BATS exchange withdraws IPO after stumbles

Fri Mar 23, 2012 6:42pm EDT
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By Olivia Oran, Chuck Mikolajczak and Carrick Mollenkamp

NEW YORK (Reuters) - In a breakdown that resembled a mini version of the 2010 "flash crash," a series of blunders hit the market debut of BATS Global Markets Exchange Inc on Friday, causing the company to take the extremely rare step of withdrawing its initial public offering of shares.

The problems Friday morning caused BATS shares briefly to trade for less than a penny, confusing investors and potentially threatening the future of the fledgling exchange itself.

The glitches also fouled a trade in shares of Apple Inc, the world's most valuable company, and caused a temporary halt in the stock.

Prices plunged shortly after BATS shares began their first day of trading on the BATS exchange, a start-up that in a few years has captured about 11 percent of U.S. equity market volume and 3 percent of equity options volume.

"The one thing they would have guarded against is the integrity of their platform on the day they went public," said Francis Gaskins, president of IPO research site, in Los Angeles.

The exchange operator had priced 6.3 million shares at $16 per share late Thursday in an initial public offering sold by lead underwriters Citigroup Inc, Morgan Stanley and Credit Suisse Group. Several former or current Credit Suisse bankers serve on BATS' board, according to a BATS regulatory filing.

As trading began on Friday, BATS stock dipped to $15.25. Then extreme turbulence hit. A slew of bad trades at less than a penny sent the stock plunging. Though the trades were later voided, the plunge unnerved investors.

Around the same time, a bad trade for 100 shares of Apple also went through, triggering a circuit breaker that temporarily halted trading of Apple.   Continued...

Joe Ratterman, CEO of BATS Global Markets, speaks at the Reuters Exchanges and Trading Summit in New York March 29, 2010. REUTERS/Natalie Behring