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LSE: Fight for independence

Robert Peston | 12:07 UK time, Thursday, 1 February 2007

Bob GreifeldI don’t know Bob Greifeld, though I met him briefly at last year’s World Economic Forum, where the Nasdaq chief executive is a regular. After this morning’s newspaper coverage of the state of Nasdaq’s attempt to take over the London Stock Exchange, I’m certainly no closer to understanding him.

The FT says he has signalled his intent to eventually capture the LSE, that he may hold his 28.75 per cent stake in the Exchange for 18 months, with a view to renewing his bid then. By sharp contrast, the Daily Mail says he could sell at any time, if a better deal came along. Confused? Well, I am.

But here's the really weird stuff. The Daily Telegraph and the FT both say Nasdaq is threatening to collaborate with the eight international investment banks which are plotting to create a new pan-European share-trading platform that would be a rival to the LSE (and also to Euronext and Deutsche Boerse, inter alia). Greifeld’s message appears to be, “that’ll teach the LSE a lesson.”

But hang on a sec. If Nasdaq in partnership with the Big Eight Banks (also known as the Turquoise banks, after the moniker of their project) were to take business from the LSE, and if they were to drive down the LSE’s share price, who exactly would be hurt. Well the LSE’s shareholders for one. And who is the LSE’s biggest shareholder? Oh yes, it’s Nasdaq.

At the current share price, Nasdaq’s stake in the LSE is currently worth almost £800m, a tidy sum. Precisely how shrewd would if be for Nasdaq to construct a bomb to put under the LSE’s share price?

London Stock Exchange logoApart from anything else, simply holding the LSE stake is expensive enough for Nasdaq. Why? Because the LSE’s dividend yield is under 2 per cent, which is significantly less than the cost of the capital deployed by Nasdaq in buying the holding. So surely Mr Greifeld wouldn’t want to add a capital loss to his carrying cost? Would his shareholders be delighted by that?

All that said, there was one clear message from all the cacophony of this morning’s Nasdaq noises. With Nasdaq talking in such detail about what would happen if its bid for the LSE were to fail in a few days time, the unmistakeable implication is that Greifeld has recognised that the bid will fail. No real news there. As I said on Radio Four’s Today Programme on Saturday (listen here), the LSE almost certainly secured its independence - at least for now - when Nasdaq decided on Friday not to improve its bid terms.

Comments   Post your comment

  • 1.
  • At 04:05 PM on 01 Feb 2007,
  • Robert Talbut wrote:

Useful and interesting I'll try to make a point to look again. How about a reminder when you make a posting so that people will look.
I'd also encourage a more hard hitting approach to business and politics - only where it's deserved of course.

  • 2.
  • At 04:53 PM on 01 Feb 2007,
  • Tony Good wrote:


Congratulations - great stuff!

In particular, I strongly agree with your comments on the ludicrously low fines imposed by the regulators on the banks and others. Not only are the amounts miniscule in relation to their profits but the fines are effectively on shareholders, who are totally innocent. There has to be a better way, surely?

  • 3.
  • At 08:23 PM on 01 Feb 2007,
  • Christian Pereira wrote:

I was absolutely livid when I heard the NYSE approached the Paris Euronext. I had thought it would be a natural deal for the LSE to tie up with NYSE.
Now that NYSE/Euronext deal has been finally accepted this means that the French investors will have access to the American markets and vice versa whereas UK investors into the US market have to go into the NYSE market the long winded way.
I think the LSE board must be half asleep when they should have approached NYSE with a friendly tie up.
Now that the above deal is a done deal perhaps Clara Fuse ought to telephone NYSE/Euronext to be invited to the party.

  • 4.
  • At 10:35 PM on 01 Feb 2007,
  • Tim Smith wrote:

Good article. I only hope the other shareholders take note. I think the Nasdaq Boss has treated them like idiots with some of the stuff he has said

Also, how is it that Nasdaq and NYSE can buy exchanges around the world, but anyone who wants to buy them can't because of ownership rules???

Interesting comments.. :D

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