You may have heard that Intercontinental Exchange (ICE) is making a $9.6 billion bid for the Chicago Board of Trade (CBOT). One of the more interesting factors is that the ICE “only” has a market-cap of $8.8 billion, which makes the acquisition price a very curious event.
How can ICE do that? They’re making the offering with new stock, which means they’d issue new stock worth over 100% of their current market cap. Most people can’t do things like that, but basically the management at ICE have managed to secure the equivalent of a line of credit with their investment banks. They’ve talked to the brokers that would help them issue the new stock, and convinced them to help them sell such a large chunk of shares. (In a deal like this, the investment bankers will make a ton of money in fees, so I doubt it took much convincing.)