CBOE’s IPO success may prompt others to take chance on uncertain market

CBOE IPO shines, may prompt others to go public

NEW YORK — Shares of options exchange CBOE Holdings Inc., the last major U.S. exchange to go public, jumped in their trading debut, logging a double-digit first-day gain.

In the current market, wherein numerous initial public offerings have been postponed or canceled, CBOE was a success. Volatile stock markets and a tentative economic recovery have made investors wary of riskier investments. Half the companies that have gone public this year have priced below expectations, the highest proportion since at least 1999.

CBOE’s shares priced at top of the range that the company and its underwriters were targeting. The shares opened at $32.80, 13 percent above their offering price of $29 and continued to climb. The stock, trading on the Nasdaq Stock Market under the symbol “CBOE,” soared $3.49, or 12 percent, to close at $32.49 in trading Tuesday.

But compared to other exchanges that have gone public in recent years, the offering wasn’t as impressive. New York Mercantile Exchange’s stock more than doubled on its first day of trading in 2006. Intercontinental Exchange Inc. shares rose 51 percent, and Chicago Board of Trade Holdings Inc. shares rose 49 percent when they debuted in 2005. CME Group Inc.’s stock rose 23 percent in its IPO debut in 2002. CBOT and NYMEX are now part of CME Group.

“In a better environment (CBOE) would have done better,” said Scott Sweet, who owns research firm IPO Boutique. The exchange, “had the goods.”

Still, the fact that a well-known, profitable company with a brand name offered shares and did well may prompt other high-profile companies looking to raise money through IPOs to step forward.

Electric car maker Tesla Motors Inc., which has a partnership with Toyota Motors Corp., set terms for an IPO Tuesday and plans to go public in the last week of June. CBOE’s strong debut could motivate others like hospital chain giant HCA Inc. and toy retailer Toys R Us Inc. to set a trading date soon, said Josef Schuster of IPOX Capital Management. The smaller companies that have traditionally used the IPO market for funding to expand will continue to have problems, he said.

Many of the companies that have attempted offerings have had years of losses or a load of debt. However, CBOE’s history of rapid growth, exclusive products and potential to be acquired made it attractive.

The Chicago Board Options Exchange, based in Chicago, is the country’s largest options exchange. Options are financial instruments whose value depends on an underlying asset, such as a stock. Hedge funds and other investors use them to offset risks of other investments.

The CBOE is famous for creating products such as the VIX, a popular gauge of risk known as the market’s “fear index.” CBOE is also the only exchange for investing in options linked to the Standard & Poor’s 500 index. The company’s net income has grown nearly tenfold in the past five years.