BY Dominic Jones
AMERICA’S second-biggest stock exchange looks poised to become a major player in the investor relations services business after closing a deal to buy a newswire service.
Added to its recent buy of Shareholder.com, a company that builds and hosts template investor relations websites, the deal potentially casts Nasdaq as a major player in the investor relations services arena.
It puts the exchange in direct competition with other newswire companies and IR website vendors that may already have service relationships with Nasdaq-listed companies. Key competitors include the likes of Thomson Financial, PR Newswire, Business Wire and CCNMatthews’ MarketWire.
However, it remains to be seen if Nasdaq’s focus will be on growing these operations or using them as a loss leader to attract new listings. Also in doubt is whether non-Nasdaq listed clients of Shareholder.com and PrimeZone will renew their contracts now that their vendors are owned by a competitor to the exchange where their stock is listed.
Benefits to Nasdaq firms
Although PrimeZone and Shareholder.com have said they will continue to service non-Nasdaq companies, it is clear that the Nasdaq’s priority is to use these services to attract and retain listings on its market.
In a statement announcing the PrimeZone deal, Bruce Aust, executive vice president of Nasdaq said: “The acquisition of PrimeZone is another example of Nasdaq partnering with the best-in-class service providers for its companies. This transaction reinforces our strategy to maximize the value companies receive from Nasdaq.”
Nasdaq-listed companies can access the PrimeZone and Shareholder.com services at discounts through the exchange’s issuer services group.
To date, none of the other exchanges have invested in building or acquiring similar corporate services offerings to those of Nasdaq. The exchange also offers its issuers insurance, independent research and market data services.
Significant assets and opportunity
With the acquisition of PrimeZone and Shareholder.com, Nasdaq has put together important assets that have the capacity to pose a serious challenge to the current market leaders.
PrimeZone is one of the smaller newswire services. It was started in 1998 by industry veterans to challenge the 40-year duopoly of PR Newswire and Business Wire. The company meets the disclosure requirements of the SEC and has established relationships with larger international companies listed in the US. It also services a wide range of smaller listed companies.
With the Nasdaq brand backing it, PrimeZone could make greater inroads against the two big press release giants. A lower-priced disclosure wire service would be particularly attractive to many companies.
Shareholder.com is the second biggest provider of template-based investor relations websites in the United States and has made limited in-roads into Europe and Canada. Thomson Financial is its main competitor in the US.
While Shareholder.com has recently introduced an improved platform for its template-based IR websites, the company has welded the new platform to a user tracking system that poses privacy and confidentiality issues for IR departments. This may hamper its ability to attract new clients, especially in Europe with its stricter privacy rules.
However, Nasdaq can now offer public companies both news release dissemination and IR website and webcasting from a single source. This could be a compelling offering for IR departments and a serious challenge to the big industry players.
But it remains to be seen if Nasdaq management will focus on growing these services given they contributed less than 3% to revenues in the quarter to June 30, 2006.