Reuters ponders Instinet's future
John Cassy
Wednesday April 3, 2002
The Guardian
Information group Reuters is reviewing the future of its electronic brokerage operation, Instinet, less than a year after floating it on Nasdaq.
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ecutives at Reuters, which still owns an 83% stake, are debating whether to buy out minority investors following a 50% fall in its share price. Instinet is now valued at only just over its cash in the bank.
Another option would be to merge Instinet with another electronic broker but retain an interest in the enlarged group.
No decision has been taken but Instinet shares rose 10% in early US trading, while Reuters closed up 20.5p at 562p
A Reuters spokesman declined to comment.
Instinet, in common with many electronic brokers, has suffered a fall in the volume of share trading due to the weakening economy and September 11 attacks.
Greater competition has also forced it to cut prices and last week it warned that it would report a first-quarter operating loss.
Analysts believe that Reuters would rather not have to pay to buy back Instinet, following a year in which it saw profits fall £500m and cut 1,800 jobs.
They believe a tie-up with a rival trading platform that would enable Reuters to continue to sell news and information services to share buyers.
"The best thing for Instinet is to take part in the consolidation going on," said Andrew Gordon-Brown, an analyst at JP Morgan.
Buying back control of Instinet at a price far below the level at which the stake was sold may also anger minority shareholders who backed the initial flotation.
Instinet was valued at $3.5bn (£2.5bn) when it floated on Nasdaq in May last year. The issue garnered Reuters $464m, of which $150m was used to clear inter-company debt.
Instinet was founded in 1967, bought by Reuters 20 years later and is the largest electronic agency securities broker, trading in 40 markets. Nasdaq stocks provide much of its business. |
