO debut in 2002. CBOT and NYMEX are now part of CME Group.
Still, CBOE’s IPO is still a success — particularly in the current environment. Half the companies going public this year have priced below expectations, the highest proportion since at least 1999, according to Renaissance Capital, an IPO research firm in Greenwich, Connecticut. Fourteen companies have postponed or cancelled offerings in the past two months — only 14 have gone public.
Many of the companies that have attempted offerings have had years of losses or a load of debt. CBOE was more attractive with net income that has grown nearly tenfold in the past five years as hedge funds and other investors use options to offset risks of other investments.
