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April 3, 2014

Reasons for Virtu to Remain Private

“It’s a good thing Virtu Financial doesn’t really need to go public.”

“The “technology-enabled market maker” Virtu is delaying its initial public offering.  Virtu may be different, but too much of what it does sounds similar to the high-frequency trading that’s suddenly in the spotlight.”

“It’s reasonable to ask why a highly profitable private trading firm aspires to be publicly traded at all. It doesn’t need capital. Virtu disclosed profit of $182 million on total revenue of $665 million last year. And from 2011 to 2013, it paid out nearly $700 million in distributions to its owners, thanks to both business cash flow and the proceeds of borrowing.”

“Nor does its founder, Vincent Viola, formerly the chairman of the New York Mercantile Exchange, seem to have much inclination to share control, with four classes of shares – part of a complex corporate structure – helping to concentrate voting power in his hands.”

“The answer may be that private equity firm Silver Lake Partners, which invested about $250 million in Virtu in 2011, wanted a profitable exit route and I.P.O. investors seemed gung-ho enough to invest on Mr. Viola’s coattails at a high enough price. Valued at the ballpark 20 times earnings multiple that attaches to flourishing exchanges in the United States, Virtu could be worth more than $3.5 billion.”


Read full New York Times DealBook article here.

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