Shares of Bats Global Markets rallied on Friday in their debut, marking a high-stakes test of the company's own exchange and of the wider new-issues market after a lackluster first quarter.
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The shares opened at $22.88 in morning trading, up 20% from their IPO price.
Bats raised $252.7 million in its initial public offering late Thursday after selling 13.3 million shares at $19 apiece, valuing the company at $1.82 billion, according to people familiar with the offering.
Earlier Thursday, Bats had increased the number of shares, which it had priced at between $17 and $19, from 11.2 million, a sign of strong investor interest in the IPO.
The first quarter was the slowest quarter for U.S. listings since the financial crisis, and a successful Bats debut could help revive the IPO market.
For the Lenexa, Kan., exchange operator, it is a shot at redemption. Four years ago, Bats was forced to cancel its IPO after it said a software bug disrupted trading shortly after its stock listed on its own exchange.
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Bats said it is ready to go this time. The exchange operator is touting itself more as a technology firm than a financial company, according to investors and analysts who have attended the company's roadshow, when executives meet with fund managers who may be interested in buying shares. It is also highlighting its competitive edge in the exchange-traded fund, or ETF, business, those people said. And recent market volatility could work in Bats's favor.
"IPOs have been starved, and financial IPOs aren't always the most lucrative relative to other industries, but it seems like the timing and the story is more correct now for Bats," said Gene Novak, a research analyst at Nuveen Asset Management who said earlier this week he is considering purchasing the shares.
While few analysts expect Bats on its own to reinvigorate the IPO market, if other planned IPOs such as American Renal Associates Holdings and SecureWorks Corp. go well, the combined success could be an encouraging sign for new offerings.
Bats started trading Friday on its own Bats BZX Exchange under the symbol "BATS."
The company faces challenges. Some potential investors cited upstart competitor IEX Group Inc., a firm trying to shake up the traditional exchanges.
Investors considering the IPO also are concerned about the potential for technology-related disruptions on exchanges and the sustainability of Bats's growth and market share, people familiar with the offering said.
One such potential growth area for Bats is its ETF business. According to Bats's prospectus, it is the largest exchange operator of ETFs and other exchange-traded products by market share. From the start of 2016 through March 23, ETFs accounted for about a quarter of total stock-market trading volume, up from 17% in the same period of 2014 and roughly a fifth of trading volume in 2015, according to data from Credit Suisse Group AG.
"You cannot deny the ETF has become more and more popular among the investor community," said Lei "Rocky" Wang, a portfolio manager on the $8.7 billion Thornburg International Value Fund, which invests in exchanges. "Bats has a competitive advantage in ETFs, and the investment community will continue to look for new growth in the ETF product. That's their strength."
While coming off a period of market volatility is typically a negative for companies going public, it can be beneficial for stock-trading venues, which earn more money when more shares change hands. Heightened trading activity in the first three months of the year, when stocks fell sharply before rebounding, drove the quarterly average trading volume to its highest since the U.S. credit downgrade in the third quarter of 2011.
The stock price of rival Nasdaq Inc. hit a record in March. Nasdaq has since declined but remains up about 10% this year, outperforming the S&P 500.
To be sure, those market conditions can be fleeting.
"One drawback [when investing in exchanges] is that revenues are very dependent on volumes, which tend to be a function of the market environment," said Chris Lee, manager of the Fidelity Select Financial Services Portfolio. "Quarter to quarter [exchanges] can exhibit seasonality or volatility."
The roadshow highlighted Bats's proprietary trading technology, and the company said it is ahead of some tech firms in workers' productivity, investors and analysts who have attended the presentation said. Technology is a major driver of Bats's ability to win market share and charge low transaction fees, executives said, according to these people.
"If you list or portray yourself as a tech company, you are implying your multiple should be more stable and your top line should be more stable," said Nuveen's Mr. Novak.
At the same time, other investors said the barrier to entry for cost-efficient trading technology is fairly low, and with so many stock-exchange destinations in the U.S., competition runs high.
Bats's offering is led by Morgan Stanley and Citigroup Inc.
--Maureen Farrell contributed to this article.
Write to Corrie Driebusch at email@example.com