NYSE Euronext Inc
) has acquired a minority stake in a start-up venture firm - ACE
Group Inc. - for undisclosed amount and terms. The buyout is an
attempt by NYSE to diversify into the private stock placement
The private placements of stock is another form of raising
capital or funds in which the equity, debt or other securities
are sold to a small group of investors usually from mutual funds,
pension funds, insurance and large banking institutions as well
as high net worth or accredited individuals. In this case, the
stock is not sold through open market operations. Moreover, the
companies are not obligated to seek approval from Securities
Exchange Commission (SEC) for initiating private placements.
Thus, ACE Group offers a high-quality online service platform
, stock information and other relevant risk management tools in
order to help its private institutional investors identify valued
Additionally, ACE Group actively works toward addressing the
challenges faced within the private market, which include lack of
centralization, regulatory challenges and limited scope. This
3-year old start-up firm is operated by a small group of
experienced experts in financial services.
Hence, the deal appears a strategic fit as NYSE will enhance
the technical capacities and operating leverage of ACE Group,
bringing about efficiency and security within the private market
operations. Moreover, the US private market itself records a
turnover of over $1 trillion annually, offering ample
opportunities for both NYSE and ACE Group.
At a time when the traditional equity and derivative trading
platforms have been experiencing sluggish growth and business
volatility due to the changing dynamics of the exchange industry,
we believe NYSE should diversify into innovative business
opportunities in order to retain sustainable growth in the
However, this is not the first time that an exchange giant
tapped the private placement market. Earlier this year,
Nasdaq OMX Group Inc.
) established a joint venture with SharesPost Inc. to form Nasdaq
Private Market (NPM). Nevertheless, NYSE is likely to gain from
this new revenue source, given its competitive edge and scale of
efficiencies in the market.
While both NYSE and Nasdaq carry a Zacks Rank #3 (Hold), other
outperformers in the financial sector include
Fleetcor Tech Inc.
CIT Group Inc.
). Both these stocks carry a Zacks Rank #2 (Buy).
CIT GROUP (CIT): Free Stock Analysis Report
FLEETCOR TECH (FLT): Free Stock Analysis
NASDAQ OMX GRP (NDAQ): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
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