Since November 2013, the New York Stock Exchange has been run out of Atlanta.
Intercontinental Exchange (NYSE:ICE), founded to run futures markets in 1999, spent $11 billion on NYSE Euronext in 2013, then spun off the European markets the next year. The IPO was worth $1.2 billion.
Since then, ICE has been the worst-performing stock market stock. While ICE’s value has doubled, Nasdaq (NASDAQ:NDAQ) is up 169%. Euronext (OTCMKTS:EUXTF), the ICE spinoff, has been the star of the show, up a whopping 269%.
But if you’re thinking of getting into this relative bargain, there’s more trouble ahead. Because the man who brought the exchange to Atlanta, Jeff Sprecher, has also bought himself huge political risk. That risk might yet force ICE to divest its prize asset.
What Sprecher Wrought
It’s fitting that Atlanta now owns the NYSE. Atlanta is the primary back office of the credit card processing industry. Running a stock exchange today is a lot like processing credit card transactions.
Sprecher understood this from the beginning. The low cost of processing real-time transactions, once the software is running, is behind the growth of ICE. When the exchange was forced to close its “trading floor” early this year because of the novel coronavirus, nothing happened. The floor had become nothing more than a TV stage set years before. Everyone can do fine without it.
But that change, which all other exchanges have since copied, was Sprecher’s one weird trick. ICE has nothing more up its sleeve.
ICE stock opened for trade April 17 at about $90 per share, a market capitalization of near $49 billion. It’s by far the largest company in the field, with Nasdaq having a market cap of just $17 billion. But it’s an underperforming asset, not worth an investor’s money. It has a price-earnings ratio of nearly 25, against nearly 30 for Visa (NYSE:V). The dividend, just 30 cents per share, yields a paltry 1.4%.
Then there’s that political trouble.
Icarus in Congress
On Jan. 24 the Senate Health Committee got a private briefing on the coming pandemic. Over the next few weeks, while President Donald Trump’s administration downplayed the threat, its newest member and her husband posted 29 stock transactions, almost all of them sell orders. Among the few buys was Citrix (NASDAQ:CTXS), whose software helps people work at home.
The junior member was Kelly Loeffler, a Republican of Georgia. She’s Jeff Sprecher’s wife. Loeffler denies she did anything wrong, but in April the couple moved their holdings to exchange-traded funds (ETFs). A recent poll has her being pounded by her Republican primary opponent, Rep. Doug Collins.
It gets worse. Among the stocks Sprecher sold, after the briefing, was ICE stock itself. Before the virus impact hit the couple sold $19 million worth of ICE shares, at prices from $89-$92. On March 23 ICE closed under $67.
So far the only legal result has been a caution by the U.S. Securities and Exchange Commission. But if Republicans lose the November election, I expect that to change.
The Bottom Line on ICE Stock
A Democratic president and Congress could easily decide to make an example of Jeff Sprecher and ICE. A demand that ICE divest itself of the exchange, or that Sprecher and Loeffler leave the company, is possible.
Before becoming a senator, Loeffler was pushing Bakkt. This was originally a bitcoin futures market. Now it’s being pushed as an app for moving seamlessly between “fiat” currencies and digital ones. The home page talks of things like buying coffee with bitcoin and getting gaming rewards.
That’s a long way to fall, from futures market to a coffee wallet. But it could be the future for Sprecher, and the best outcome for ICE shareholders.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.