Liquidnet files for $500 million IPO

NEW YORK (Reuters) - Liquidnet Holdings Inc, an electronic trading venue that has eaten away at the market share of the established stock exchanges and squeezed their profit margins, has filed to go public and sell up to $500 million of its common shares.

The filing, made late on Tuesday, did not disclose the number of shares to be sold or the expected price but Liquidnet is targeting the fourth quarter for the IPO.

The company will not receive the proceeds of the sale of its common stock by selling stockholders, who include the company's senior management and board of directors.

The New York-based company, founded in 1999, is the dominant electronic marketplace serving buy-side trading firms in the United States. It lets the firms anonymously trade large blocks of stock without traditional brokers and exchanges. It is among the 10 largest brokers in the country.

In 2007, the company averaged a trading volume of 63.2 million shares per day, up 32 percent from a year earlier, according to the filing.

Liquidnet's announcement comes at a time when the IPO market is experiencing its worst slowdown in years. The second quarter, the slowest in five years, saw only 14 IPOs in the United States. The small number of deals can put downward pressure on IPO prices, one analyst said.

"The filing today may end up being tainted in the perspective of investors because of the moribund IPO market," said David Menlow, president of IPOfinancial.com.

Still, he said, a well run, growing company can price well even in a weak market.

"It is a difficult market, however, we are confident that we, along with our underwriters, will have a successful IPO," the company told Reuters in an e-mail message.

Liquidnet's rivals have generally seen their stocks get battered this year. Shares of CME Group CME.N, NYSE Euronext (NYX.N) and NASDAQ OMX Group (NDAQ.O) have fallen more than 44 percent as investors express concern about future trading volume on the exchanges.

Menlow said if Liquidnet proves to have a better model, "it's probably going to pique the interest of investors in spite of the weakness of the exchanges."

Liquidnet has recently moved aggressively to build up its market share and is in talks to link its liquidity pools to major exchanges such as the New York Stock Exchange, a unit of NYSE Euronext Inc, and Nasdaq OMX.

The company is also moving to build up its business overseas, having entered the Japanese market in June. In May it traded $2.3 billion in Asia.

In an interview with Reuters in May, Liquidnet Chief Executive Seth Merrin said overseas revenue would make up half of the company's business within three years.

According to unaudited financial information included in the company's filing with the U.S. Securities and Exchange Commission, Liquidnet's first-quarter earnings rose 11 percent to $30 million, while revenue increased 38 percent to $107 million.

For all of 2007, net income was $115 million on revenue of $345 million.

Underwriters of the IPO are Goldman Sachs & Co (GS.N), Credit Suisse (CSGN.VX), JPMorgan (JPM.N), Lehman Brothers LEH.N, Liquidnet and Sandler O'Neill + Partners LP.

(Reporting by Phil Wahba; editing by John Wallace and Tim Dobbyn)