Warren Buffett Bid on NYSE Euronext (NYSE: NYX)
ICE Outbid, But Shows Confidence
Warren Buffett’s offer to acquire NYSE Euronext (NYSE: NYX), which owns the New York Stock Exchange, was made in November last year and has only just come to light. Although that bid was declined in favor of a better offer, it has caused speculation to grow about a resurgent trading market.
Stocks saw a volume decrease of 18 percent over 2012. Now, as of early 2013, U.S. equity funds have earned nearly $3.1 billion (a record high). In fact, equities have gone up by $1 trillion this year, bringing the S&P 500 Index within just 4.4 percent of its record high.
Berkshire Hathaway’s (NYSE: BRK.A) interest in NYSE Euronext could well be an indicator that Buffett, with his famed investment acumen, sees a real rebound in exchange earnings.
“He’s saying maybe things will turn around and volume will come back,” E. William Stone, chief investment strategist at PNC Wealth Management in Philadelphia, said in a phone interview. His firm manages about $112 billion. “It is a company that just benefits from transactions, and we all know the challenges of stock volume moving away from the exchanges.”
NYSE Euronext ultimately went to InterContinental Exchange (NYSE: ICE), which had bid $8.2 billion in December. Berkshire and Chicago’s CME Group Inc. (NASDAQ: CME) were also courting NYSE Euronext.
Although the NYSE has seen declining profits over the past three quarters, Bloomberg’s compiled analyses indicate a possible 22 percent resurgence this year.
Buffett has, of course, typically played long games, and it’s precisely because he may have seen a long-term rebound for NYSE that he made his offer.
Back in November, NYSE Euronext was trading at 11.6 times reported earnings. It's up 8.6% so far this year.