BGC Partners' 2013 Annual Shareholder Meeting (Transcript)

Jun. 4.13 | About: BGC Partners, (BGCP)

BGC Partners, Inc. (NASDAQ:BGCP)

2013 Annual Shareholder Meeting

June 4, 2013 10:00 AM ET


Caroline Koster - Assistant General Counsel and Secretary

Howard Lutnick - Chairman and CEO



Good day, ladies and gentlemen and welcome to the BGC Partners’ 2013 Annual Shareholder Meeting. My name is Gary I’m your coordinator today. (Operator Instructions) As a reminder this call is being recorded for audio replay purposes.

I would now like turn the call over to Caroline Koster, Assistant General Counsel and Secretary, over to you.

Caroline Koster

Good morning, thank you. Before we begin, I would like to remind the attendees who have been present on the webcast that the information delivered at this meeting and on the webcast contains forward-looking statements within the meaning of Section 27A, the Securities Act of 1933 as amended in Section 21E, the Securities Exchange Act of 1934 as amended.

Such statements are based upon current expectations that involve risk and uncertainties, actual results, performance or achievements could differ materially from those contemplated, expressed or implied because of a number of risk and uncertainties that include but are not limited to the risks and uncertainties identified in BGC Partners filings, with the U.S. Securities Exchange Commission. We believe that all forward-looking statements are based upon reasonable assumptions when made. Similarly, to the extent that this presentation contains references to the potential value of certain assets or portions of our business no representation is made as to the accuracy of the assumptions or the valuation models or the multiples that are used.

Any such valuations are based on assumptions about profit margins of business conditions, actual pro forma results of BGC Partners. Other risks to our results include those related to the proposed NASDAQ, OMX transaction, which are detailed in our recent public filings. We caution that it is impossible to predict the actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcome. And accordingly you should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or development.

Please refer to the complete disclaimer with respect to forward-looking statements and risk factors set forth in our most recent public filings on Forms 8-K, 10-K and 10-Q which we incorporate today by reference.

I would also like to point out that during this presentation we will be referring mainly to our financial results of a distributable earnings basis. Please see BGC Partners’ financial results press release in May 2, 2013 for GAAP results. Please also see the sections of the press release entitled distributable earnings, distributable earnings results compared with GAAP results, reconciliation of revenues under GAAP and distributable earnings and reconciliation of GAAP income to distributable earnings. For a definition of these terms and how, when and why management uses them.

Unless otherwise stated, whenever we refer to income statement items such as revenues expenses, pretax earnings or post-tax earnings or doing so on a distributable earnings basis. I’m now happy to turn the meeting over to Mr. Lutnick.

Howard Lutnick

Good morning, and welcome to BGC’s 2013 Annual Shareholders Meeting. I’m Howard Lutnick, Chairman of the Board and CEO of BGC. I’d like to introduce you to the other directors that are here with us today. Our independent directors are John Dalton, Steve Curwood and Al Weis. Also with us today is Shaun Lynn, our President, Sean Windeatt, our COO, Graham Sadler, our CFO, Stephen Merkel, our General Counsel, Michael (Lehrman) and Bob Hubbell in the back Director of Communications. And I am sure we have many other BGC people with us and of course Caroline Koster, our General Counsel upfront.

Also with us today is Christopher Jensen who was our Counsel of Morgan, Lewis & Bockius back in the left and (inaudible) from Ernst & Young are with us.

And also before I move on I want to take a moment to take Barry Sloane who was our director since 2006 and he severed on many, many committees and he really was a wonderful addition for the years he served on the Board. So I just wanted to take a moment to thank Barry for his years of service to the company, building great friends at the company and adding tremendous value and insight. So Barry thank very much for your service.

So, I’d like to open the meeting with official business and then we will discuss our business in quarter for BGC and we would review our financial results. And after that of course I’ll be happy to answer any questions you might have. So, with that said I would like to announce the meeting to come to order I hereby appoint Ms. Caroline Koster to act as secretary of the meeting and the Chair recognizes Ms. Koster.

