Why Tradeweb’s IPO Shot Higher

MarketsMotley Fool

If you have grown used to the ease with which you can trade stocks online, you might be surprised to hear that a large share of bond and fixed-income asset trading is done the old-fashioned way: with phone calls or text messages. Financial services upstart Tradeweb Markets (NASDAQ: TW) has become one of the leading operators of electronic marketplaces where companies can trade those fixed-income assets. And it went public last week.

In this segment of the Motley Fool Money podcast, host Chris Hill and Fool senior analyst Andy Cross talk about why it met with such an enthusiastic response from investors, and why this could be a record year for IPOs overall.

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This video was recorded on April 5, 2019.

Chris Hill: Tradeweb Markets is an electronic trading platform. Tradeweb went public on Thursday at $27 a share. Promptly shot up 30%. Andy, if you like fixed-income trading markets, this might be the stock for you.

Andy Cross: And I do. It was a great performance. They went public at $27. Originally were pricing around $24-$26. They received 17 times more orders than they could actually fill. Really good showing. Continues to show the demand for a lot of these IPOs.

Tradeweb, along with MarketAxess (NASDAQ: MKTX), which is another company I follow pretty closely, they are the leaders in the electronic bond trading platform, fixed income trading, which is still done through a lot of old-school, old-fashioned telephone and text-message buying. These companies are trying to innovate that space. It was a really nice success for this business. And these are large businesses, Chris. These are $10 billion businesses, attracting capital to a market that is in desperate need of some innovation.

Hill: You mentioned the size of the IPO. I saw a report this week. This could be a record year in terms of money raised in IPOs. The record is currently held by the year 2000. Which didn't end well for a lot of people.

Cross: That's right.

Hill: Should we be rooting for this?

Cross: Well, I think it's great to see companies come to the public markets. As we have seen over the last couple of years, more and more companies are staying private for longer and longer. We've seen a shrinking pool of opportunities for investments in the public markets. Tradeweb is exceptionally profitable, growing very nicely, which is a little bit different than some of the other IPOs we've seen recently.

Hill: Pets.com?

Cross: And other IPOs we'll see this year. It's certainly much different than what we saw in the late '90s and 2000s.

Andy Cross has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.