Montreal Exchange(MXX) Shares Rise in Trading Debut
By Sean B. Pasternak and Doug Alexander
March 27 (Bloomberg) -- Shares of Montreal Exchange Inc., owner of Canada's derivatives market, rose 2.6 percent on their first day of trading, joining other exchange stocks that have gained on increased demand for options and futures.
The shares climbed to C$46.15 at the 4 p.m. close of trading on the Toronto Stock Exchange, after opening at C$45, giving the Montreal-based exchange a market value of C$1.43 billion ($1.24 billion). Earlier, the shares touched C$49.50, for a 10 percent gain.
``There's been euphoria around exchanges worldwide. It's consolidation, growth, technology,'' said Paul Hand, managing director of equity trading at RBC Capital Markets, a Montreal Exchange shareholder. ``There are people who feel this is part of a global consolidation of exchanges.''
Shares of exchange companies such as Nymex Holdings Inc. and Chicago Mercantile Exchange Holdings Inc. have rallied amid investor optimism that they will boost earnings and benefit from increased trading. The FTSE/Mondo Visione Exchanges, which tracks 19 exchanges around the world, has surged more than fivefold since 2001.
``The space globally has been remarkably active,'' National Bank Financial analyst Robert Sedran said in a telephone interview. ``You're seeing, increasingly, risk managers are turning to the derivatives market to hedge off various risks.''
No IPO
The Montreal bourse, which listed almost 31 million shares under the stock symbol MXX, has said it needed to go public to allow its investors, which include National Bank of Canada and UBS AG, the ability to trade its shares. The bourse didn't raise money from the listing, nor did it set a price for the opening trades. Montreal Exchange was the third most actively traded stock by value today, with more than 3.93 million shares changing hands.
John Aiken, an analyst at Dundee Securities Corp., who expected the stock to begin trading at C$42, forecasts the shares could trade in a range of C$50 to C$55. At C$55, the Montreal Exchange would trade at about 60 times its 2006 per- share earnings, making it one of the most expensive bourses in the world, based on Bloomberg data.
TSX Group Inc., owner of the Toronto Stock Exchange, trades at almost 25 times per-share earnings, and the NYSE Group Inc., owner of the New York Stock Exchange, trades at about 55 times earnings. The Chicago Mercantile Exchange Holdings Inc. trades at 46 times earnings.
``Off of these prices, there's potential for significant downside,'' for the Montreal shares, said Hand at RBC Capital, a unit of Royal Bank of Canada.
TSX Shares
TSX Group was the first exchange in North America to sell shares to the public. The stock rose 13 percent on its first day of trading in 2002 and has increased more than five-fold since then, for a market value of about C$3.4 billion. Shares of the Chicago Mercantile Exchange, the largest U.S. futures markets, have surged 15-fold since its 2002 debut.
Nymex, the world's largest commodity futures exchange, is one of the Montreal exchange's largest shareholders, after purchasing a 10 percent stake for C$90.9 million, or C$29.33 a share.
Other shareholders include Caisse de Depot et Placement du Quebec, Canada's biggest pension-fund manager; National Bank of Canada, the country's sixth-largest bank; and the Canadian unit of Switzerland's UBS AG. Montreal Exchange's rules prohibit individual shareholders from owning more than 10 percent of the company.
The 134-year-old exchange once led stock trading in Canada before Toronto supplanted Montreal as the country's financial center in the 1970s after separatists won power in Quebec. The bourse has been limited to trading derivatives under a 1999 agreement with TSX Group. That agreement ends in 2009, and TSX has already announced plans to compete with Montreal, creating a new market with the International Securities Exchange Holdings Inc.
Boston Agreement
In addition to a natural resources exchange it's developing with Nymex, the Montreal Exchange owns about a third of the Boston Options Exchange and 51 percent in a venture with Chicago Climate Exchange Inc. The bourse has agreed to buy an additional 13.3 percent of the Boston exchange for $34.2 million, pending approval from U.S. regulators.
``We will look at other opportunities to seek out agreements with strategic partners,'' Bertrand told reporters in Toronto yesterday.
Bertrand, who rang the bell to open trading at the rival Toronto Stock Exchange today, said in an interview with Bloomberg Television that the investment by Nymex isn't a prelude to a takeover.
Montreal Exchange hired National Bank of Canada and Citigroup Inc. to help it go public.
The following table shows the performance of shares in North
American exchanges on their first day of trading:
Exchange First Day of Trading Percent
Montreal Exchange March 27, 2007 2.6
TSX Group Nov. 6, 2002 13
Chicago Merc Dec. 6, 2002 23
Nasdaq July 1, 2002 15
ISE March 9, 2005 69
Board of Trade Oct. 19, 2005 49
ICE Nov. 16, 2005 51
NYSE Group March 8, 2006 25
Nymex Nov. 17, 2006 125 |
