Exchange Shopping

European stock exchanges may be aggressively marketing to foreign corporates. But U.S. companies need a good business reason to list overseas.

Given the beating that global stock markets have been taking and the near-moratorium on initial public offerings, some American finance chiefs may be tempted to give up pursuing international equity altogether. But not World Wrestling Entertainment Inc. CFO August Liguori.

The Stamford, Connecticut-based company went public on Nasdaq three years ago and moved to the New York Stock Exchange two years ago. Now, Liguori is adding the possibility of a European equity offering to the company’s long-term growth plan. Ideally, a listing will land the company on the “most global” and “prestigious” stock exchange in Europe, as a natural complement to WWE’s international sales expansion strategy. “We find that when portfolio managers see the power of the brand being demonstrated [and get to] meet and greet the talent,” he says, “they become pretty substantial investors. In the long term, we’re hoping to replicate that kind of activity around the globe.”

Exactly which European exchange will be the most global and prestigious when Liguori is ready, though, is an open question. After decades as member-owned fiefdoms separated by high cross-border trading fees, varying listing requirements, and unconnected clearing and settlement processes, “exchanges are becoming more like businesses,” says Cornell University finance professor and American Finance Association president Maureen O’Hara. Nine exchanges, including the London Stock Exchange (LSE) and Germany’s Deutsche Boerse, are now publicly traded companies, she says, and most other exchanges are looking to pump up their volumes through alliances, mergers, and acquisitions. The introduction of the euro as well as governmental efforts to standardize listing requirements and accounting rules across the continent by 2005 are only intensifying the race to be biggest and best.

Where the Action Is

To be sure, the major exchanges have already taken some significant steps toward a Pan-European securities market. Bourses in Paris, Amsterdam, Brussels, Warsaw, and Lisbon have all come together under the Euronext name in the past two years, “a wildly successful effort,” according to O’Hara. Nasdaq, meanwhile, recently purchased a 50 percent stake in Nasdaq Deutschland AG, the product of the newly combined Berlin and Bremen exchanges, with the hope of complementing its still-struggling Nasdaq Europe. For its part, the Deutsche Boerse, owner of the Frankfurt Exchange, is pursuing a vertical-integration strategy: buying up the technology that settles and clears the trades to give it some control over where the new borders are drawn.

Also in the mix are some 20 new exchanges, including Athens’s year-old NEXA Market, that have emerged since 1995, aiming to be Europe’s version of Nasdaq. The result, says Gerry Beaney, partner in Grant Thornton LLP’s London office, is that Europe has become a continent with “too many markets regulated in too many different ways and trapped by varying degrees of red tape, language barriers, and cost.” And, he predicts, “the exchanges will have to consolidate to survive.”

The big prize, of course, is the LSE. The exchange has already been courted by the Deutsche Boerse, Sweden’s Stockholm Stock Exchange, and Nasdaq, and experts predict that one of these suitors–or another–might soon be successful in sealing a deal.


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