Virtu seeks $2.6bn valuation from listing
A stockbroker gestures while monitoring financial data on his computer screens at Shore Capital Group Ltd. brokerage in London, U.K., on Thursday, March 28, 2013. Cyprus's banks opened for the first time in almost two weeks, with new rules curbing access to cash preventing an initial panic to withdraw deposits. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg
Virtu Financial, a US electronic market maker, is poised for a stock market listing this month in a move that will test investors’ attitude to the controversial practice of high-frequency trading.
The group is seeking to raise up to $361m from its listing on Nasdaq, restarting a process put back a year ago amid the furore caused by the publication of Michael Lewis’s Flash Boys.
In a filing with US regulators on Monday, Virtu confirmed it was seeking to offer 16.5m shares at between $17 and $19 a share. The move would give it an equity valuation of about $2.6bn, lower than the $3bn it was seeking 12 months ago. The underwriters also have the option to purchase another 2.5m shares in the flotation if demand warrants.
Its success or otherwise will help decide if some asset managers and long-term investors — often cited as the victims of aggressive trading strategies — have moved on from last year’s fracas over high-frequency trading and are willing to buy shares in what would be the first listing of a proprietary electronic trading business.
In the wake of Flash Boys ’ publication, which focuses on the rise of high-frequency trading in the US equity market, US regulators have begun a review of US market structure. Market participants, from traders to exchanges, have been fined by the US Securities and Exchange Commission for breaking trading rules.
Virtu is one of the largest traders in global equities, commodities and foreign exchange, making money on the difference in the spread at which assets are traded.
Formed in 2008, the group – tother with its rivals, such as KCG Holdings and RGM – has come to represent a new breed of trader that succeeded in grabbing large chunks of daily trading flow from the banks.
They use cutting-edge technology to trade frequently but aim to end the trading day with minimal capital committed in open positions.
Virtu has drawn attention for its disclosure that it has lost money on just one of the past 1,485 trading days. This statistic is largely due to the size and frequency of its bets in the market. Just under half of trades are profitable.
Revenues at the company rose 9 per cent to $723m while net income climbed 4.3 per cent to $190m in 2014. It also estimated that in the three months to March 31, quarter-on-quarter revenues rose between 21 per cent and 30 per cent to $210m-$225m. In the same period, net income rose between 44 per cent and 55 per cent, to $70-$76m.
The IPO will help Silver Lake Partners, a US private equity group and long-time backer of Virtu, sell down part of its 10.7 per cent shareholding.
The listing is being lead by Goldman Sachs, JPMorgan and Sandler O’Neill & Partners.