Quite some big news today. The Dutch high frequency trader Flow Traders is exploring an IPO. The firm is said to be valued over a $1.1 billion. The news broke just five days after Virtu announced to be reviving their IPO plans. It’s a bull market after all.
Roger Hodenius and Jan van Kuijk founded the firm after working together at Optiver and Newtrade. The latter firm wasn’t as famous as Optiver, but in the open outcry era has been a very profitable firm between 1997 and 2003 in the option trading. Jan worked longer at Newtrade than Optiver, Roger came directly from Optiver. They founded Flow Traders in 2004.
Flow Traders was mainly known as king of the ETF trading. Making a market in the ETF and hedge it with the underlying components. The ETF sector has seen tremendous growth, and Flow should be positioned on the right spot as worldwide liquidity provider. However, investments in low latency connections are heavy. Competition is fierce, for instance new contender Virtu was only founded in 2008.
Flow valued EUR 220m in 2008
Four years later the American investing firm Summit bought a stake of 30% in the firm. Sources have informed me they paid EUR 66 million for the stake, valuing the firm around EUR 220 million. One year earlier, General Atlantic invested $300 million for a 20% stake in HFT firm Getco (valuing it at $1.5 bln). Getco was three times bigger than Flow in terms of headcount at the time (150 vs 50), and had a broker platform which Flow had not. Basically, 220m was a valuation in line with the market. In 2008.
No buyers in 2012
In 2012 Flow Traders has been put up for sale again. Hodenius and Van Kuijk wanted cash out, and probably also Summit was happy to make a profit on their stake. Alas, no buyer showed up for the whole firm. The main reason was the firm wasn’t trying to attract investors for further growth but solely for an exit of the shareholders. And second, the rumor has it they have ben asking too much for a one-trick-pony, as Flow was seen by potential buyers.
IPO this year
Back to 2015. Bloomberg mentioned an amount of EUR 1 billion for the Flow IPO. Interesting enough, the rival trader Getco is currently a listed company as they have bought the remains of Knight Capital Group. One more reminder of the risk investing in a trader. Anyway,
Getco KCG Group is currently valued at a little less than $1.5 bln. That’s the same as 2007. Then again, I haven’t dived into the details of KCG’s books.
Question still remains whether the shares will be listed in the USA or in Amsterdam.