Caroline Koster

Thank you, Mr. Lutnick. I now present the affidavit of Broadridge Financial Solutions Inc. with respect to the mailing on April 25, 2013 of the notice of Internet availability of the proxy materials relating to this meeting to the holders of record of the corporations Class A and Class B common stock. As at the close of business of April 9, 2013 which is our record date for the meeting. I also present here list of the holders of record of the corporations Class A and Class B common stock as the close of business on April 9th which were prepared and certified by American Stock Transfer and Trust Company which is the corporation’s transfer agent which indicate the address and number of shares registered to each stockholder.

At this time I’d like to introduce Mr. Peter Descovich a corporate representative of Broadridge Financial Solutions, who has presented to us the affidavit of mailing and who is qualified to serve as the Inspector of Election.

Howard Lutnick

I have directed the affidavit, the notice and the other documents to be filed with the minutes of the meeting and the list of stockholders to be filed with the records of the corporation return to authorization by the Board of Directors, I hereby appoint Mr. Peter Descovich to act as the Inspector of Election at this meeting.

Caroline Koster

And I present to the meeting the oath of Mr. Peter Descovich the Inspector of Election.

Howard Lutnick

I join that the oath submitted by the Inspector of Election be filed with the records of corporation. Are there any stockholders present in person who are represented by a proxy, who have not yet had the opportunity to vote, if so please report your presence to the Inspector of the Election.

Okay, so we’ll now proceed to determine whether the Board a quorum is present either in person or by proxy.

Caroline Koster

Mr. Chairman and the Inspector of Election has advised me that they are present in person or represented by proxy the holders of at least 58,56,481 shares of the company’s common stock of Class B out of the total of 132,573,815 outstanding shares of Class A common stock each of which is entitled to one vote per share and 34,848,107 outstanding shares at the Class B common stock each of which is entitled to 10 votes per share at the corporation which presents all the Class B common stock outstanding as of the record date and these shares also represent a quorum for the transaction of business.

Howard Lutnick

The proxy and any substitutional proxy is present at the meeting I hereby direct to be filed with the records of corporation. A quorum is present and the meeting is properly constituted as a transaction of business. The first order of business is the election of directors each for one year churn. The Board had previously nominated myself, Howard Lutnick, John H. Dalton, Stephen C. Curwood and Albert M. Weis as directors of the corporation each for a term expiring at the 2014 annual meeting of stockholders. Is there any second to my vote?

Mr. Curwood

I second the motion.

Howard Lutnick

The proposal is now formally before this meeting., the Board of Directors of the corporation has recommended that stockholders voted in favor of the proposal to elect myself Lutnick, Curwood, Dalton and Weis.

Caroline Koster

Mr. Descovich, have you tabulated the votes for the election of the director nominees?

Unidentified Speaker

I here tabulate that the votes cast for the election of directors and find that the stockholders present or represented at the meeting have cast at least 383,660,226 votes for each of Messrs .Lutnick, Curwood, Dalton and Weis for the election of each as the director of the corporation which at least a polarity of the total voting power of the shares of the common equity present in person or by proxy and entitled to vote.

Howard Lutnick

According to the inspectors report which is accepted without objection nominees have been duly elected directors of the corporation each for term that shall expire at the annual meeting of 2014 and until predecessors are duly elected and qualified. Congratulations to each of you.

The SECOND order of business is the approval of the Fourth Amended and Restated BGC Partners, Inc. Long Term Incentive Plan. The Board of Directors and the Compensation Committee have previously proposed an amendment to the Long Term Incentive Plan to increase from 150 million to 200 million the aggregate number of shares of our Class A common stock that may be delivered or cash settled pursuant to awards granted. In addition, we are also taking this opportunity to ask our stockholders to approve the entire Amended and Restated Plan in order to re-start the five-year stockholder approval period under Section 162(m) of the Internal Revenue Code. Is there a second for my motion?

