Markit Heads to IPO Market, Wall Street BrokerDealers All Smiles

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wsj logoBelow BrokerDealer.com blog news extract courtesy of the Wall St. Journal.

One of the biggest financial service industry IPOs of the season (as well as any other industry initial public offering of the season) is scheduled to launch on Thursday, and, as noted by the WSJ, Wall Street’s biggest banks are in line for a payday of up to a billion dollars from Markit Ltd.’s share float, as they cash out part of their stakes in the financial-data firm and divvy up the underwriting fees.

The 12 financial institutions that rank among the London company’s top shareholders expect to raise as much as $1.02 billion selling shares Wednesday at as much as $25 apiece, a rare bit of good news at a time of sluggish revenue, soft trading activity and regulatory scrutiny. The largest sellers are expected to be Bank of America Corp. BAC 0.00% , Citigroup Inc. C +0.29% and Deutsche Bank AG DBK.XE +0.49% , with Bank of America selling seven million shares to raise up to $176 million, according to filings.

The firm’s largest holders—an employee-benefits trust, private-equity firm General Atlantic and Singapore state-owned investment company Temasek Holdings Pte Ltd.—aren’t selling their shares, according to regulatory filings. The Canada Pension Plan Investment Board is considering buying $450 million worth of the shares, the filings said.

The offering, which begins trading Thursday, could give the financial-information company a $4.5 billion market value, highlighting Markit’s evolution in the years since the financial crisis and investors’ thirst for data on derivatives, bonds, loans and foreign-exchange markets.

“Markit started with a great idea, which was to create a central pricing service in what were at the time very rapidly growing credit markets,” said Mark Beeston, a former board member and founder of financial-technology venture-capital firm Illuminate Financial Management.

At the same time, the banks that have backed Markit since its founding more than a decade ago have been jockeying for position in selling the offering to the public. The deal is expected to raise as much as $1.1 billion altogether.

The company and the banks are discussing a fee pool of about 4% on the IPO, which would amount to as much as $45 million if the deal is priced at the top of the range, people familiar with the matter said.

The banks skirmished over their roles as the IPO was in its planning stages, according to some of the people familiar with the matter.

For the full story, please click here to visit the WSJ.

Bankers Open Vault for Hotel Deals:BrokerDealer.com Blog

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wsj logoBrokerDealer.com provides news extract below courtesy of the Wall St. Journal

Banks are checking back into the hotel business.

J.P. Morgan Chase JPM +0.63% & Co., Deutsche Bank AG and other firms are ramping up lending for lodging acquisitions and debt refinancing to levels not seen since before the financial crisis. Lenders made $31 billion in hotel loans last year, nearly double the 2012 level, according to the Mortgage Bankers Association, while all commercial-property lending rose 47%.

wsj loansCredit is flowing against a backdrop of rising room rates, limited new construction and a spike in leisure and business travel in big cities such as New York and Los Angeles. Net operating income increased by 10% for the average U.S. hotel in 2013, according to PKF Consulting USA, which predicts “double digit annual gains” through 2015.

The easy money means hotel companies and investors can use less of their own cash to make deals, potentially amplifying returns. Debt now accounts for more than 67% of a hotel purchase price, up from about 56% in 2010, says PKF. That level is just below the high of around 70% in 2005.

Some of the largest hotel transactions have relied even more heavily on debt. NorthStar Realty Finance and a partner this month borrowed about $840 million from J.P. Morgan to acquire a 47-hotel portfolio for about $1 billion.

“There’s been a sea-change during the past two months,” says Monty Bennett, chief executive officer of Ashford Hospitality Trust, AHT +0.47% a Dallas-based hotel investor. “It’s pretty close to the 2007 lending environment again.”

The full WSJ article can be accessed by clicking here.

Trader Who Called Markets ‘Rigged’ Tempers His Critique

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BrokerDealer.com/blog update courtesy of extracts from today’s NYT DealBook

WASHINGTON – Bradley Katsuyama, chief executive of the stock trading upstart IEX Group, made waves on Wall Street by playing the part of a disruptive innovator who said he believed the markets were “rigged.”

But he adopted a softer tone on Tuesday in testimony prepared fora hearing before the Senate Permanent Subcommittee on Investigations. Mr. Katsuyama, who rocketed to prominence afterbeing featured in Michael Lewis’s recent book “Flash Boys,” voiced more measured criticisms of the market and defended the regulatory status quo.

Bradley Katsuyama, chief of IEX Group, at a Senate hearing on high-speed trading. (Doug Mills/The New York Times)

“We want to emphasize the point that IEX was created within the current regulatory framework, which shows that the spirit of the rules governing our market allow for different types of solutions to emerge if participants are properly incentivized to create them,” Mr. Katsuyama said in the prepared remarks.

The testimony showed a different side of Mr. Katsuyama, who had accompanied Mr. Lewis on a media tour surrounding the publication of “Flash Boys” in March.

