Monday, August 01, 2005

The Deal with the Deal

The S-4 that Arca/NYSE ("NYX") sent to the SEC on 7-21-2005 is extensive so here are some highlights from the filing. Hopefully this'll answer questions regarding AX-to-NYX shares, post-merger. This deal has all the makings to be the most significant merger ever to happen in the US capital markets.

Hope this helps:
  • How many NYX shares will be registered
Paraphrased from the S-4:

The number of shares of common stock, par value $0.01 per share, of the registrant (“NYSE Group Common Stock”) being registered is based upon the sum of (i) the product obtained by multiplying (x) 48,815,000 shares of common stock, par value $0.01 per share, of Archipelago Common Stock estimated that will be outstanding, on a fully diluted basis, immediately prior to the mergers by (y) an exchange ratio of 1.0, plus (ii) the product obtained by multiplying (a) 1,366 memberships in the New York Stock Exchange, Inc. outstanding immediately prior to the mergers, by (b) an exchange ratio of 80,154.95, which is a maximum estimated exchange ratio assuming that there are only 46,925,000 shares of Archipelago Common Stock on a diluted basis for purposes of calculating the exchange ratio."

Without the legal mumbo-jumbo, the formula for determining the number of NYX Common Shares there'll be looks like this:
48,815,000 x 1 + (1,366 x 80,154.95) = 158,306,662 NYX Shares.
  • What is the $39.595 'Proposed Maximum Offering Price' I've heard about?
The proposed offering price is $39.595 and is used solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price per unit is $39.595, which is the average of the high and low prices of AX on 7-19-2005.

They had to come up with a figure to use in order to determine the registration fee. A common misunderstanding is that this will be the price of NYX when it goes public.

  • How many shares of NYX will my AX shares convert to?
Since this is such a common question lets just quote the S-4. Here's exactly what it says, "In the proposed mergers, Archipelago stockholders will be entitled to receive one share of NYSE Group common stock for each of their shares of Archipelago common stock." (Source: 3rd paragraph on page 2 of the S-4).


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