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Why Nasdaq Stock Sank on Wednesday

Motley Fool - Wed Mar 20, 5:42PM CDT

Several key Nasdaq(NASDAQ: NDAQ) key trading indexes landed in positive territory Wednesday. Funnily enough, we can't say the same about its stock. Nasdaq shares lost more than 2% of their value across that trading session, because of news that a major stockholder unloaded some of its holdings. That 2%-plus loss was in marked contrast to, for example, the Nasdaq Composite index, which rose by more than 1%.

A big secondary sale

Shortly after market closed on Tuesday, Nasdaq and Borse Dubai announced that the latter company had launched a secondary offering of Nasdaq's common stock. The U.A.E.-based exchange operator is selling just under 27 million shares of its American peer and has granted the sale's underwriters a 30-day option to purchase an additional 4 million-plus shares.

As is customary in secondary sales, Nasdaq stressed that it will receive no proceeds from the issue, as it is not the selling party.

Once the sale is completed, the two companies said, Borse Dubai will hold roughly 10.8% of Nasdaq's common stock. That figure drops down to around 10.1% should the underwriters exercise their option in full.

When the offering closes, Borse Dubai indicated it would agree to an 18-month lockup period for its remaining Nasdaq shares. If its holding stays above 10%, it will have the right to designate a nominee for the American exchange operator's board of directors.

The seller will remain an investor

In the joint press release, Borse Dubai explained that it is selling the stock to "enhance" its capital structure and boost its liquidity. It quoted its CEO Essa Kazim as saying, "We continue to be a long-term shareholder in Nasdaq and are invested in the success of the company."

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

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