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Nasdaq has signalled that it is prepared to fight a prolonged battle with the London Stock Exchange.
The US stock market warned on Wednesday that, if its hostile takeover bid failed, it could offer its technology to an LSE rival as part of moves it expects to drive down the exchange’s share price.
Bob Greifeld, chief executive, told the Financial Times that Nasdaq could keep its 28.75 per cent stake in the LSE for 18 months.
He expected the share price to fall in that time, he indicated. “In 18 months’ time, we will know what is the fair value of the exchange.” Nasdaq has refused to raise its offer price from £12.43 a share and looks steeled to seeing its current approach running out of time. LSE shares have stayed stubbornly close to £13, making it highly unlikely the bid will succeed.
Mr Greifeld defended his refusal to raise the price, saying the LSE had yet to grasp the nature of the fierce competition that European regulations will unleash.
It would take at least 18 months for the effect of the new competitive environment to sink into the London market’s collective psyche.
“It is probably the most dramatic transition [for the LSE] in their 300-year-old history, except perhaps for Big Bang. I think it may be even more dramatic than Big Bang,” he said, referring to the 1986 law that closed the LSE trading floor that divided banks into brokers and traders.
Nasdaq faces competition from upstarts in the US, including BATS Trading, which has captured 15 per cent of trading in Nasdaq-listed stocks by, in effect, paying people to trade on it.
“This is the competitive dynamic we live with,” Mr Greifeld said. “This is the intellectual underpinning for our offer price.” In a signal to LSE investors that they should wait for another bidder such as the New York Stock Exchange, Mr Greifeld revealed that Nasdaq last week met representatives of the consortium of banks planning a rival platform, Project Turquoise.
Although Nasdaq had not planned to use its technology to compete with the LSE, it was considering, if its bid failed, licensing it to the consortium. Nasdaq’s high-speed INet platform is understood to be on a shortlist of preferred technology providers, according to bankers familiar with the project.
However, he said Nasdaq would seek to hedge at least a portion of its exposure to the LSE, a move which could involve buying put options or selling shares short.
He said Nasdaq would not participate in a move by hedge funds to replace LSE management with one more amenable to approaching a prospective buyer – possibly Nasdaq – with a view to achieving a higher sale price.