Nasdaq raises $1.90 billion via US bond markets to pay for its purchase of Verafin

Darren Sinden

Nasdaq’s newly issued 10-year bond offers investors a yield of around 1.69% and are rated Baa2 by Moodys and BBB by S&P Global.

Nasdaq index 5000 pts

Stock exchange operator Nasdaq has tapped the bond markets to raise money to help fund its acquisition of Verafin, which was announced back in mid November.

Nasdaq has raised an impressive US$1.9 billion through the issue of three bonds including a 10 year tranche that priced just 75 basis points above the US 10 year treasury bond.

Verafin is a specialist in anti-financial crime and Nasdaq is paying $2.75 billion to acquire the business a move that its hopes will allow it to develop a global SaaS product aimed specifically at detecting and preventing financial crimes.

Verafin, which is based in Newfoundland on Canada’s east coast was founded back in 2003 and provides its services to more than 2000 US financial institutions via cloud-based platforms, which help them to detect track and report money laundering and financial fraud.

Nasdaq intends to combine Verafin with its existing Nasdaq Trade and Market Surveillance platforms alongside its buy-side compliance capabilities, which it supplies to around 250 banks and broker-dealers

Nasdaq’s newly issued 10-year bond offers investors a yield of around 1.69% and are rated Baa2 by Moodys and BBB by S&P Global.

Nasdaq didn’t specifically comment on the fundraising but one is forced to wonder why a business that makes its living through the listing and trading of equities chose to tap the debt markets rather than issue new shares to fund the deal?

After all Nasdaq shares have risen by just over +20% year to date and with a current market cap of $21.08 billion raising the $1.90 billion would have represented a relatively modest issuance to a business, which, is 72.59% owned by institutional shareholders.

No doubt Nasdaq’s management has a rationale for that decision, and of course, with interest rates so close to zero in the US, debt is a very cheap currency with which to fund expansion and acquisition, though perhaps we might have expected Nasdaq to wave the flag for the equity markets.

Nasdaq is just one of a number of exchanges which are investing in their data and data services capabilities in order to diversify their income streams away from listing and trading revenues.

The purchase of Verafin is still subject to regulatory approval and one of Nasdaq’s major rivals, the London Stock Exchange Group, recently received European Union approval for its $27 billion purchase of market data and trading platform provider Refinitiv, which is 45% owned by Thomson Reuters.

The deal, which will catapult the LSE into the top tier of market data and trading platform providers, is expected to close in Q1 2021, after which the London Stock Exchange could well find itself going head to head with the market leader Bloomberg.

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