Mr. Weis

I second the motion.

Howard Lutnick

The proposal is now formally before this meeting. The Board of Directors of the corporation and the Compensation Committee have recommended that vote in favor of the proposed amendment to the Long Term Incentive Plan and in favor of the amendment and restatement of the Plan.

Caroline Koster

Mr. Descovich, have you tabulated the votes for the amendment of the plan.

Peter Descovich

I have tabulated the votes cast for the election of the board.

Caroline Koster

Plan amendment.

Peter Descovich

372,479,212 votes in favor of the (fourth) amended and as stated long-term (sense of) plan which is obliged a majority of the total voting power of the shares of common equity in person first of all by proxy and entitled to vote.

Howard Lutnick

The earnings inspector is reported which is accepted without objection and which is a (inaudible) the launch of the long-term incentive plans approved in the fourth amended (to be) stated BGC Partners long-term incentive plans approved is basically higher. If there is no further witness to come at the meeting I will now entertain the motion for adjourned.

Unidentified Company Representative

I hope that the meeting be adjourned.

Unidentified Company Representative

I second the motion.

Caroline Koster

It has been duly (noted) in second of this meeting adjourned. Those in favor please say aye.

Howard Lutnick


Unidentified Company Representative


Caroline Koster

The proposed motion is carried.

Howard Lutnick

The meeting is adjourned. Thank you for your participation and your support of BGC Partners. We will now begin our presentation of our business and financial results.

So, I’d like to start at the top I know many of you are familiar faces and you’ve heard it before but at least with the stock performing so well, we feel good to through it yet again. We are in the brokerage business. We don’t make money when the markets go up.

Unidentified Company Representative

Yes sir. We can’t hear very well.

Howard Lutnick

We were in the brokerage business. That means we don't make money when market goes up and we don’t lose money when markets go down. We like volume and volatility in the financial service markets. We don’t love low interest rates and we don’t love quantitative easing. And so as interest rates increase in the future whereas quantitative in patterns, those are both positive tailwinds that will be coming for the company.

Our real estate segment however, we do like low interest rates because that increases values and moves commercial real estate property forward. So we have two financial segments; financial services and real estate. And if you think about things in those two ways, you would see that they complement each other in many, many different ways.

So we are diversified by geography and by product category both in each of those categories and beyond it. We feel that the actions of the company are unappreciated by the market, the transaction is the transaction of our benchmark U.S. Treasury I think clearly highlighted that. We have many, many other assets that we feel are very, very valuable and it is the company's job both to express with you in conversation like today, expressing in our earnings and ultimately making sure that we express it in market value for the company.

We like to hire and acquire accretively. I have often been asked the question which is, well with interest made so low and the company expected that so much cash isn't almost everything accreted. The answer is of course almost everything is accretive when you are earning 0.2 on your cash. However, we don’t feel accretive has earning more than 0.2. Our dividend yield is about 8.5 and so we look at accretive meaning for going to the best of money needs to be well in excess of that 8.5% dividend yield and that's how we, inside the company we think as accretive.

We want to grow a full electronic trading. That is something you have heard before, but now you understand the whole value of it. As we convert our (voice) business into fully electronic businesses, you can see with the bench market U.S. Treasury transaction that comes with a huge value multiplier on top of that as well. And we intend to drive in business full electronic that is our business and is our direction. That is where we are going. We have an extraordinary talented senior management, both in financial services and in real estate. They know the companies very-very well. We worked very well together and it is an extraordinary group of people and as I said before with the dividend yield in excess of 8% it's still continuing that this company is tremendously undervalued, tremendously cash rich and in extraordinary place to produce that.

So, I'll express our segments, financial services both voice electronics and fully electronic. The fully electronic businesses obviously have tremendous value. It has great margin and it has been growing. The business of U.S. Treasuries in our fully electronic business has not been growing. As a matter of fact last year it was down 7%, even though it sold for such in large number and that wouldn't be because quantitative easing by the U.S. government held that down. So it's not as if NASDAQ made a bad purchase or that that we made a sell at the wrong time. Neither one is actually, I think, in this case is absolutely a win-win for the company or for NASDAQ.

