NYSE Owners Get Payday

The exchange's parent prices 25 million secondary shares.
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The parent company of the New York Stock Exchange unleashed a huge chunk of stock into the public market Thursday, raising a billion and a half dollars for insiders who have been waiting to cash out their stake in the storied institution for more than a year.

About 25 million

NYSE Group


shares were priced at $61.50 apiece, raising about $1.54 billion for exchange holders, many of which are Wall Street banks who helped underwrite the deal. The stock went out below its $62.87 close, suggesting underwriters had trouble drumming up demand for the richly priced issue.

Although the company will be receiving no proceeds, the deal was significant as it is the first foray into a public market by the NYSE, which gained a public listing in March through a reverse merger with Archipelago Holdings.

Trading in the stock has been volatile. It went above $90 just days after the merger closed -- running all the way from the mid-$60s. In the year leading up to the merger, shares in Archipelago had already surged by more than 240%.

Over the past two months, though, NYSE shares have gradually ticked down, as traders braced for Thursday's secondary and grew skeptical about the company's expansion plans, especially its ability to outgun the



in bidding for the London Stock Exchange.

People close to the secondary offering said that the company's meetings with prospective investors provided little clarity about the pressing questions facing the exchange, including how it plans to set prices on its emerging "hybrid" market, as well as how it will execute its consolidation goals.

Complicating the deal for the NYSE was an 18.5-million-share offering priced last week by the Nasdaq. The deluge of exchange shares hitting the market gave investors a choice and arguably hurt the valuation of both. Shares in the Nasdaq have fallen 19% in the past two weeks to a Thursday close of $35.51.

Given the NYSE deal price, holders who opted not to sell into it could be the ones that make out the best. One such investor is Thomas Caldwell, chairman and chief investment strategist of Caldwell Asset Management, who is one of the NYSE's top shareholders.

"We tendered only a sliver of our holdings in the NYSE for a few clients to create cash," said Caldwell. "We are long-term investors in the NYSE, which is why management's ability to implement a plan and remain accountable in important." Caldwell sold about 4% of his stake in the company.

Caldwell says he remains confident in the NYSE's long-term plan, despite its recent lack of transparency. "Management is constrained as to what they can say and do during this phase, so it is a little bit of an act of faith," Caldwell said.

Thursday's secondary gives a number of large broker-dealers, who are former seatholders on the exchange, the opportunity to sell their stake. Five-percent holders that are selling into the secondary include each of the deal's lead underwriters:


(JPM) - Get Report


Lehman Brothers



Merrill Lynch



Morgan Stanley

(MS) - Get Report

. Other Wall Street firms taking part include


(UBS) - Get Report


Bank of America

(BAC) - Get Report



(C) - Get Report

, each of which is part of the underwriting syndicate.

Goldman Sachs

(GS) - Get Report

and General Atlantic LLC, also cashed out a portion of their stake.