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Author Topic: CBOT IPO 10/19/05...This could be huge! The next Baidu?
thebluedog
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RPT-IPO VIEW-CBOT could be hot commodity in first day-analysts
6:26 p.m. 10/16/2005 Provided by


(Repeating column initially transmitted Friday)

By Scott Malone

NEW YORK, Oct 16 (Reuters) - CBOT Holdings Inc., operator of the nation's No. 2 futures exchange and a key trading floor for agricultural commodities, will become a hot commodity in its own right when it goes public on Wednesday.

The CBOT will be one of the most closely watched initial public offerings of 2005. But analysts warned that, amid the hype, investors should be realistic about pricing.

"There could be lots of aggressive buying on the first day to run the stock up," said Sal Morreale, an institutional salesman at Cantor Fitzgerald. "When you get a stock like this, that is having such a huge amount of hype even before it goes public, people tend to jump on the bandwagon and pay the wrong price."

At a forecast value of about $150 million, based on the midpoint of its anticipated price range of $45 to $49, the CBOT's 3.2 million shares will not be an overly large offering. The average U.S. IPO this year included 11.5 million shares and raised $174.5 million, according to Dealogic.

Measured by price to book value, the CBOT's shares would be cheaper than those of some of its largest competitors, according to Francis Gaskins, president of IPO Desktop, an independent research company that tracks IPOs.

He calculated the CBOT's price-to-book ratio at 5.4.

By way of comparison, that measure is 14.1 for the Nasdaq Stock Market Inc._ (NDAQ), 11.7 for the Chicago Mercantile Exchange (CME) and 11.9 at online brokerage OptionsXpress Holdings Inc. (OXPS) .

"I haven't seen that kind of discount," said Gaskins.

He added the small initial offering may be a sign the CBOT wants to follow up with additional shares. The offer includes only 6.1 percent of the outstanding shares, which will list on the New York Stock Exchange under the symbol "BOT." (BOT) .

EXCHANGE SHARES PAINTING THE TOWN

Major U.S. exchanges have posted solid gains this year, even as the major indexes declined. The broad Standard & Poor's 500 index (SPX) is down 2.5 percent for the year.

Nasdaq shares are up 169 percent so far this year. Those of the Chicago Mercantile Exchange, the CBOT's larger rival, are up 34 percent, even after a sell-off this week amid the financial scandal at Refco Inc._ (RFX), the U.S.'s largest independent futures broker.

In the wake of Refco's problems, rumors in Chicago the CBOT would have to postpone its IPO gained enough traction that the exchange stepped forward on Thursday to confirm it would hold the offering as planned.

Tom Taulli, an IPO analyst and founder of DealFlowSurge.com, said Refco's woes could benefit the 157-year-old CBOT by encouraging investors to focus on long-established trading platforms.

"Maybe it means more business. Maybe companies will gravitate toward the bigger exchanges," Taulli said. "CBOT has been around forever."

The CBOT's offering will provide a look at investor appetite for exchange shares ahead of two market debuts. The New York Mercantile Exchange, the major U.S. site for energy trading, is planning an IPO, while the New York Stock Exchange plans to merge with electronic trading platform Archipelago Holdings Inc._ (AX), which will result in the Big Board becoming a public company.

CAUTIONARY TALE

Analysts warned investors to keep cool through the first day of trading.

"Remember when people bought Baidu at over $100 a share?" said Morreale.

Chinese search-engine company Baidu.com Inc. (BIDU) shares went public at $27 a share on Aug. 5, but more than quadrupled in the first day of trading. They have since fallen steadily. They closed at $67.27 on Nasdaq on Friday.

That is still well above the offer price, but means investors who bought in the first week have seen their investments sink.

"There could be money to be made here, especially if you can get this IPO at the offering price," said Taulli. "After it starts trading on the market, oftentimes it's too late."

Anyone jumping in?

Check out some of the posts from the forum from the below mentioned site. Lot's of people talking about it. Could be good for quick "in and out".
http://www.ipohome.com/cgis/dcforum2/dcboard.pl?az=list&forum=IPOChat

Here's one post from IPOhome Chat that caught my attention:

Augie,I like the way you think. My biggest "problems" concerning IPO trading have always been 1) I start second-guessing myself, instead of trusting the hours of research and analysis I've put into an issue 2) I let greed rear it's ugly head..."If I just hold on a bit longer, I can really hit it big" 3) I don't put stops in place in a timely fashion (see number 2). The list goes on...but one "biggie" is I waste time playing IPOs that don't even come close to making the grade with regards to my own trading IPO formula. Looking back over the last 15 years of trading IPOs, if I had just been a bit pickier (and less greedy)...I can assure you that I would have realized much more successful results. Thanks for your take on IPO-trading, augie...I can assure you that I'll pay more attention to your posts. Good luck tomorrow morning. Hope you "get in" and "get out" with some green. I suppose that one reason I'm tempted to hold my BOT position all day tomorrow is that there are so many "investors" who aren't even planning on jumping in until BOT "finds" some sort of "level" tomorrow. Should be wild for sure. Keep me posted, augie, if you hear or read any pertinent BOT info tonight. I'll probably be up most the night...blame it on the adrenaline...what a rush...stay positive (and disciplined) augie...see you on the other side...out

Posts: 250 | From: New Orleans Native | Registered: Feb 2005  |  IP: Logged | Report this post to a Moderator
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Its going to be a sweet one. Stock also has a small amount of shares outstanding which makes it even more intriguing. It can definitely follow the performance that CME has done. The CBOT is one of the biggest exchanges in the world. I can only see revenues growing and the exchange getting stronger and stronger in the future imho. I heard there is something like 300 million orders already in for this stock. Its gonna be crazy tomorrow. I'm getting in.
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thebluedog
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IPO Watch: Hot Commodity

The CBOT IPO is next week’s—and the year’s—most eagerly anticipated offering.
October 14, 2005

From Chicago comes the most awaited IPO of the year. It is CBOT Holdings, the holding company of the Chicago Board of Trade, one of America’s oldest and largest commodity futures exchanges.

