A publicly traded exchange quietly owns 10% of the prediction market venture Robinhood and Susquehanna just built.
That's $MIAX. And the prediction market stake isn't even the main reason to own it.
Here's the backstory. They sold 90% of a CFTC-licensed exchange into that venture, booked a $50 million gain on the way out, and kept 10% of the upside for free.
Management flat out told analysts to leave it out of the model. Prediction markets go mainstream and that stake is worth a fortune. If it goes to zero, nothing breaks.
Because underneath it is a real business the market completely misreads.
Everyone watches the trading volume. The thing hiding under it is a recurring, 51% margin operation that grows whether a single contract trades that day or not.
Firms pay just to plug into the exchange and pull the data. Pure subscription economics. That piece grew 45% last quarter. Net revenue up 40%, EBITDA up 66%. The market still prices the whole thing like a volatility bet.
And the trading side is better than its reputation. 3rd-largest options franchise in the US, built from scratch in 2012, compounding 20%+ a year. When share dipped last quarter it was on purpose. They cut the junk volume and grew the high-quality flow. Revenue per contract went up.
Now the part nobody's paying for.
95% of US index options volume lives in two products, SPX and VIX. Both Cboe's. Most profitable franchise in the industry, untouched for 40 years. MIAX isn't attacking the license, it's going around it.
Bloomberg indexes on a 10-year exclusive, cleared at the OCC so traders can cross-margin against everything else they hold. Cboe and CME can't copy that without torching their own clearinghouses. Futures are already live. The cash-settled options are the catalyst.
Then the setup got even better. The stock ran to $57 and got knocked down to $40. Not on earnings. The June 29 Russell rebalance kicked it out of a batch of value indexes and index funds were forced to sell. Add some insider selling and you get a 30% haircut on a company that only got stronger.
Strip the GAAP noise and it trades ~13x forward. A 30%+ grower at a 51% margin, cheaper than Cboe, ICE, Nasdaq and CME, all growing low single digits.
Risks are real. Nasdaq's got a live jury claim you can't hedge, and the options haven't launched yet. But $550M in cash covers it, and that's the reason it's cheap.
One number tells you if it's working, and it's not volume. It's open interest once the options go live. Nobody can fake traders leaving real money in overnight.
The market is pricing the exchange it can see. The whole opportunity is in the businesses it can't.
