With the recent share sale from NASDAQ (NASDAQ:NDAQ) and the planned share sale from the New York Stock Exchange (NYSE:NYX), there's a need to compare and contrast the two. Moreover, the potential ramifications for the entire business segment of “Exchanges” are big.
In short, this NASDAQ share sale looks like a good offering and the coming NYSE offering just feels sleazy. It is still worth exploring the current exchange landscape and the coming land grab that is certain to be on the immediate horizon. Please note that many of the shares and dollar figures have been estimated and have been rounded up and down where appropriate.
THE NASDAQ SHARE SALE
NASDAQ (NDAQ) is selling 18.5M shares at $37.36 (raising about $690 Million), which it filed to sell on April 20. When NASDAQ reported earnings on April 20, they reported $0.16/R$396.2M versus $0.11/$360M estimates. According to current prices, the market cap of NASDAQ is currently $3.45 Billion.
The use of proceeds from the NASDAQ offering will be to pay down debt and to help finance its stake taken in the London Stock Exchange. While all stock sales are usually a form of dilution, it looks good that this is being used to help finance that London Stock Exchange stake purchase and paying down debt never hurts. Since they had over $1 Billion in long-term debt as of their last report, paying some debt off now is not a bad idea at all.
THE NYSE SHARE SALE
New York Stock Exchange (NYX) has filed to sell 25M shares (or $1.7 Billion worth of shares) for selling holders on April 26, but the shares have not priced yet and have not been sold. What stinks about this offering is that the pre-IPO NYSE shareholders are getting basically all of the proceeds. When the NYSE reported earnings on April 19 it posted $0.24 vs $0.24-0.25, but the numbers are convoluted because of the Archipelago deal and expenses (as well as a thin group of estimates). The current market cap of the NYSE is about $10.6 Billion.
The largest portion of the offering is from the 1300+ former NYSE seat holders that are selling over 14.5M shares (looks to be about 14.7M). Private equity firm General Atlantic Partners is selling 1.8M of the shares, Goldman Sachs is selling 1.7M shares, Merrill Lynch is selling 1.2M shares, UBS is selling 760,000 shares, Bank of America looks like they are selling 716,000 shares (I have seen conflicting numbers on this, so it could be larger or smaller), Citigroup is selling about 1.3M combined shares, and Morgan Stanley is selling about 800,000 combined shares.
Many of these firms are also listed as the underwriters and bankers for the deal, which makes this even sleazier. The stock is marginally lower than when the deal was priced, but this just feels bad for the holders to be getting much earlier cash-outs than the street was expecting. I originally called the NYSE last month to try to decipher the whole order of the lock-up periods and when certain sales would take place, and if you can believe it both the prospectus and the company had it as an undefined and unresolved issue.
The NYSE has been reported as an acquirer for some time and is still rumored to be exploring other mergers and partnerships, and it is likely that they will acquire or partner. It would seem that about the only thing that could be said about THIS NYSE offering is that it is at least expanding what was a relatively thin float. It looks like the days of fleecing the public are far from over. If the company would come out and sell some shares to bolster ITS OWN pockets you would be getting a different tone from this note.
THE CURRENT EXCHANGE ENVIRONMENT
You could probably write a book about the coming consolidation in the global exchanges, and it is just too convoluted to predict exactly who is going to own whom and who will partner with whom. In recent days and weeks there has been much activity: the Osaka Exchange is said to be up from grabs, Euronext is potentially in a deal, the International Securities Exchange [ISE] has said it will enter the equities arena, NASDAQ bought a piece of the London Stock Exchange (and the exchange has long been a potential target of many), the Italian stock exchange has been noted as a potential target, the Dubai Stock Exchange is looking to go public, there have been changes at the American Stock Exchange and at the NYMEX, and the list just goes on. The Chicago Mercantile Exchange [CME] and the Chicago Board of Trade [BOT] have seen successful IPO's that have created a new batch of wealth, and both have been noted to be looking at deals.
NASDAQ was one of the first exchanges to attempt global listings in the late 90's and early 2000's, and both Germany and the old EASDAQ had some less than prosperous operations into global exchanges in the past.
Usually the more things change the more the old principles stay the same, but it does feel like this time is going to be different. It is obvious that there is a land grab in the works and a year from now it is likely that many these exchanges will have a much larger and broader footprint. Exchange Traded Funds are also changing the trading vehicle landscape, and it doesn't look like there is going to be any slowdown there any time soon.
The US bulge-bracket firms have also been involved in nearly aspect of every deal from top to bottom, and they will likely be just as involved in the overseas deals on the horizon; and we have even seen a resurgence in IPO's of actual boutique firms. Don't count the private equity funds out of this either, because many of these exchanges are prestigious assets and some are wildly profitable.
If you are wondering at all if some of these exchanges will appear as US and international members of our 'Bait Shop Report' it is safe to say 'You can bet your assets' that some of them will be, and likely sooner rather than later. About all that can be said without tipping the hand too much and without making too bold of predictions here is "Stay Tuned".....