IPO traders and investors have been lining up for a piece of the action since May 9, when the CBOT filed to go public. That day finally arrives the evening of October 18. That’s when the deal will be priced. The IPO is expected to start trading the following morning on the New York Stock Exchange.



The trading symbol is tentatively “BOT,” but you might want to confirm that before entering orders to trade the IPO in the aftermarket. Stock trading symbols have been known to change at the last minute and you could end up buying or selling something you never heard of.



Supply and Demand

Now let’s take a look at the deal.


No matter how many traders and investors clamor for stock in the coming IPO, there won’t be too many shares to go around. The company and its insiders plan to sell about 3.2 million shares in the offering. That’s about the size of a run-of-the-mill block trade on the floor of the NYSE.

The final number of shares could be increased if the underwriters exercise the over-allocation option of 478,723 shares. The over-allocation is called the “greenshoe,” and underwriters generally have up to 30 days to exercise it. Nevertheless, the greenshoe option can be exercised as early as the day the deal starts trading.


The CBOT Story

The Chicago Board of Trade is a 157-year-old exchange. In 2004, the CBOT accounted for about 15 percent of the global listed futures and options contracts. The commodities and financial instruments underlying the futures contracts traded on the CBOT range from soybeans and wheat to U.S. Treasury bonds, German bunds, gold, and the Dow Jones Industrial Average.



For the six months ending June 30, the CBOT reported net income of $39.4 million on total revenues of $237 million. For the six months ending June 30, 2004, the CBOT reported net income of $32 million on total revenues of $203 million.



People have compared the CBOT to the Chicago Mercantile Exchange, which is about twice the size of the CBOT. The CME, known as the Merc, trades futures and options contracts that let investors hedge risk related to agricultural commodities, interest rates, stock indexes, and foreign exchange.


On December 6, 2002, the Chicago Mercantile priced 4.75 million shares at $35 each and the IPO closed its opening day at $42.90 per share. On October 13, the stock closed at $311.25 per share, up 789.3 percent from its initial offering price.



—CBOT Holdings is a Chicago-based derivatives exchange that offers both electronic trading and open-auction platforms. Among the contracts traded are interest rates, agricultural commodities, equity indexes, metals, energy, and other underlying instruments. The interest-rate products include U.S. Treasury bonds and notes, 30-day fed funds futures, interest-rate swaps, and municipal bonds. The agricultural products include wheat, corn, soybeans, and rough rice.

CBOT plans to price 3.19 million Class A common shares at $45 to $49 each. The company will offer 2.93 million shares and selling shareholders will offer 263,003 shares. The IPO is to start trading on October 19. For the year ending December 31, 2004, CBOT reported net income of $41.1 million on total revenues of $380 million. Formed in 1848, CBOT has about 725 full-time employees and 24 part-time employees.

Chicago Forecast

Savvy travelers to the Windy City always check the forecast before they fly there. And now a final word on the CBOT’s proposed offering.



A bullish sign of a “hot” IPO is when the investment bankers increase the offering price due to huge demand. This has already happened with the CBOT IPO. Its proposed price range was increased to $45 to $49 per share, up from $33 to $36 per share

Posts: 250 | From: New Orleans Native | Registered: Feb 2005  |  IP: Logged | Report this post to a Moderator
Catch22
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Any general tips what/where/when to try to get this? When are IPOs usually entered? will it be tradable first thing in the morning?

newb questiosn i know... but im sure other people would like to know

thanks,
tom

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thebluedog
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You should be able to trade an IPO once it hits the open market. I don't know exactly what time you'll be able to trade this tomorrow.
Once it starts trading, it will be all over the financial news.
Once it's available for trading tomorrow, you should be able to purchase it through any broker.
I'm sure a lot of people will be getting "in and out" of this one.
I'm not sure what to expect, but I'll be watching closely.
I've read some people estimating that it will open at $80.
Good luck!

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keithsan
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mixed thoughts on this one dig into it...
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thebluedog
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Opened at $80.75...let's see where this goes. Jumpin' for a few!
Posts: 250 | From: New Orleans Native | Registered: Feb 2005  |  IP: Logged | Report this post to a Moderator
Catch22
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any idea how the fact volume has exceeded offered shares should effect the price?

Oh and any idea how bad this will crash later on today? or are 80s a good price for this?

[ October 19, 2005, 11:22: Message edited by: Catch22 ]

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Thorn
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It can't seem to break 86ish.

--------------------
May your trading build your character as well as your portfolio.

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keithsan
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yep there are some issues with this one, remember bidu trades at 65 now was much higher that release day.

i didn't have the time or energy to flip this one.

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thebluedog
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Bailed at $93 plus for a small gain.
Posts: 250 | From: New Orleans Native | Registered: Feb 2005  |  IP: Logged | Report this post to a Moderator
   

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