Sloan Sessions: NYSE's second offering

Allan Sloan

TEXT OF STORY

SCOTT JAGOW: Friday, the New York Stock Exchange, which is now publicly traded, made a second stock offering. It raised more money than the whole exchange was worth just a year ago.Newsweek's Allan Sloan joins us now. Allan, I guess going public turned out to be a pretty smart move, huh?

ALLAN SLOAN: Yes I think we call that market timing.

SCOTT JAGOW: Why?

ALLAN SLOAN: Because in early 2005 the whole New York Stock Exchange market was valued at a little over a billion dollars because a seat changed hands at $975,000. As of the end of that stock offering, the stock that was sold, the stock that the seatholder still had was worth roughly $5.5 million so you had a 5.5to1 return in roughly 16 months if you held onto your seat instead of selling it.

SCOTT JAGOW: What has happened to drive up the value of the New York Stock Exchange?

ALLAN SLOAN: I think a lot of it is actually perception as opposed to reality. Back last year the people were saying "the exchange is doomed." That was the whole fallout from the whole Grasso scandal. There were all of these problems and the business of the stock exchange did not look especially promising so the value of seats was depressed but stockholder-owned stock exchanges have been very hot stocks the last year or so and what used to be Archipelago and is now the NYSE Group has been exceptionally hot, so the people who got in a return for their seats have made an awful lot of money

SCOTT JAGOW: The NASDAQ has been positioning itself to perhaps try and buy the London Stock Exchange. The NYSE getting more powerful could also do something like that. Do you think we're headed for some kind of consolidation worldwide in exchanges?

ALLAN SLOAN: I mean it's clearly happening and by the way the reason the NASDAQ can do this is it also has publicly-traded stock that was down for a very long time but it ran up about the time of the Archipelago deal and it's kept on running so both the New York Stock exchange and the NASDAQ market or whatever it's called these days have currency, they have stock they can use to buy other exchanges.

SCOTT JAGOW: And for the average investor, having the exchange go public means what?

ALLAN SLOAN: I don't really think it makes any noticeable difference. I don't see where it's to anyone's benefit other than the seatholders to have had it go public. The story that they told at the time was this would make markets better and things would be more efficient and yada yada yada. I have no idea if that's true. What I do know is the former seatholders of the New York Stock Exchange have really been rescued from a bad situation and it's turned into a good situation and what if anything that means to you and me I don't know but at least for me, it makes for a good story.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...