Worth £1 billion?

Rumors About CMC Markets' Float Resurface, Is the Time Right?

U.K. media is reporting about an upcoming IPO of CMC Markets on a third occasion, does it merit more attention

According to a report by U.K. newspaper Evening Standard, the CEO of CMC Markets, Peter Cruddas, was once again allured by the opportunity to publicly list the spread betting firm on the stock market.

Citing a figure of £1 billion, the newspaper reported about the  founder’s intentions to capitalize on it years after the firm backtracked on similar intentions in 2006. Last September, further U.K. media reports revived the speculation that the company was back on the IPO road after the firm had reported £32.8 million of pre-tax profits.

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But is there more merit to these reports this time around? The main cause for CMC Markets to pull out from a float in 2006 in the eleventh hour was the volatile market at the time.

For all those who haven’t noticed, another spread betting operator in the U.K., Israeli Plus500, has just lost two-thirds of its market cap in a week following a suspension of trading activities and withdrawals for its clients.

That doesn’t seem to be an issue for CMC Markets as shares of its major direct competitor on the U.K. market, IG Group, have rallied to a fresh all-time high this week, reaching 801 pence per share and closing the week higher by almost 4.5%.

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If anything the troubles of Plus500 is playing out to the advantage of other spread betting companies in the U.K., which could take up market share from the Israeli company. There is little doubt that all major spread betting operators in the U.K. will take the opportunity to attract existing customers of Plus500 to their books.

Challenges remain – back in January, numerous media reports about companies which have not forgiven negative balances for traders of the Swiss franc put the names of leading operators IG and CMC Markets on the radar.

Both companies have never claimed that they offered negative balance protection and the reports were dismissed as irrelevant by stock marker investors. Even IG’s loss which was immediately reported at £30 million ($45 million at the time) was not enough to hamper the buoyant mood of investors in shares of the biggest spread betting operator in the U.K.

Ironically, the only major concern for an incoming IPO of CMC Markets could once again be the market itself. Seven years into a bull market the opportunities for new listings are getting squeezed by board stock market correction expectations.

Almost ten years ago, the CEO of the company Peter Cruddas played with the IPO idea for the first time. The firm was reported to be valued around £800 million in an IPO listing, which was pulled out at the last minute.

How will the £1 billion valuation of CMC Markets play out this time around?

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