NYSE Owners Seek Injunction on Vote
Dissident seat owners of the New York Stock Exchange said in court Monday that Goldman Sachs Group Inc. cheated them out of a better deal by advising both sides of the NYSE’s planned $6-billion acquisition of Archipelago Holdings Inc.
In the first day of what could be a weeklong hearing, plaintiffs led by seat owner William Higgins alleged in New York state Supreme Court that Goldman Sachs pulled the two sides together for its own interest. Plaintiffs noted that the Wall Street investment firm owns a 15% stake in Archipelago as well as a number of seats on the not-for-profit Big Board.
Higgins is asking the court for a preliminary injunction against a shareholder and seat owner vote on the acquisition, set for Dec. 6, until another investment bank can provide an independent assessment of the value of the two entities.
“Goldman continued to run the show” despite being retained by both Archipelago and the NYSE as an advisor on the transaction without direct involvement in negotiations between the two, according to Higgins’ attorney James Sabella.
The NYSE would become a for-profit corporation as part of the deal and would have a rapid entry into the growing world of electronic stock trading that would supplement its famous trading floor. The Big Board has maintained that the proposed acquisition is fair to all sides and noted that investment banks Greenhill & Co. and Lazard Ltd. provided fairness opinions to the boards of directors of both exchanges.
Before a packed courtroom lined with several dozen boxes of documents related to the acquisition, Goldman Sachs managing director David Schwimmer said the company’s role did not include valuing either the NYSE or all-electronic exchange Archipelago, nor did it involve itself in negotiations. Schwimmer said he reached out to the NYSE on behalf of Archipelago and was present when the chief financial officers of the two exchanges first met to discuss a deal.
Under examination by Sabella, Schwimmer acknowledged that he wrote an e-mail saying that NYSE Chief Executive John Thain could “get cold feet” about the transaction. Schwimmer testified that he wrote that only because of the deal’s scope, and that Thain, a former top Goldman executive, was known to be cautious and conservative.
Considerable time was spent in discussion of the run-up in Archipelago stock since the proposed acquisition was announced April 20. The stock, at a 52-week low of $15.20 just before the announcement, closed Monday at $49.44, up 4 cents.
Schwimmer said Archipelago’s soaring stock price was not just because of excitement over the acquisition but also general investor enthusiasm over publicly traded exchanges.
Also Monday, an NYSE seat sold for a record $3,025,000, topping the previous high of $3 million.
