CBOE IPO Prices at Top of its Range

CHICAGO/NEW YORK (Reuters) – CBOE Holdings Inc. (CBOE.O), North America’s last major unlisted financial exchange, priced shares in its initial public offering at the top of the expected range on Monday, signaling investor demand in what has been a rocky market for new U.S. issues.

The Chicago Board Options Exchange sold 11.7 million shares for $29 each, raising about $339 million, according to a market source. It had planned to sell 11.7 million shares for $27 to $29 each.

The highly anticipated CBOE IPO could be a bright spot in a U.S. market weighed on by Europe’s debt woes, analysts said.

“It does show that there was demand from institutional investors for it, so there’s a decent likelihood that there is going to be some extra demand that is going to push it higher than that $29 tomorrow,” Morningstar equity analyst Michael Wong said.

“There’s a good possibility of a little pop.” 

Shares in IPOs have historically risen 10 percent to 15 percent in their first day of trading.

Fourteen U.S. IPOs have raised about $1.51 billion in May and so far in June, according to Thomson Reuters data; 18 IPOs worth almost $4 billion have been postponed or withdrawn.

Separately, CBOE’s largest investor boosted his stake in the No. 1 U.S. options market by purchasing two more seats, a bullish bet that put CBOE’s value on the eve of its IPO at $3 billion.

Chairman of Toronto-based Caldwell Investment Management, Thomas Caldwell, who spent nearly $5 million on the seats and whose purchases bring the total number of CBOE memberships under his control to 56, told Reuters they were a good deal.

The seat sales value CBOE shares around $29 or $30 each; Caldwell thinks shares will begin trading at $32 or $33. 


CBOE’s IPO makes it a possible takeover target, analysts and investors said. Such a move would have been difficult if not impossible as a member-owned organization, they added.

Speculation on a potential merger partner has most commonly focused on domestic buyers such as CME Group Inc (CME.O) and NYSE Euronext (NYX.N).

CBOE Chief Executive Officer William Brodsky’s acknowledged merger talks were indeed with the Chicago Board of Trade, now owned by CME.

But Caldwell said the scope of potential buyers is much larger, and could include overseas players such as Germany‘s Deutsche Boerse AG (DB1Gn.DE) or Brazil’s BM&F Bovespa SA (BVMF3.SA). 


CBOE’s IPO comes just before a legal decision in a case that threatens its highest-margin products, its exclusively listed options on stock-market indexes like the Standard & Poor’s 500.

CBOE gets 32 percent of its transaction fees — the lion’s share of its revenue — from these proprietary index options. But in a lawsuit first filed in 2006, CBOE rival International Securities Exchange Inc is seeking to force stock-index owners like S&P to allow other exchanges to list options on their benchmarks.

If ISE wins, CBOE’s licenses would become worthless, and its market share would fall, CBOE said in its public filings.

The judge is expected to rule on July 8.

CBOE, which competes with seven other options markets, dominates exchange-listed U.S. stock-options trading, with about 32.4 percent of the market.

The exchange is home to the widely followed CBOE Volatility Index, or VIX, and the exchange’s options on the index have become one of its fastest-growing contracts.

And because the market’s exclusive Standard & Poor’s 500 Index options can be used as a kind of insurance against broad-based stock-market declines, CBOE does well even when the stock market drops.

Last month, when Wall Street’s “flash crash” stripped 700 points from the Dow Jones Industrial Average in a matter of minutes before the benchmark rebounded, trading at CBOE rose faster than the industry average to a daily 6.6 million contracts.

Goldman Sachs led 18 underwriters on the IPO. The shares are expected to begin trading on the Nasdaq on Tuesday. (Reporting by Ann Saphir in Chicago and Clare Baldwin in New York; Editing by Sofina Mirza-Reid, Leslie Gevirtz, Gary Hill)