Eventually the government will top quantitative; eventually the scale and size of the U.S debt will cause enormous volumes trades in the U.S treasury market, just not next quarter. And that is a long term purchase for them. I think it will work out very, very well for them. But for us, we can say near terms next couple of years with the expectation of how to constrain U.S. treasury growth, we will have to sit down and continue to tell you that our electronic business isn't growing as quickly as you would expect. Without that constraint quantitative equal business, you will see our other electronic businesses have been growing.

Our three year average is a 27% last quarter, 11% you are seeing superb electronic growth in our business and that business is very valuable, carries more than 45% margin, it is an extraordinary business and extraordinary growth and it comes from our voice business which has a billion dollar pipeline which will drive into the business.

So that's our business model and as I said, diversified by geography and segment which evolve real quickly to next one. Because of the scale of our technology, we are able to hire and acquire accretive and that now includes a real estate business. So we are going to continue as we very-very successfully did with the Grubb & Ellis acquisition.

So we started with new market in real estate which is a platform just like as we rebuilt after 9/11. We started in financial services to rebuild in the bank of real brokers and the platforms in it and our technology and continue to add the business to that. So in real estate we added Grubb & Ellis, then we added Smith Mack, we added Frederick Ross.

We will continue to roll out small and mid-sized real estate companies into our infrastructure and that will just add value step by step. We think we can acquire real estate in the mid-teens as a return for the far, far distant future. So we think there is an enormous opportunity to acquire in real estate, beautifully accretively for the long, long distant future. But I do not want you to take away from that that we don't think that's also true in financial service.

The Dodd-Frank regulation, the regulations coming in Europe all make it much, much more expensive to be a small or midsized company in the global industry. That pushes companies towards allowing us to acquire them and roll them into our model. We already have the technology. We already have the infrastructure and you're going to those opportunities continue to emerge for us at ever better prices.

We know everyone. We talked to them that it’s all about finding the right company at the right price. All about the right company at the right price. The reason we've been so successful at acquiring companies is because the secret sauce that we bring is our technology. The installed technology in that base of brokers at these companies more productive and that we move that business from the electronic trading which will drive our bottom line and ultimately the value of stock prices that you have seen in new transaction.

So these transactions, just to highlight for a moment for you we sold the brand eSpeed but for those of you who'll remember when eSpeed was a public company we did not sell all of eSpeed. We sold the brand of eSpeed and we just sold the business of the two year, the three years, the five years, the seven year, the 10 year and the 30 year, electronic trading platform, U.S. Treasury notes. Meaning the other U.S. Treasuries, the 280 of them, the other US treasuries we still broker and we can broker and we still will.

So on consideration, $750 million in cash plus the earn out that we expectedly forge an $84 million in NASDAQ stock. We get the earn out provided that we do at least $25 million gross, that provided that taken as a whole. The whole company backed that, including its equity business. The $25 million taken as a whole, we will get our equity.

So we have a complete expectation that we look at all the equity in our in our bad debt stock. We continue to retain our other full electronic trading and marketing software businesses and as I mentioned we continue to keep an eye on the U.S. treasury related debts but we remain in the technology business and as I said our other full electronic businesses is 27%.

So as I mentioned we expect to make a great acquisition. We have asked organically in growing our business in both of our segments and we think are in an excellent, excellent position to do so. We expect three purchase units in our performance stock and our partnership, and will probably also repay some debt. We do not expect to have a onetime dividend, but we do expect to maintain our $0.12 common dividend for the foreseeable future.

So let's go over the financial services business briefly. So historically we interview our broker, which meant that corporations, governments, hedge funds, money managers, pension funds, they are all did business with banks or investment and then we intermediated between banks and investment banks in the financial markets all around the world, didn't matter if those were in securities or derivatives, foreign exchange. That was the business that we did.

