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May 31, 2002

Nasdaq IPO in the Fall

By Michael Ha

In the fourth quarter, Nasdaq could finally pull the trigger.

That's what Nasdaq officials say about pending plans to take their market public.

"Nasdaq will be the first U.S. exchange to go public," said Paul Warburg, the new vice president of investor relations at Nasdaq. "Because of our profile and what we stand for, which is total transparency, we need to do everything as perfectly as possible. We firmly believe we can set a positive benchmark for other exchanges."

Senior Management

To prepare his company for the changes, Warburg is creating comprehensive education programs, starting at the senior management level, extending to cover all other employees.

"Number one, my job is to prepare the organization and management to face the public while meeting the requirements of Regulation FD. This involves teaching them what to say when analysts call, and also how to talk about issues, such as what to do with options, when the time comes," he said.

Warburg, who is also responsible for cultivating relations with institutional investors before the company's IPO, said Nasdaq's brand recognition is an asset in meetings with them.

"Nasdaq's huge brand recognition, as well as its notoriety, is great from a marketing perspective," Warburg said.

The challenge is in teaching investors that the performance of Nasdaq as a company is not necessarily analogous to the Nasdaq index. Nasdaq can continue to generate profits even during a bear market, he said.

Indeed, the company performed well in 2001, posting a net income of $40.5 million. That's an increase of nearly 74 percent compared to 2000. Its total revenue for last year was $857 million, which is a rise of about three percent from 2000.

Warburg is optimistic that Nasdaq will perform well on its own exchange, where the securities of some 4,100 companies are traded.

"Obviously, the IPO market is not as robust as it used to be. But once there is a significant return to equity investment, we will have a solid model for growth. We like our position very much," he said.

A key component of Warburg's strategy is finding long-term investors instead of flippers who have plagued so many of the exchange's listed companies.

"It's really about understanding our business and understanding potential investors' criteria and matching those two. We are looking more for investors who will buy Nasdaq the company, not Nasdaq the stock," he said.

Communicating with potential overseas investors will also play a big part in Warburg's targeting efforts.

"Our company's goal is to link all liquidity around the world, which means we will also actively target overseas investors. Nasdaq has operations in Europe, Canada and Japan, and we're also in discussions with China, so these are good places to start," he said.

Currently, the NASD owns approximately 55 percent of Nasdaq, and the company has about 27,000 shareholders though private placements.

Nasdaq Technology

Warburg plans to leverage Nasdaq's technological capabilities for his IR efforts. "We are in the process of completely reconfiguring our IR Web site, which will be managed internally. We have an exceptionally strong technology staff here, and we will leverage that resource," he said.

Warburg's arrival is part of wider personal changes at Nasdaq, which includes the appointment of Ronald Hassen as senior VP and corporate controller. Both report to Nasdaq CFO David Warren.

Before joining Nasdaq, Warburg served as VP of finance and operations at 24/7 Media and held several senior positions, including director of IR at Pitney Bowes.

Michael Ha is an associate editor at Investor Relations Business, a sister publication of Traders Magazine.