ICE

[David Randolph]

There's no new information about ICE. My motives to be short this stock remain valid (trading at more than 30 times one year's revenues), and the trend is bearish now. I'll continue holding ICE short.

[David Randolph]

ICE is priced for more than perfection, so I see it having another bear move towards the $106 area or so. I'll continue holding ICE short whatever happens in terms of short term volatility.

[David Randolph]

ICE's 200 days moving average is coming up just at $89, but I'll be nice and cover for a nice profit at $106 if I get that chance. My hands are strong on this short, the overvaluation this company is trading is almost an insult, it is a patriotic act to sell it short LOL

[yukiii]

ICE to Buy Stake in India
Word Count: 85  |  Companies Featured in This Article: IntercontinentalExchange, ICICI Bank
Energy and commodities exchange IntercontinentalExchange Inc. agreed to buy an 8% stake in India's National Commodities and Derivative

[David Randolph]

Thanks for that news yukiii

One of my main reasons for this short position, besides overvaluation, was that I was negative on the Chinese economy, and that scenario would make commodities go down and volume on those energy and agricultural contracts to dry.

But I'm not negative on the Chinese economy anymore, as I've written on several places over the last few months. So my bear case on ICE has weakened considerably. I'm going to take my 2.86% profit on this trade and run, my business (capital) is needed somewhere else.

The trading plan is:

Buy to cover ICE.

[David Randolph]

News just out for ICE:

• IntercontinentalExchange Proposes To Merge with Chicago Board of Trade
PR Newswire (Thu 7:31am)

Look here:

«CBOT shareholders would own approximately 51.5% of the combined company and, in addition to receiving a premium, would participate in the significant strategic and financial benefits of the combination.»

ICE was a $9.08 B market cap company yesterday, BOT was a $8.78 B, and they're giving 51.5% of the combined company to BOT? It seems like the market was overvaluing ICE, and even ICE agree with that.

This buyout of BOT can only be seen as bad news to ICE's shareholder's because it were the growth rates that gave the stock those lofty multiples of 30 times revenues Now, BOT isn't growing nearly as much, so the combined company will have a lower multiple.

I see ICE opening higher on the news, which I believe is a non-sense, I'll continue holding ICE short and will be looking to close it, say, just at around $120 !

[David Randolph]

As expected the market didn't like ICE's bid for BOT. Why?

Well, at today's close ICE is trading at 28.4 times 2006 revenues. Also at today's close, BOT is trading at 16 times 2006 revenues, even as it went up 17%, a lot higher than ICE's bidding price.

So, the combined company price to sales ratio should be something like 22. To have a sales multiple of 22, ICE should go down to $100.

ICE offered $187.34 for BOT, and BOT closed at $194.95, so the market believes it is possible that ICE and CME will enter a bidding war for BOT, which would also be bad for ICE.

The only flaw to this is speculation. The market might speculate that BOT or even CME will make a counter offer and try to buy ICE.

As I see it, this is all a bit of insane because fundamental numbers don't justify these stratospheric valuations in my opinion.

Anyway, I was about to close ICE's short position before the news was out, but I canceled it (as you've received in your e-mail), because that higher open was a non-sense.

Now I can keep on holding the short position, expecting the market to punish ICE some more, or I can take my 6% or so profit and walk.

My decision is I don't want to be involved in this for a few percentage points more, we never now if there's isn't a counter offer when pride of very influential people is at stake, I'll just take my money out of the table.

Trading plan:

Buy to cover ICE.

[Tirebldr]

ICE Continues its moves up

[ScottishTrader]

Hi Tirebldr,

After breaking above $140 on Thursday (I was watching it too...) ICE got slammed with the rest of the market, but made up that ground yesterday, closing above $140.  Looks like ICE wants to start stairstepping higher here, and I think it could reach $153 or so in the short term. 

This round of price appreciation looks to be spurred by all of this take-over speculation.  CME have raised their bid for CBOT, and CBOT have indicated that they believe that the CME bid is a better fit for them.  If ICE does not make a subsequent bid (which I hope they don't as the last bid wasn't received very well by the market, as David detailed above), they then become a possible takeover target as consolidation continues in the exchange market industry.

I'd like to see ICE break above $142.50 early next week, which would confirm that this is indeed a breakout from the last 2 months basing.