Exchange operator Cboe writes down bulk of ErisX acquisition

Cboe Global Markets Inc (CBOE.Z) on Friday reported second-quarter profit slightly below Wall Street expectations as compensation costs rose, and also said it took a $460 million writedown on its recent purchase of digital asset exchange ErisX.

The global exchange operator’s net income, excluding one-time items, rose to $1.67 per share, in the three months ended June 30, which was 2 cents below the consensus estimate of analysts, according to Refinitiv IBES data.

The miss was driven by higher-than-expected compensation expenses, Jefferies analyst Daniel Fannon said in a client note.

Including one-time items, the Chicago-based company reported a net loss of $1.74 per diluted share due to the writedown related to ErisX, a spot and derivatives exchange for digital assets, which has been renamed Cboe Digital.

Cboe announced the acquisition of ErisX on Oct. 20, when the price of bitcoin topped $67,000, with the goal of becoming a major player in the cryptocurrency industry.

Since then, digital asset prices have plunged, with bitcoin currently hovering around $24,000, leading Cboe to write down its digital asset unit by $460 million.

“We believe that our adjustment reflects the reality of the digital asset market environment today, but in no way changes our commitment to the digital asset space,” Cboe Chief Financial Officer Brian Schell said on a call with analysts.

Cboe’s revenue from options trading, futures trading, global foreign exchange trading, and North American and European equities all rose as investors rejigged portfolios to hedge against the risks imposed by the economic downturn, sending transaction volumes higher.

Net revenue at Cboe, which operates in North America, Europe and Asia Pacific, was up 21% to $424 million.

Rival exchange operator CME Group Inc (CME.O) sailed past Wall Street profit estimates earlier this week on the back of robust trading volumes and hedging demand.