But the world is changing with Dodd-Frank. So what Dodd-Frank has done is focused on in a variety of markets in interest rate swaps, default swaps and in some parts foreign exchange options market. They are changing that to where swap dealers, which will now be the new name for large banks and eligible participants, corporations, large money managers, they will be present in a multilateral setting, than they were much less likely. There will only be a certain particular way for business with one institution. That would be to put out their request to at least three different banks and put them in competition.

But alternatively, but alternatively they can go to a system like ours and we will be licensed as in the U.S. called a set but there will be multiple execution capabilities, and most importantly they'll be new sets of clients that take to business with us.

So remember before it was all about banks talking to their clients and us talking to banks. Now with Dodd-Frank, that model changes and those companies are going to be required to seek a multi counted money model to throw back their business. They will required to seek a multi-counter-party model in their business and that model in many circumstances will include doing business with us and therefore the scale and size of our business will dramatically rise.

So volatility remains relatively low, which means that while there are enormous amounts of financial service debt out there, volatility, as well as the interest rates are overly low because the government should grow, because of quantitative easing, our compression of volatility is pushed down by governmental action. And if action removed is when and it's on when, not if, but when can governments stop.

Whenever the governments stop pushing down, that is a loaded spring that will and will explode upward. What cannot hold down volatility forever and not radically possible the balance sheets could never handle it. They can do it for certain amounts of time, they can do it next quarter and quarter after and quarter after; but they can't do it in five or 10 years from there.

So when it stops, volatility will explode upwards, volumes will come back in a way that people have never imagined because they will have lost what used to be regular or debt cycle that's coming between and then once those governments start to reduce the scale of their balance sheet, they have to remember that the Federal Reserve of United States of America is now one of the great debtors of the world.

It’s not just the U.S. treasury; we now had an ameba moment. We used to be the greatest debtor in the world. Now we got two. We got the U.S. Government and the Federal Reserve. And when the Federal Reserve takes its multi trillion dollar balance sheet and tries to bring it back down, that means they need to be selling bonds as well.

And when those two things happened, we got to remember it’s not only do they sell, but what is constraining volume is a hedging. Normally when some advice an instrument to hedge, only the U.S Government buys $10,000 mortgages and doesn’t hedge them, just buys them. When they go and stop buying them, the next buyer will naturally hedge them with other securities, which will then cause another hedge and another hedge and another hedge and that’s how you get the volatility to bounce back up. It's simply velocity and that will come back with quantitative easing, which will come with time.

So let’s go back to our core business model, when we add mortgage brokers, we made money at the margin by the payout brokers by 60%, they only have the infrastructure. So we add probably incrementally $0.30 to the bottom line of a broker joining our system.

When we convert to electronics you no longer pay the brokers 60% itself, you pay this broker to be an electronic salesman an average of 15%. So we will pick up 45 points of margin. And that’s why those margins leap up and we highlight your fully electronic business has 45% margin and that’s growth.

It can continue to grow because we are always building new businesses. We don’t go right from 60% to 15. We form a smooth transition for the brokers to encourage those brokers to move out their business electronic and remember our brokers are owners of this company.

Our brokers own, and our employees own about 30% of the company. So they are incented to drive the business electronically because they are huge owners. We are building a company that has aligned incentives for the employees, the brokers and our shareholders. That’s very-very important to us.

So the business again, we’re electronic, although we have the right voice on the left but we move and the colors change. So things start at a point, they move hybrid and eventually go electronic. We have more and more products going electronic all the time. So we expect retaining nearly half of our fully electronic businesses. We got about an $80 million business, fully electronic remaining after we do just re-transaction of the benchmarking treasuries, and we expect, we still have our technology. We have not sold our technology. We still have our technology, we got the ability to transact and grow our business, just not in those benchmarking those treasury.

