Philly Stock Exchange Settles Shareholders’ Lawsuit
Officials of the Philadelphia Stock Exchange said they have settled a class-action lawsuit brought by shareholders who accused the exchange of diluting their ownership interest when it sold a major stake to six Wall Street firms.
Terms of the settlement, which are subject to final negotiation and court approval, were not disclosed.
The June 2006 lawsuit, filed in Delaware’s Court of Chancery, also named as defendants Citigroup, Merrill Lynch, Credit Suisse First Boston, Morgan Stanley, UBS Securities and Citadel Derivatives Group. The lawsuit said shareholders weren’t adequately compensated for the deal.
“With this settlement behind us, the exchange will continue to vigorously pursue its strategic plan and build on its ongoing growth in the options market,” Sandy Frucher, the privately held exchange’s chairman and chief executive, said in a statement.
In August 2005, the six financial institutions invested $3.75 million to $7.5 million in the exchange for a 45 percent stake. The exchange met certain performance requirements, so the Wall Street firms increased their stake to nearly 90 percent.
In 2004, the exchange had converted from memberships to having shareholders, becoming a for-profit institution. The investment firms saw ownership of the exchange as a hedge against the possibility of rising transaction costs from the dominant New York Stock Exchange and Nasdaq Stock Market.
The Wall Street Journal reported in April that the Philadelphia Stock Exchange was in talks to be acquired by Nasdaq.
A lawyer for the plaintiffs confirmed that an agreement was reached. A spokeswoman for the exchange declined to comment on the report.
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