About as bad as an IPO can get
Lately it’s been a banner time for IPOs. Most companies that have gone forward with raising money and taking their companies public have been well received and their shareholders handsomely rewarded. Well not for BATS Global Markets (BATS). The company’s IPO debut was absolutely horrific.
The Kansas City based electronic exchange priced its initial public offering Thursday night at $16 and made its market debut today. Unfortunately, that was the last good news BATS would have.
A single trade of 100 shares at a price of $542.80 hit the tape at 10:57a.m. coming from the BATS Exchange. The previous trade seconds earlier was at a price of $598.26. Shares of Apple, the world’s most valuable company, plunged nine percent on a single trade, causing APPL to be halted by the ‘single stock circuit breaker rule’ because of volatility.
The single stock circuit breaker rule triggers a halting of trading in the stock until the trade can be analyzed. In this case, according to Joe Terranova chief strategist for Virtus Investment Partners, “It looks like a fat finger mistake.” As it turned out, a mere nine minutes before the wacky trade took place; BATS issued this alert:
“Please be advised that BATS is currently investigating system issues trading in symbols range A through BF.”
Shares in APPL began trading about 5 minutes later near the $597.00 level. The bogus trade was corrected and as for Apple, the rest of the trading session was normal. That certainly can’t be said for BATS.
Bad to worse to GONE
The $16 IPO shares of BATS Global fell to $15.25 and then things really got out of hand. It’s possible that it may be due to its own exchange, but within minutes, BATS bid and ask prices dropped to just a few pennies. This initially prompted an indefinite halt to trading in BATS shares. Normally exchanges are able to work things out as was the case with Apple. What happened next was unbelievable for a debuting IPO.
At 3:15 p.m. BATS Global stated that its stock will not reopen for trading Friday, and that all executions of trades made at the open will be cancelled and affected parties notified. Ok well, it must be a glitch, right? The stock will probably begin trading on Monday. Wrong!
At 3:42p.m. BATS issued a statement that it plans to withdraw its IPO. President and CEO Joe Ratterman said, “Although our affected market has reopened, 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.”
Talk about a snafu. Not only does it appear that BATS caused a rotten Apple trade, but it appears as though its own system has taken it out of the game, at least for now. The BATS Exchanges currently handle between 11 to 12% of ALL U.S. equity trading on a daily basis. That places the exchange in the number three spot. Regardless if the company IPO’s in the future, it’s quite obvious there are technical bugs that need to be dealt with before other companies and investors are driven batty.