So when everything else, we start the capacity, the capability that we always have and it we will be focused on tremendous growth around the world for full electronic trade. So obviously our dimensions are product that we retained have grown faster, but because they were suffering. And now I’d like to direct the objective to quality easing.

And now I would like to step over to our Real Estate business. So the real estate business operates on equipment, seasonal models in the financial service business. In the financial service business the first quarter is busy, second quarter little less, third quarter has got the summer, fourth quarter has got Christmas. As we trade down the real estate business, they all want to get their deals done before the end of the year.

So not only fourth quarter is the best quarter but the last two weeks of December are the biggest two weeks of the year in real estate, and you think billing right just around Christmas, near to it, right everybody trying to get their deal done, just before the end of the year.

So the fourth quarter is the biggest, and my definition of the fourth quarter, it’s the biggest, the first quarter is the slowest. So it’s naturally, it’s sort of that contrast to the financial service business. So you should expect our numbers to be more even going across the year, because our real estate business will offset the seasonality of our financial service business or you could say our financial service business will offset the seasonality of the real estate business.

But the best quarter of the real estate is the fourth quarter, the worst quarter is the first. In financial services the best quarter is the first quarter, just with seasonality, and of course the last quarter is the worst.

So first quarter is seasonally slowest but where our businesses, we're really good at leasing, leasing advisory. Our fastest scoring business within the real estate business, the global corporate services that is consulting for the large company, and helping them determine how they should use their real estate better. And that is a huge business for us; and a huge growth business for us. We had big announcement of big successes which I will go over a little bit. We do retail, and then we take care of stores and store price; lots of big change in the national electronics. The stronger you are nationally, the better you can do with national change and that helps your business trends.

We have a great retail services business. We are now into property and facilities management with scale. So we take care of the building, we rent out the building with by providing the services to take care of the building. Then when the tenants moves out, we can help lease the building. That's a BGC service as well. We do project management, we do industrial services, we do valuation. We know all of this about real estate. You can hire us to do evaluation of the building and that’s another way to get information, knowledge in the real estate business and then of course when the capital market business and you should expect us to grow a capital market in real estate tremendously that the selling building, raising debts for people who own buildings, and raising and raising equity for people who own the building.

So, the drivers of the real estate are good, sequential rising, the vacancies are improving, low interest rates means, sales of building would go ever higher. We have seen huge property sales in New York as of late is because interest rates are so low, cap rates are going well over than the yield, people are expecting when they buy real estate is dropping precipitously and therefore makes buyers more and more anxious to get into the real estate market. We continue to grow. We felt that there was ample room that the financial service markets are much, much less fragmented than the rest of the business specifically, much more consolidated. So the real estate business is much more fragmented and therefore we have a great opportunity.

The $20 billion U.S. market for brokerage only, the top five players only have a 30% market share then the ability to consolidate and build the kind of market share that the agencies have in financial services is a really a superb opportunity in real estate. We are in early part of the commercial real estate recovery. So I think the fundamentals are good of the business, plus our growth outperform fundamentals as well because we are a growing business. As I said we have lots of positive acquisitions out there and we expand and we plan to grow our capital market business, sales and capital ways, and added material. So, cap rates are low, the spread between U.S. treasuries and real estate remain abnormally high, therefore the real estate will do very, very well as an asset class going forward.

So, to sum, to just talk about sort of how we look at our business with sum of our parts, so now in fact we will be paying $750 million and we expected to be passing that 20%, we have $484 million dollars with $32 million a year in NASDAQ stock, we expect that to be taxed consistent with how we have been in the past, about 15%. So, the 750 will not go in our GE but we expect $32 million a year to go into our distributable earnings. So therefore, we really we don’t have that much to grow in order to make up for the business that we sold. We have (inaudible) and we have our other fast growing electronic businesses and we have the pipeline of our growing business, driving business portfolio and driving business in to profitability of our voice business.

