2nd UPDATE: BATS Global Markets Withdraws Initial Public Offering
March 23 2012 - 4:24PM
Dow Jones News
In one of the shortest debuts ever for a newly public company,
BATS Global Markets was forced to pull its initial offering after
systems issues caused a day filled with cancelled trades and
uncertainty.
The company, which priced its 6.3 million-share deal at $16
Thursday night, had been scheduled to trade on the BATS Exchange,
but ran into problems from the moment it opened.
The stock was halted in the morning for "clearly erroneous"
trades after it opened. BATS issued an alert on its website that it
was "actively investigating an issue." The exchange issued an alert
at 10:48 a.m. EDT that there were "system issues in symbols range A
through BF."
BATS didn't explain what went wrong with the trading in its
shares. In a statement just ahead of the market's close, the
company's chief executive said the deal was being withdrawn.
"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," said Joe Ratterman, chairman, president and chief
executive of BATS Global Markets.
Even though BATS had priced its IPO, it was still able to
withdraw the deal because the trades weren't scheduled to settle
until March 28. Until the trades settle, they can be canceled.
Besides BATS, shares of Apple Inc. (AAPL) were temporarily
halted in the morning for five minutes after erroneous trades were
made on BATS's exchange. According to FactSet, orders placed
through the BATS Global Markets came in well below where Apple had
previously been trading.
Although companies withdraw their IPOs all the time before
pricing, it is rare that they do so after the deal has already
priced. In 1993, Wilt Chamberlain's Restaurants Inc. was rescinded
after it priced, began trading, and declined sharply--angering
individual investors, who threatened legal action based on reports
that the company had allegedly taken a shortcut when it appraised
its only restaurant in operation.
The same fate befell Spectrum Diagnostics a year earlier, which
canceled its IPO after short-sellers pounded its stock. Osteotech
Inc. did the same in 1991 when its chairman took a leave of
absence, according to University of Florida finance Professor Jay
Ritter.
Another example was the IPO of Eagle Computer in 1983, said John
Fitzgibbon, president of research firm IPOScoop.com. In that case,
the CEO of Eagle was killed in a car accident the day of the IPO,
and the IPO was rescinded. The company eventually did come public
under another CEO, but later went into bankruptcy.
The BATS IPO launched as the Securities and Exchange Commission
examines whether some rapid-fire trading firms such as Getco LLC
and Tradebot Systems Inc., BATS investors, have used their close
links to computerized stock exchanges like BATS to gain an unfair
advantage over other investors. The wide-ranging probe, which was
detailed in a front-page article Friday in The Wall Street Journal,
is examining a number of electronic exchanges. The probe is at an
early stage and there is no suggestion of wrongdoing by trading
firms and exchanges.
The SEC probe stems partly from a broad look at computerized
trading that regulators initiated after the "flash crash" in May
2010, when stocks fell and rebounded sharply within minutes,
following glitches in computer-trading systems.
-By Lynn Cowan; 202-257-2740; lynn.cowan@dowjones.com