CEO Gaffe of the Week: BATS Global Markets
Mar 30th 2012 2:14PM
Updated Mar 30th 2012 2:16PM
This year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!
For the third straight week -- and I promise you this isn't a conspiracy -- I'm going to stick with the financial sector and highlight the CEO of BATS Global Markets, Joe Ratterman.
The dunce cap
The last time I checked, "mulligans" weren't allowed once you hit 12 years old, but apparently when you list your company on a public exchange you get to make up the rules as you go along.
BATS Global Markets, the company behind the BZX Exchange, is now the third-largest stock exchange operator, handling 10.9% of all executed trades last month. Its acronym, which stands for Better Alternative Trading System, was anything but better last Friday as the exchange that gained prominence from the proliferation of high-frequency trading suffered from Three Stooges-like mistakes -- one after another.
Shortly after 11 a.m. Friday, just minutes before BATS began listing its own shares for public trading, BATS BZX exchange went haywire, to put it mildly. According to BATS, its BZX Exchange wasn't relaying information from its BYX Exchange quickly enough and the company was "investigating system issues" with stock symbols ranging from A to BF. Fittingly, BATS Global Markets ticker symbol, BATS, fell within that range.
The company was pricing 6.3 million shares at $16, at the low end of the expected $16 to $18 range. According to Bloomberg data at 10:45 a.m., the company was quoted at $15.25. By shortly after 11 a.m., 1.26 million shares had traded hands with the company being quoted at -- I hope you're sitting down for this -- 3.84 cents! Trades had actually been executed for as little as $0.002!
To the corner Mr. Ratterman
But wait; there's more!
Not only did BATS traders completely get hosed by its faulty opening, but BATS' BZX Exchange managed to scare the living daylights out of shareholders of the largest company in the world, Apple (NAS: AAPL) . A single trade of 100 shares at $542.80, almost 9% below the previous trade on the stock, triggered a halt on Apple's stock as investors were left wondering where more than $50 billion in market value had disappeared to in just a split second.
As if the embarrassment of botching its own IPO wasn't enough, nor the halting of America's sweetheart, Apple, CEO Ratterman went for the trifecta later that day. Rather than owning up to the high-frequency trading mishap, here is what Ratterman had to say:
In the wake of today's technical issues, which affected the trading of certain stocks, including that of BATS, we believe withdrawing the IPO is the appropriate action to take for our company and our shareholders.
You're reading that correctly; he chose to discontinue BATS' IPO altogether. All those shares that traded at bogus prices can be canceled because BATS wasn't ready. I don't think I ever have, nor ever will again, see a corporate mulligan to the effect that we're seeing here. I wasn't even aware that you had the option to remove your shares from trading simply because you didn't like what had transpired during the trading session!
In a related, but equally amusing sidebar, the lead underwriters who will no longer be profiting from this venture happen to include last week's CEO Gaffe nominee, Citigroup (NYS: C) , as well as Morgan Stanley (NYS: MS) , Credit Suisse (NYS: CS) and partial stakeholder (don't fall out of your chair laughing) the estate of Lehman Brothers Holdings. Who needs Seinfeld when you've got comedy like this?
Do you have a CEO you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.
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At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He is merciless when it comes to poking fun at dubious CEO antics. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Apple and Citigroup. Motley Fool newsletter services have recommended buying shares of, and creating a bull call spread in, Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never wears a dunce cap.
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