So we have, as you see on this chart, we take our $80 million in 12 and months routine tech revenues and our margins, you can go over PE’s, prices sales, whatever models you would like, we did tremendous value, financial services revenues of over a billion dollars, again with price 11% margins and you go down the average peer traded 11 times and our real estate segment about $550 million trailing 12 months, again at about 19 (NYSE:PE) and you can see that as we just do the math of those parts, you would see that plus our cash, PGC is widely undervalued and that’s why I didn’t think our above 8% dividend is tremendously-tremendously attractive.

So to go back over it, financial services and real estate, both wonderful businesses. Real estate in a growing segment, financial services with great tailwinds coming with quantitative using ends diversified by geography, diversified by broader categories, we think the assets of the company are underappreciated but we are now clearly expressing that under-appreciation to the market. Obviously we are beginning to get noticed more and more and we expected to do so by making more money, growing our business and really acting for the benefits of our partners and shareholders.

We are going to continue to acquire and hire credibly and we are going to grow our electronic business, don’t take market risks, we are a business company not a market risk company. We don't win money when it goes up, we don't lose when it goes down but we like volumes, we like the services, that's who we are, we have again what we think is a great-great management team and our yield at about 8%; stock performance has got be one of the most attractive we think one of the most attractive equities out. So with that, I appreciate you listening to business and hope to answer any questions that anybody have.


Question-and-Answer Session

Unidentified Analyst

Thank you very much. Howard, when do you see the deal with NASDAQ closing? Did you expect for the quarter but do you have a specific time in the third quarter?

Howard Lutnick

I think we have said in the middle of the year that since we are coming through the middle of the year, there was a lots of different things but it’s a; I would say, we expect it to close on June 28th? So, we missed the middle of the year by two days.

Unidentified Analyst

Just want to know, when you were a kid you ever sell watches to your friend? I have to say you talk so fast that we are having a hard time following you, it’s a good thing you’ve made these, it’s not a problem, it’s just that you all seem to be in a rush so I figure that's one of the reasons why I invested in this company if you would call I was here last year, I complemented you, perhaps you could call what it was last year or a few months ago, by the way (inaudible).

Howard Lutnick

The idea was, historically we had our annual meeting towards the end of the next year and that seemed a little off schedule, so we moved it up to June and we intend going forward to have our annual meeting around this time of the year, which I think is more generally consisting by the time.

Unidentified Analyst

You keep saying we’re an undervalued company, and I own a lot of shares, not as much as you but I want to get a better understanding why do you feel that way. I know what you outlined already and where you think our value should be.

Howard Lutnick

Well, so the question is why do I think it’s an undervalued company. So NASDAQ prepared $750 million cash and 20% cash about 600 million cash and that's why approximately 400 million current cash right, at least $2 billion, and I think we’ll have (inaudible) of cash. So it's $1 billion in cash and then $484 million NASDAQ stock coming in. If you put that sort of simple way I try to think about these things, it’s just the NASDAQ stock and put it against our debt, put those two things together, wrap them in a bow those things are about worth each other NASDAQ stock that's coming in and again that we have a company in billion one in cash no debt is equal to NASDAQ stock and connected but towards our debt. Now remember if you take out the debt you also have to take out the 40 million shares that come with the convertible bonds, right, so sometimes the analyst give you both ends, they say we have a lot of shares and we have the debt.

Convertible bonds are one of the two but they are not both, so if the NASDAQ stock takes out the debt you also have to reduce a fully diluted share cap at 40 million shares, so then you have a number about over 300 million shares but in the low 300, 320 million or so shares that’s said, so 320 million shares a $1 billion is cash so just under $4. then you have our technology businesses which do 80 million in revenues, at a 45% margin and they are growing 3 years at 20% where the treasury business with 10% but it’s got the same multiples right 12 times revenue would be a $1 billion and you’ve got less than 12 times you got the same multiple, it would be a $1 billion business growing largely fast, not slow, fast, so that’s a $1 billion right and again our 300 odd million shares that’s $300. so right then right that $4 plus $3 generally equals to $7 and our stock is trading below 6 that gets under appreciation, but that’s only 80 million above revenue. Then you have our financial service, we’ll talk about realty, but we had trailing 12 months of $550 million revenue and we expect to grow faster in the industry but that industry traded 19 times, right, 19 times earnings, so 19 times trailing 12 months earnings and we made what $45 million dollars. So you have the value $800 million to $900 million dollars in the real estate business that we expect to growth faster than our peers faster than anything.