In one appearance on CNBC, Mr. Katsuyama addressed the president of the BATS Global Markets exchange company, William O’Brien, and said: “I believe the markets are rigged. I also think you’re part of the rigging.”

With the book tour over, Mr. Katsuyama is trying to gain legitimacy for IEX by registering it as a full-fledged exchange. On Monday, IEX said it had hired John Ramsay, a former acting head of the trading and markets division of the Securities and Exchange Commission, to oversee regulatory compliance.

The Senate hearing on Tuesday, examining possible conflicts of interest in the stock market, will provide an opportunity for Mr. Katsuyama and other financial executives to recommend new policies while simultaneously promoting their business models. They will be subjected to questioning by the members of the Senate panel, which is led by Senator Carl Levin, Democrat of Michigan.

A major focus of the hearing will be the payments that brokerage firms receive for routing customer orders to particular exchanges or trading firms. The Senate panel contends that these payment systems can compromise brokerage firms’ obligation to execute customer orders on the best possible terms.

But not all the witnesses see it that way. Joseph P. Ratterman, the chief executive of BATS, acknowledged in his prepared remarks for the panel that payments for stock orders “create the potential for conflicts of interest,” but he added: “I believe these potential conflicts of interest can be and generally are managed by vigorous oversight within broker-dealers.”

He addressed a payment system known as the “maker-taker” model, in which brokerage firms accept rebates from exchanges in return for routing orders there. The Senate panel has singled out such rebates for scrutiny, warning of possible conflicts. But Mr. Ratterman said the rebates could improve liquidity and prices for investors.

“I believe restricting incentives to provide liquidity could be counterproductive,” he said in his prepared remarks. “Whether it is banning the current maker-taker fee structure, limiting payment for order flow generally, or other attempts to alter the economics of trading, price controls are a blunt instrument likely to cause disruptions and consequences that are unforeseeable and potentially detrimental to all types of investors.”

The full article can be found at NYT DealBook.

Swedish Cable Company Com Hem Raises $853 Million in Initial Public Offering.

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BrokerDealer.com/blog update courtesy of extracts from today’s NYT DealBook

LONDON – The Swedish cable company Com Hem Holding said on Tuesday that it raised 5.67 billion Swedish kronor, or about $853 million, in its initial public offering on the Nasdaq OMXStockholm exchange.

Com Hem, which was acquired by the private equity firm BC Partners in 2011, priced its offering at 58 kronor a share, giving it a market capitalization of 11.5 billion kronor. Shares of Com Hem rose 8.8 percent, to 63.10 kronor, in trading in Stockholm on Tuesday morning.

Com Hem is the largest cable company in Sweden, with around 1.8 million connected households. It could receive additional proceeds of up to 567 million kronor if an overallotment of shares in the offering is fully exercised.

BC Partners, which did not sell shares in the I.P.O., remains the company’s largest investor, with a 50 percent stake. It would hold a 47.7 percent stake if the additional allotment were sold.

“With the support of our new shareholders, we are in a strong position to move forward and to grow our business,” Anders Nilsson, the Com Hem chief executive, said.

Com Hem plans to use the proceeds to reduce debt and to give it more financial flexibility.

The I.P.O. comes at a time of consolidation in Europe’s telecommunications industry.

Vodafone of Britain, Telefónica of Spain and other large players have announced acquisitions in the last 18 months as Europe’s largest carriers bolster their offerings by purchasing cable and fixed-line assets to complement their mobile networks.

Com Hem, founded in 1983, also provides broadband and telephone services. It was spun out of Sweden’s former telecommunications monopoly and counts 39 percent of all households in the country as customers.

The company posted net revenue of 4.4 billion Swedish kronor in fiscal year 2013 and employs about 950 people.

The full article can be found at NYT DealBook.

Amid the Crazy Enterprise Valuations, Google Finds a Steal of a Deal: Entrepreneurs and Bankers Take Heed; A BrokerDealer.com Blog

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BrokerDealer.com thanks Connecticut’s JLC Group for below extract.

How to differentiate your disruptive and innovative company from the rest? Have your chief cheerleader (presumably your CEO) make an epic statement in which your entire company and your constituents can continuously hang their hats on..  The following is a classic example:

“We think we are going to fundamentally change humanity’s understanding of the economic landscape on a daily basis.” Skybox co-founder Dan Berkenstock

The above words from an entrepreneur whose offering is seemingly perceived to be something simple: satellite technology.

If you are an aspiring tech czar in the capital raising mode, a brand enhancement specialist, a brokerdealer or venture capitalist doing due diligence, or a mere investment banker who is working with an advanced-stage company whose execs are also looking to you to help ‘craft the value proposition” to investors, your target audience will always be more inspired when you perspire passion to the point where its dripping from your pores.

The context of the above quote is in connection with a very compelling piece written by WSJ reporter Christopher Mims in his aptly-titled column “KEYWORDS”

Hyperlink above will bring you to the June 16 WSJ article: The story itself is not merely about enterprise valuation techniques and not only about the next great technology innovation, the story transcends borders for those who can read in between the lines..