Thursday, March 02, 2006

Misleading Info from Lucchetti; The Real Skinny About the NYX IPO

(update added regarding Lucchetti's actual statement in today's WSJ, link to S-4 that doesn't require login information, and link to the press release mentioned below)

Before getting into the latest misleading information that Lucchetti's written, I want to take a minute to say CONGRATULATIONS (once again) to everyone at Arca and at The Big Board for making it through the regulatory, political, and just outright, circuitous obstacle course that has lead to the closing of what is arguably the most dramatic, landscape-shifting deal in Wall Street's history -- truly!

When the closing bell rings on March 7th, it will be a bittersweet chime. Bittersweet because it will mark the end of Arca as a stand-alone enterprise. However, the Porshe engine that is ArcaEx has now been installed in a Lincoln Town Car (the NYSE), and the merger of these two amazing companies will lead the future of bourses globally. And that's where the sweet part of bittersweet comes in.

Perhaps the rock group Semisonic put it best, "Every new beginning comes from some other beginning's end."

So onward and upward we go. John Thain puts things eloquently in his press release announcing the SEC's approval. He says, "This will mark the beginning of a new era for the Exchange and America’s financial markets. As a for-profit, publicly held company, the NYSE Group will be better positioned to grow, create value and compete globally. We will provide customers with more choice in trading, an advanced technology platform, a broader product mix, and listing opportunities among a wider group of companies. This is an exciting and historic time for the entire Exchange community, our Archipelago partners, our customers, our future shareholders and America’s investing public."


Ok, on to Mr. Lucchetti's article in today's WSJ.

Guessing by the number of folks in the AX bleachers (Y! Finance Message Boards) who have asked about how shares of AX will convert to shares of NYX, there seems to be some confusion. WSJ reporter, Aaron Lucchetti perpetuates this confusion in today's WSJ. He writes:

"The initial batch of stock will be distributed to NYSE seat holders and employees and Archipelago staff under terms of the companies' merger. The secondary offer could raise $1 billion to $2 billion, depending on how many Big Board seat holders decide to sell some of their shares in the new company."

So, folks who read that may gather that the initial NYX stock will be held solely by NYSE seat holders and employees of AX and NYSE. He even concludes that the secondary offer is contingent on how many Big Board seat holders decide to sell their stock. This is misleading and not accurate.

The reality is, that AX shareholders, NYSE seat holders, and employees of AX and NYSE will own (and do own) the initial batch of NYX stock.

As stated in the S-4, one share of AX will convert to one share of NYX. Please click here to view this SEC filing, and then go to page 12. At the top of page 12 (the first question on the page), it clearly states:

Q: What will I receive in the mergers if I am an Archipelago stockholder?

A: If you are an Archipelago stockholder, you will be entitled to receive in the mergers one share of NYSE Group common stock for each of your shares of Archipelago common stock. If you hold any Archipelago stock options to acquire
Archipelago common stock, you will receive options to acquire an equal number of shares of NYSE Group common stock.

So, Lucchetti's lack of insight perpetuates the notion that the NYX is having an IPO in the traditional fashion. It's clear that there are a substantial number of investors that are totally clueless about their ability to own NYX today, by having their AX shares convert to NYX shares on 3/8. If one relies on getting information from places like WSJ, CNBC, Bloomberg, and The Nightly Business Report, one gets the idea that the NYSE is going public in the same manner that most companies go public. The message that the NYSE is having an IPO is somewhat misleading. Misleading because there seems to be a lack of emphasis on the fact that AX will convert directly to NYX.

Next week will probably be chock-full of stories that mislead folks to believe that to own NYX they need to wait until 3/8, when the NYSE "goes public." There's already discussion about the high demand for NYX when it opens for trading. Thing is, it's already open for trading -- under the ticker "AX."


Post a Comment

<< Home

Free Web Counters