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Warren Buffett Bid on NYSE Euronext (NYSE: NYX)

ICE Outbid, But Shows Confidence


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By Swagato Chakravorty
Wednesday, January 30th, 2013

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.

Bloomberg reports:

“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.


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