Shares in the London Stock Exchange fell yesterday as a predicted buying spree from investment banks in support of its merger with Deutsche Borse failed to materialise.
The fall on the first day of trading in LSE shares came amid criticism of the merger by smaller UK firms that iX, the name for the Anglo/German market, would turn them into "stock market also-rans".
There were fears that the fall in the LSE's value could weaken its hand in negotiating with Deutsche Borse on the operational details of iX. "With such a small and volatile market it takes only one investor to move the price, which isn't good in the middle of merger negotiations," one banker said. The LSE dismissed those fears. Shares in the LSE, mutually owned until it became a commercial enterprise in March, began trading at £28 sterling each, valuing it at more than £830 million (€1347.62 million). But the price fell throughout the day in thin trading, before closing at £22, valuing the exchange at £656 million.
Leading investment banks said the LSE was "not an important enough investment" to justify buying more shares, at least for now. Their banks support the merger in principle but have reservations about the structure of iX.
Traders said the indications were that retail stockbroking firms were selling bits of their stakes to reap windfall profits. Each member firm received an allocation of 100,000 shares, irrespective of their size. Irish member firms include Davy, Goodbody, NCB and ABN-Amro (Ireland).
