Whats a BILLION between friends?
________________________________________
Tuesday December 7, 5:08 pm Eastern Time
NASD may sell off most of Nasdaq to raise $1 bln
By Elizabeth R. Smith
NEW YORK, Dec 7 (Reuters) - The National Association of Securities Dealers on Thursday may move forward with a plan to raise $1 billion by selling off most of its crown jewel, the Nasdaq stock market, through a historic private placement.
The Nasdaq's top listed companies, such as Microsoft Corp. (NasdaqNM:MSFT - news) and Cisco Systems Inc. (NasdaqNM:CSCO - news), would be offered stakes in the solely electronic stock market, as would the NASD's 5,592 members, people familiar with the plan said.
NASD executives would not talk about the proposal, but it is expected to be the main topic at the NASD board meeting in New York this Thursday, the sources said.
The idea behind the plan is to free the Nasdaq, the second largest U.S. stock market, from its entangled relationship with the NASD and the NASDR, the organization's regulatory arm. The NASD, a nonprofitp rofessional organization with roots datingback to the early 1930s, is parent company of both the Nasdaq and the NASDR.
The plan comes at a time when the U.S. equities markets are undergoing major changes, primarily due to the rising popularity of upstart electronic stock trading networks, known as electronic communications networks (ECNS). ECNs, sometimes no more than offices full of computers, pose a threat to the Nasdaq and the New York Stock Exchange because they undercut the established exchanges in trading speed and costs.
In the first stage of the private placement, the NASD would sell up to 49 percent of its shares, mainly to the top 100 companies listed on the Nasdaq. The NASD members would also be able to participate, but it is unclear as to how much equity the NASD would offer them in both the first and second rounds of the deal.
The NASD would retain up to 51 percent in the Nasdaq after the first stage of the plan. But it would forfeit that control in the second stage by selling more equity until it was left with about a 25-percent stake in the market.
A private placement could well be a precursor to the Nasdaq becoming a publicly traded company, but sources familiar with the plan say that is still undecided.
A sizable chunk of the $1 billion generated from the NASD's sale of the Nasdaq stake would be slated to finance NASDR, so that the regulatory organization would have a source of independent funding.
The idea of splitting off the Nasdaq from the NASD has been percolating since mid-1998, when the NASD put together a committee to explore the idea. The Baxter committee, named after its chairman, Frank Baxter, chief executive of the Jefferies Group Inc. (NYSE:JEF - news) brokerage, endorsed the idea in July.
In addition, NASD executives in the last month have been flying around the country discussing the idea of a private placement with NASD members at so-called town meetings.
The private placement would come at a time when the Nasdaq is already steeped in an ambitious project -- the construction of two sibling markets in Japan and Europe. The international expansion would serve as the foundation on which Nasdaq could erect a global electronic stock exchange.
Some smaller NASD broker-dealers, however, are worried that they would lose influence in the private placement to larger Wall Street firms and the powerful, cash-flush technology companies listed on the nasdaq, who could end up with significantly larger stakes in the stock market.
Alan Davidson, president of the Independent Broker-Dealer Association, which represents 225 brokerage firms that are NASD members, is the chief critic of the private placement plan.
Davidson, president of Zeus Securities, a brokerage firm from New York's Long Island, is insisting that the NASD's members be able to vote on the private placement before any changes take place. The plan, however, stipulates that the members would vote after the first stage of the private placement.
Davidson said he does not object to the idea of selling off the Nasdaq stake or a private placement but has problems with the NASD's approach.
''The (NASD) members must have more input on how this would be done,'' Davidson said. ''They (the members) don't like the way it is currently structured.''
The NASD built the Nasdaq, a purely electronic, screen-based market place, in 1971 on the premise that a trading floor was unnecessary to buy and sell stocks. It has since mushroomed in size and prestige, with 4,800 companies listed on its market.
Issuers include most of the most recognizable names in the U.S. technology sector, long credited as the engine powering the booming U.S. economy. Most U.S. Internet companies have opted to list their shares on the Nasdaq.
The NASD would have to secure the approval of the U.S.Securities and Exchange Commission to move forward on the second stage of its plan, the sources said. |
