Tradeweb Jumps in Debut After 2019's Second-Biggest U.S. IPO

(Bloomberg) -- Tradeweb Markets Inc., the bond and derivative trading platform, jumped in its debut after raising $1.1 billion in the second-largest U.S. initial public offering this year.

The shares closed up 33 percent from the offer price to $35.81 in New York trading Thursday.

The offering gives Tradeweb a total value of almost $8 billion including the Class A shares issued in the IPO as well as three other classes of shares, including two that won’t provide dividends. Including only the Class A shares and Class B stock, which carry 10 votes each and will allow those holders to retain more control of the company, that value comes to $4.9 billion.

The IPO streamlines Tradeweb’s ownership structure and gives it a public currency it can use for paying employees and for acquisitions, Chief Executive Officer Lee Olesky said in an interview. The company -- a reluctant borrower until now -- is obtaining a $500 million credit line in conjunction with the IPO that it will be able to tap for acquisitions to enhance its technology, Olesky said.

“We’ve done some things in the past and for us, we always say the past is a bit of prologue.,” Olesky said. “We focus on building networks. We focus on software development. We’ll look at a variety of things and we’ll be opportunistic.”

Tradeweb’s listing prospectus pegs government bonds, exchange-traded funds and U.S. credit as key areas of potential growth. Olesky said he sees growth across the board as it broadens its business to include retail and wholesale markets.

Digitization, Opportunity

“The larger the network you have, the more overlap there is in business,” he said. “So as things digitize you can connect different markets and we think that’s a big opportunity.”

“It’s not as if we’re doing this just for M&A,” Olesky said. “Having equity puts you in a different sort of footprint from a financial standpoint.”

Tradeweb sold 40 million shares on Wednesday for $27 each after twice raising the size of the offering. The shares opened trading Friday at $34.26 each.

The company will use the proceeds to buy shares from some members of a group of banks that own stakes in the company, including Morgan Stanley, which could receive as much as $188 million, and Bank of America Corp., which could get as much as $184 million, according to a registration statement filed Tuesday. Those numbers may have since changed because Tradeweb increased the size of the offering.

The bank investors are keeping a minority stake in Tradeweb and won’t be able to sell any more shares for six months, according to filings.

Lyft, Levi’s

Despite a slow start, 2019 is shaping up to be a blockbuster year for U.S. IPOs. Lyft Inc.’s $2.34 billion IPO last week is the biggest listing this year. Levi Strauss & Co.’s $623 million offering in February ranks third. Tradeweb’s IPO is also the biggest for a financial services company in the U.S. since online lender GreenSky Inc. raised $874 million in May.

The offering follows benefits administrator Alight Inc.’s decision in March to postpone plans to raise as much as $800 million in an IPO. Alight and Tradeweb are both owned by private equity firm Blackstone Group LP, which led the $17 billion acquisition last year of Tradeweb parent Refinitiv from Thomson Reuters Corp.

Net income at Tradeweb in 2018 was $159.5 million on revenue of $684.4 million, compared to net income of $83.6 million on revenue of $563 million a year earlier, the filing shows.

Majority Owners

Affiliates of Refinitiv will continue to hold about 54 percent of Tradeweb’s outstanding common stock, according to filings.

Tradeweb, founded in 1996, builds and runs electronics markets for trading government bonds, derivatives, exchange-traded funds and other financial instruments over the counter. It handled an average of $549 billion in daily trades in 2018, according to its IPO prospectus.

JPMorgan Chase & Co., Citigroup Inc., Goldman Sachs and Morgan Stanley led the offering. Tradeweb trades under the symbol TW on the Nasdaq Global Select Market.

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