Preliminary details of a NASD spin-off of Nasdaq emerged Nov. 3 at a meeting of small firms in Marina del Rey, Calif.
The restructuring of Nasdaq will take place via two tranches of privately placed stock, with 75 percent of Nasdaq ultimately distributed to key market participants and member firms by fall 2000, said John Hilley, chairman and CEO of Nasdaq-Amex International.
Hilley, speaking to the California Association of Independent Brokers Dealers, emphasized that terms of the complicated transaction are still being worked out.
The first tranche will be offered shortly after the first of the year. The NASD will sell 49 percent of Nasdaq at that time. Shares will be offered to key Nasdaq stakeholders--trading firms and issuers. Because the NASD is a nonprofit corporation, shares in Nasdaq cannot be distributed directly to member firms without adverse tax consequences, Hilley said.
The second tranche is planned for fall 2000, after Nasdaq is registered as an exchange. At that time, "Seventy-five percent of Nasdaq would be owned by market participants and the membership," Hilley said.
In order to ensure diverse ownership, the NASD is planning to limit each buyer to a 2.5 percent stake.
Hilley pegged the value of Nasdaq at 1.3 billion dollars to 1.4 billion dollars. "With standard private placement discounts, we're valuing it at about a billion dollars," he said. "So we're thinking of 100 million shares at 10 dollars a share [in] a combination of warrants and stock."
Hilley predicted Nasdaq itself would receive 300 million dollars from the transaction. Most of that money will go for technology.
The NASD parent company will get the "vast bulk" of the proceeds and is expected to use its funds to ensure adequate funding of NASDR. Hilley told the small-firm owners that the Nasdaq sale and the resulting investment in NASDR should reduce the cost and intrusiveness of its regulation.--Tom Nelson