Nymex Shares More Than Double on First Day of Trading
By Matthew Leising
Nov. 17 (Bloomberg) -- Shares of Nymex Holdings Inc., owner of the world's largest energy market, more than doubled on their first day of trading, the best performance for an initial public offering this year.
The shares jumped $81.61, or 138 percent, to $134.61 at 1:32 p.m. on the New York Stock Exchange, making Nymex the world's fifth-largest publicly traded exchange. The company and shareholders sold 6.5 million shares for $59 each in an IPO yesterday. Before this week, the company had forecast the shares would sell at $48 to $52.
The Nymex IPO ``came late in the game, and was the right thing to do, so that's why it's so valued,'' said Francis Gaskins, president of IPODesktop.com, a research company based in Marina del Rey, California.
Nymex is one of the last U.S. exchanges to transform itself into a public company. Shares of Chicago Mercantile Exchange Holdings Inc. have soared to more than $500 from $35 in their initial public offering in 2002. Intercontinental Exchange Inc., owner of Europe's largest energy market, has risen almost fourfold since going public a year ago.
Nymex, which trades benchmark U.S. contracts for crude oil, gasoline and natural gas, is benefiting from surging growth in commodities futures and options. Trading is at record levels at exchanges worldwide. Nymex profit has doubled or almost doubled compared with a year earlier in each of the past six quarters.
Fifth Largest
Gaskins said Nymex's market capitalization of about $12 billion, based on today's trading, makes it the fifth-largest publicly-traded exchange behind the Chicago Mercantile, Deutsche Boerse AG, the NYSE Group Inc. and Euronext NV. Nymex's market valuation is more than double that of Intercontinental, its nearest competitor.
Nymex's size means that ``they will be the acquirer and not the acquiree, and that's an important part of their strategy,'' Gaskins said.
The surge in the shares ``give us currency and leverage to look at things,'' said Richard Schaeffer, chairman of the Nymex. He said the exchange has no acquisitions planned at this time.
Intercontinental's shares rose $7.80, or 8.3 percent, to $102.40 in New York Stock Exchange composite trading after Schaeffer made his remarks about potential takeovers. The shares have nearly tripled this year.
If Nymex shares close above $118 today, they will have beaten Chipotle Mexican Grill Inc. for the best first-day performance on an IPO this year. Chipotle shares doubled to $44 after their initial sale to the public in January.
Chipotle
``I think they wanted to beat the Chipotle opening,'' Gaskins said. ``That's the last time I remember a legitimate company doubling.''
The 6.5 million Nymex shares in yesterday's offering included 5.4 million sold by the exchange itself, which would have been worth about $400 million more had they been sold closer to the price at which the shares are trading today.
``Obviously, the underwriters missed the mark on this offering,'' said Jack Ablin, who helps manage $48 billion as chief investment officer at Chicago-based Harris Private Bank. ``While it's certainly customary to price an issue slightly below value to create a little pop and buzz, missing the mark by half is crazy.''
The 1.1 million sold by existing shareholders represented about 1.4 percent of the Nymex stock held by former seatholders. They got 90,000 shares for each seat when the exchange changed its ownership structure earlier this year, separating the equity from the right to trade on the exchange.
`Wild Demand'
The lead underwriters for the Nymex IPO, JPMorgan Chase & Co. and Merrill Lynch & Co., ``did their job,'' according to Schaeffer. ``Nobody expected this wild demand.''
Buyout firm General Atlantic LLC bought a 10 percent stake in Nymex earlier this year and helped push for the changes in corporate governance and ownership structure that were needed prior to an initial share sale. The firm's stake in Nymex is now worth about $1.1 billion, a sixfold gain on its $170 million investment.
In the third quarter, Nymex earned $1.45 per contract, up 9 percent from a year earlier. The exchange traded 82.1 million contracts, 37 percent more than the same period in 2005.
Schaeffer said swings in prices of commodities such as oil and gold, known as volatility, are more important than rising prices for the exchange's business. Crude oil yesterday had its biggest decline in more than a year, dropping 4.3 percent to $56.26 on the Nymex.
Electronic Trading
Expanded electronic trading has also helped Nymex increase its profits and boost investor enthusiasm for the share sale. The exchange agreed earlier this year to list its energy and metals contracts on the Chicago Mercantile's Globex electronic trading system after losing market share to Intercontinental's ICE Futures electronic exchange.
Nymex, which was long known as a defender of open-outcry trading, where orders are shouted among traders crowded into a pit, for the first time earned more profit from computer trades than from its floor in lower Manhattan in the third quarter.
The exchange earned $22.4 million via electronic trading compared with $17.7 million from its floor in the third quarter, according to the company's quarterly financial filings. In the year-ago period, Nymex earned $8.2 million from computer-based trading.
Before the CME deal, Nymex electronic trading accounted for about 15 percent of its revenue, according to Phil Stiller, a research analyst at Renaissance Capital, a research and money management firm in Greenwich, Connecticut.
To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net . |
