Nasdaq Completes Private Sale of Market's Stock
Washington, Jan. 25 (Bloomberg) -- The Nasdaq Stock Market
completed planned private sales of stock in the second-largest
U.S. market, raising less than it once anticipated as it becomes
a private, for-profit company.
Nasdaq's and its parent, the National Association of
Securities Dealers, said two rounds of private stock sales raised
about $516 million. Investors also bought warrants that, if
exercised, would raise another $627 million over the next five
years, bringing total proceeds to more than $1.1 billion.
In proxy materials last March, the NASD said it expected the
two private placements and warrants to raise as much as $1.55
billion over five years.
``Part of Nasdaq's shortfall stems from the weaker general
market last year, but part comes from questions about their
ultimate business success,'' said Benn Steil, a stock-market
expert at the Council on Foreign Relations, a non-profit research
organization. ``There is an enormous amount of uncertainty about
their trading systems, listing revenue and market-data revenue.''
An NASD statement said if all warrants are exercised the two
rounds of stock sales would put about 60 percent of Nasdaq's
stock in the hands of more than 2,900 brokerages, companies, and
institutional investors. Last year, the NASD said it expected to
sell about 78 percent of Nasdaq's stock.
The NASD today said it intends to sell its remaining stake
in the next few years. The second phase of the private placements
closed last Thursday, the NASD statement said.
SEC Approval
Nasdaq still needs Securities and Exchange Commission
approval of its application to register as an exchange before it
can fully function as a profit-seeking company. This approval
should be routine, Nasdaq officials have said.
Nasdaq, in a process begun a year ago, is converting from a
not-for-profit membership organization to try to ease its ability
to raise investment money and make strategic corporate decisions.
Of the stock sale proceeds, $326 million will go to Nasdaq and
$190 million to NASD, the statement said.
NASD Chairman Frank Zarb said the stock sales are ``an
important step'' in ``separating Nasdaq from the NASD and
creating a truly independent investor-owned Nasdaq.'' Still to
come are approval of Nasdaq's exchange registration and further
reducing NASD's stake. ``We have come a long way towards becoming
an independent shareholder-owned market, but we are not quite
there yet,'' he said.
When Nasdaq's exchange registration is granted, the NASD
plans to vote its Nasdaq shares proportionally to the votes cast
by other Nasdaq shareholders, NASD Chief Executive Robert Glauber
said.
Market Competition
Nasdaq, which started in 1971, is an electronic, dealer-run
market that lists many technology companies such as Microsoft
Corp., Intel Corp., and Cisco Systems Inc. It is classified as a
``facility'' rather than an exchange.
Nasdaq competes with the New York Stock Exchange, the
world's largest stock market, and with electronic trading
networks such as Reuters Group Plc's Instinet Corp.
Steil, the stock exchange expert, said Nasdaq faces many
questions about its ultimate sources of revenue.
SuperMontage, a Nasdaq trading platform approved earlier
this month by the SEC, ``is a complicated system that will be
very expensive to build,'' he said.
The NYSE, meanwhile, is heating up competition for listings
from large companies, Steil said. The Big Board earlier this
month lowered the highest fees it charges newly listed companies.
Nasdaq also is likely to face competition for listings from
European exchanges, he said.
In addition, the SEC is examining whether Nasdaq and the
NYSE should continue to control the revenue raised from the sale
of stock-price data to brokerages and vendors. Firms such as the
Charles Schwab Corp. have urged Congress to give them more
control over dissemination of this data.
Nasdaq Investors
Investors in Nasdaq include all of the market's biggest
market makers, the largest Nasdaq-listed companies, more than 50
percent of NASD's membership and several large institutional
investors, NASD's statement said.
Nasdaq's board also approved nominations of four additional
directors -- two from the securities industry and two from
outside. According to the statement, they are: Merrill Lynch &
Co. Executive Vice President E. Stanley O'Neal; Morgan Stanley
Dean Witter Institutional Services co-President Vikram Pandit;
WPP Group Plc Chief Executive Martin Sorrell; and Starbucks Corp.
Chief Financial Officer Michael Casey.
Nasdaq isn't the only U.S. exchange to be moving toward
becoming a for-profit company.
The Pacific Exchange's regional stock market became a
private corporation last May. Pacific last month approved a plan
to turn its options market into a company in a year.
The NYSE, the world's largest stock market, was planning to
launch an IPO more than a year ago, but postponed the plans
indefinitely.
About a dozen international exchanges already have become
for-profit companies, Steil said. These include exchanges in
Toronto, Stockholm, Amsterdam, Athens, Singapore and Copenhagen,
he said. |
