Nasdaq Completes Private Offering
The second phase of the Nasdaq private placement has formally closed, effective last Thursday. With this important step, the NASD has completed the planned stages of its reorganization and recapitalization of Nasdaq, which was overwhelmingly supported by the NASD membership in an April 2000 vote.
Nasdaq and the NASD raised over $180 million in the second phase of the private placement, making this transaction the fourth largest equity offering in December 2000, according to published reports. Combined, Phase I and Phase II raised $516 million - $326 million for Nasdaq and $190 million for the NASD. The two phases combined would be the fourth largest reported private equity transaction for 2000. If all of the warrants sold in both phases are fully exercised, the NASD will receive an additional $627 million over the next five years and approximately 60 percent of Nasdaq will be in the hands of over 2,900 investors.
Commenting on today’s announcement, Frank G. Zarb, NASD Chairman and Nasdaq Chairman and CEO, said, "The closing of the second phase marks a key milestone in the NASD restructuring. A year ago we set out to realign strategically the ownership of Nasdaq by enlisting a broad class of investor/owners interested in our long-term success and, in the process, create a financially stronger Nasdaq. The Nasdaq’s two-phase private placement met those goals. Our strategic partners now own a large percentage of Nasdaq, and we are better positioned than ever before to be the most successful equity market in the world."
Also commenting on today's announcement was Robert R. Glauber, NASD's CEO and President. "With the completion of this extended and careful restructuring process, the NASD will be able to focus solely on its historical role of industry self-regulation, financially strengthened and properly independent," Glauber said. "We will now be better positioned to deliver the tough and fair regulation on which investors rely, with the efficiency the firms and markets we oversee have a right to expect."
Glauber said that once exchange registration is granted the NASD has committed to vote those Nasdaq shares over which it has control in a manner proportional to the votes cast by the other Nasdaq shareholders. Glauber also said the NASD intends to sell off its remaining minority Nasdaq position expeditiously in an orderly fashion and subject to market conditions.
"This underscores our commitment to independence for Nasdaq," Glauber said.
Zarb noted further, "The closing of the private placement is an important step, but only a step in the process of separating Nasdaq from the NASD and creating a truly independent investor-owned Nasdaq. There are two key events on the horizon that will make that happen: first, Nasdaq achieving exchange registration and second, the NASD further reducing its ownership position. We have come a long way towards becoming an independent shareholder-owned market, but we are not quite there yet."
The investors in the Nasdaq include all of Nasdaq’s largest Market Makers, Nasdaq’s largest issuers, over 50 percent of the NASD membership, and several large institutional buy-side firms that hold a large number of Nasdaq stocks in their portfolios. No current investor holds more than a five percent stake. This investor group of over 2,900 investors in Nasdaq thus now includes the broad range of the key participants in the market -which was a goal of the restructuring.
Zarb concluded, "With the private placement behind us and the process of our formally registering as an exchange underway, I expect that the Nasdaq board will consider a wide range equity enhancing options, including accessing the public capital markets via an initial public offering."
Nasdaq Expands Board
Nasdaq’s Board also approved the nomination of four new additional directors to the Nasdaq Board-two industry members and two non-industry members. E. Stanley O’Neal, Executive Vice President of Merrill Lynch and President of its U.S. Private Client Group and Vikram Pandit, Co-President of Morgan Stanley Dean Witter Institutional Services joined as industry members. Sir Martins Sorrell, Group Chief Executive of WPP Group Plc. and Michael Casey, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer of Starbucks Coffee Company joined as non-industry board members.
The current members of the Nasdaq board will remain, and they include: H. Furlong Baldwin, Chairman, President and CEO, Mercantile Bankshares Corporation; Frank E. Baxter, Chairman of Jefferies Group, Inc.; Alfred R. Berkeley, Vice Chairman, The Nasdaq Stock Market; Michael W. Brown, retired Chief Financial Officer, Microsoft Corporation; Elaine L. Chao, Distinguished Fellow, The Heritage Foundation; John D. Markese, President of American Association of Individual Investors; David S. Pottruck, Chairman and Co-Chief Executive Officer, The Charles Schwab Corporation; Arthur Rock, Principal, Arthur Rock & Co.; Richard C. Romano, President, Romano Brothers & Co.; Arvind Sodhani, Vice President and Treasurer of Intel Corporation; and Frank G. Zarb, Chairman and CEO of The Nasdaq Stock Market.
The National Association of Securities Dealers, Inc., is the largest securities-industry, self-regulatory organization in the United States. It is the parent organization of the American Stock Exchange, LLC; NASD Regulation, Inc.; and NASD Dispute Resolution, Inc. For more information about the NASD® and its subsidiaries, please visit the following Web sites: www.nasd.com; www.nasdaq.com; the Nasdaq NewsroomSM at www.nasdaqnews.com; www.amex.com; www.nasdr.com; or www.nasdadr.com.