Unidentified Company Representative

You’ve got to take tax off.

Howard Lutnick

Oh, we've got to take tax off, so maybe it’s about $700 million. right just doing the maths of the other peoples in the end of that which is another $2.5, right, and then you have our financial service business which only does the $1 billion revenue and only makes $110 million and while it may be out of statement because of quantities easing and people worried about Dodd-Frank and this and that with all due respect, it does over $1 billion revenue and it's our pipeline for the other business.

So even if you valued it at 10 times you would put it at over a billion. You can guide it at whatever number you want with the other two, the first two numbers exceeded the value of the company by a $1 a share, then the next one exceeded the value by another $2 a share and then you have the last one which only makes the most money, you put any number you want. Add those numbers together, you’re going to get the stock that’s near double the current stock price and that’s why the divided is strong and safe because the company has got assets that are worth much, much more and I don’t think anybody ever expected, I have said it for years for those people who have had the pleasure of listening to me, for years I have said that assets are worth that much of the company. We did a transaction where the asset was worth as much as the company. Right the assets of this company are worth far more than the current stock price and it is the job of our management team to express, to make our shareholders have superb returns and we are going to do that by growing our business and doing transactions when they are the correct one for the shareholders and then people may have doubted it at some point, they should have no doubt about it anymore.

Unidentified Analyst

All the other (inaudible).

Howard Lutnick

So, I’ll repeat the question for those on the phone who can’t hear, which is the question was, Blackstone and other companies like that have been acquired residential single-family homes to the tune of it was mentioned up to 30,000 homes and there was I think today an article in the papers and the neighbors does in Phoenix and Las Vegas and companies have been investing homes the question is would we be interested. I think the answers are pretty simple which is we’re an asset light company where we don’t own a whole lot of heavy stuff, right and we don’t hope it goes up. Those acquisitions are the bought houses and they hope they’re going to go up. Now that maybe a very, very good bet and it may be a boring bet, maybe correct bet and maybe a bad bet but I think what it is. In all of those words it’s a bet you mean bet right, they may be right. It may be, it may go up as fast as they want it you have to put a lot of capital work, we don’t do that. What we would do if we went into that business, it would be, when you go to the real-estate brokerage business what’s everybody thinks it’s a residential and brokerage we would help them what they want to eventually sell them all saying that do you need help, sell them all that would be a kind of business that you said it’s a residential business because more and more institution and you guys like institutional businesses, won’t you eventually get into the residential brokerage business with all these institutions raised and that would be an answer of yes.

So, we would help them sell it intellectually. Do we do it now? Absolutely not. Why? because the most institutional side of the real-estate business is crystal, crystal clear, commercial and the number one user in the world of commercial real-estate are financial service but it is so much commercial real-estate and we have such good relationships with them, they could watch us win business right? You saw just last week, New Mark Grubb Knight Frank announced that they were hired by the (inaudible) Exchange, to sell in New York headquarters downtown, right just announced. Right so that’s an example of how our relationship with financial service firms is going to create value for this company as cross selling it’s not really cross selling, it’s called superb service relationships across margin.

Any other questions?

So, thank you all for coming and now we’ll walk around and all executives are here so feel free to say hello thanks. Caroline is there anything else we need to do.

Caroline Koster

No, we are good thank you.

Howard Lutnick

Alright thank you all for coming and we appreciate and we’ll see you next year.

Unidentified Company Representative

Operator we are finished with the conference call. If you want to go ahead and…


Certainly okay. Thank you very much. Ladies and gentlemen, that now concludes your conference call for today, you may now disconnect. Thank you.

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