LSE: Fight for independence
I 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?
Apart 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.