Tradeweb is the largest electronic fixed income exchange by volume but is obscure as a recent IPO with complex ownership. Their opportunity is massive as FI assets are worth 2.5x equities globally but only ~50% are traded electronically, compared with >90% of stocks (1/12) 
Tradeweb generates ~55.4% of sales from ‘rates’ products (see below) and~21.5% from credit instruments. Market data and subscription fees contribute 11.3% while equity instruments and money market products add 5.1% and 8.7% of revenues respectively (2/12)
Tradeweb’s Average Daily Volume, revenues and FCF compounded at 30.8%, 16.4% and 28.4% from FY16-19. In those four years, FCF margin expanded by 9.72%. Blackstone’s Refinitiv transaction caused TW’s balance sheet accounts to be revalued upwards, worsening return measures (3/12)
Four investment banks seeded Tradeweb in 1996 and began trading in 1998. Thompson Reuters acquired majority control in 04/2004 for $515mm and included Tradeweb in the sale of their financial data business (Refinitiv), to Blackstone in 10/2018. The Company IPO’d in 04/2019 (4/12)
Tradeweb is structured as a Delaware C-Corp. that owns LLC interests in the operating entity. The structure is common in PE sponsored IPOs. On a look-through basis, Refinitiv, controlled by Blackstone, holds 83.0% of voting power while owning 54.1% of shares (5/12)
The C-Corp owes LLC owners 50% of tax savings realized by their exchange of units for shares, defined by a Tax Receivable Agreement (TRA). The TRA liability, currently ~$3.45 / TW share increases with TW’s share price and tax rate and reduces as LLC owners convert (6/12)
LLC Owners can request registered offerings of newly issued Class A shares to exchange their LLC interests for. They have affected two offerings so far and are likely to affect one more Q2 2021. Tradeweb stock has outperformed SPY after the first two were announced (7/12)
The LSE agreed to buy Refinitiv in 07/2019 in a stock for stock deal, pending regulatory approval. LSE is a preferred controlling shareholder due to revenue synergies and no motivation to sell. Takeunder risk increases at lower stock prices, but LSE plans to keep TW public (8/12)
Among its financial exchange peers, TW is growing sales and FCF/shr. fastest and maintains a significant cash position. The Company’s margin profile is lower than most, but will improve as revenues grow. MKTX screens similarly to TW but trades at higher multiple (9/12)
MKTX’s historical valuations are helpful to consider as a publicly traded pure-play competitor to Tradeweb. TW (blue) currently trades above both MKTX’s (grey) and its own median EV / FCF multiple, but at a significant discount to MKTX, which is near its all-time highs (10/12)
Tradeweb’s future success depends on their ability to enter new product lines, which they have a track record of doing, as well as gaining market share from competitors. SEC filings show that TW is taking significant share in UST from CME and IG bond trading from MKTX (11/12)
Mgmt. has been marketing their business to Blackstone since at least 2018 and continuously since their IPO. If LSE is not allowed to buy Refinitiv, the stock will trade down, but their business will not change as Blackstone likely seeks a new buyer for Refinitiv and TW (12/12)
