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Tuesday, November 15, 2005

Lucchetti At It Again; Judge's Insight Questionable

Looks like Aaron Lucchetti's up to it again. Trying feverishly to create news when there is none. In today's WSJ the often misguided Lucchetti scribes an article with the dubious headline, "NYSE Dissidents Gain Some Support in Court." To be sure, the headline belches a hint of fear into the hearts of NYX bulls (as evidenced by AX's weak open this morning [~$46/share]). Equally certain is the fact that Lucchetti takes comments out of context to apply to his story.

In a capitalistic, demographic society, government typically keeps at least an arm's length from private enterprises. Courts are not investment bankers, and they don't teach concepts like calculating net present, value, terminal rates of growth, or discounted cash flow models in law school. In fact, they don't discuss income statements, balance sheets, and statements of cash flows. They discuss law.

No judge is better suited to value the NYX deal than the ivy-league, mensa-society, hardcore, investment bankers at Lazzard and Goldman Sachs. It's particularly interesting to look at Judge Ramos's track record. This fella has a documented history of misleading people -- see the top of the second page of the aforementioned link. Keep in mind that he has a background in tennant-landlord relations, and the NYX case could be out of his league.

Nonetheless, Lucchetti conjures up an image that Higgens and his handful of malcontents has gained judicial support regarding its claim that the NYX deal should be re-valued, and that the scheduled Dec. 6, 2005 vote among NYSE seat holders should be postponed until the valuation has been re-assessed.

Lucchetti writes, "A state-court judge reviewing the New York Stock Exchange's deal to acquire electronic-trading firm Archipelago Holdings Inc. said he was concerned that 'somebody missed the boat' in assigning a value to the Big Board, lending some support to dissident NYSE members who say they should receive more than 70% of the stock of the combined company."

Let's examine Luchetti's nonsensical statement. Where's the context for the judge's statement? The judge thinks he has a better idea on valuation methods than Goldman Sachs? Goldman is the world leader in investment banking.

Moreover, Lucchetti takes this simple statement and uses it as a framework for the rest of his bearshit (read: bullshit).
Lucchetti continues, "In court, Justice Ramos called the sharp run-up in Archipelago's stock price since the deal was announced in April "troubling." With Goldman Sachs banker David Schwimmer on the witness stand, the judge raised questions about whether the deal should have included a "cap" or "collar" to adjust the terms if Archipelago's share price rose more sharply than the value of an NYSE membership."

Which words are Lucchetti's and which are Judge Ramos's? Sharp run-up in Archipelago's stock price is Luchetti's phrase -- not that of Ramos. "Troubling?" What the heck is that supposed to mean? What's troubling about it? The USA is a capitalistic, demographic society which has fostered free enterprise for centuries. Free markets are an essential cornerstone for our society, and a state judge's remarks about a company's stock price are unwarrented unless there's malfeasance involved -- and rest assured, that's not the case with the NYX deal.

Lucchetti continues, ". . .NYSE members can actually benefit from the rise in Archipelago's stock price since they stand to own shares in a new company pegged to the value of Archipelago's stock price." That must've been a painful sentence to write for Mr. Lucchetti as it is counter to his overall sentiment.

IF NYSE MEMBERS BENEFIT FROM A RISING AX STOCK PRICE, THEN
A) WHY IN THE WORLD WOULD MEMBERS BE OPPOSED TO THE DEAL?
B) WHY IN THE WORLD WOULD MEMBERS WANT SOMEONE TO INTERFERE WITH THE FREE MARKET SYSTEM AND THE INCREASED INTRINSIC VALUE OF THEIR SEATS?

Finally, Luchetti indicates that Judge Ramos may not understand how free markets work. Lucchettis says, "Pointing to the sharp rise in the price of shares of the Chicago Mercantile Exchange, which went public in 2002, the judge asked: 'Did that set off any alarm bells?'"

Alarm Bells?

What kind of alarm bell should be sounded as a result of the free market bidding shares of CME to an impressive level? Does the judge believe that all companies in a sector are valued equally? Does the run-up in Google imply that any deal inked in the media space should have a collar? All a stock price reflects is the value that investors believe is fair at any given time. As sure as a day has 24 hours, stock prices reflect this fair value.

What does Judge Ramos think of Berkshire Hathaway's share price? What are his views on the macro-economy? What are his feelings regarding Regulation NMS? Does he even know what Archipelago's revenues were last quarter? Does he feel that AX has a reasonable price/sales ratio? What are Judge Ramos's feelings regarding the EVA of AX? Courthouses are not investment banks. And its not clear if Lucchetti is really a business reporter.




3 Comments:

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