Philadelphia, PA: (Jun-20-07) Shareholders filed a class action lawsuit against the Philadelphia Stock Exchange, accusing it of diluting their ownership interest when it sold a major stake to six Wall Street firms. The six firms included Citigroup, Merrill Lynch, Credit Suisse First Boston, Morgan Stanley and UBS Securities and Citadel Derivatives Group. The June 2006 lawsuit, filed in Delaware's Court of Chancery, also named the six as defendants, claiming that the shareholders weren't adequately compensated for the deal. 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.
In April 2007, The Wall Street Journal reported that the Philadelphia Stock Exchange was in talks to be acquired by NASDAQ. Terms of the settlement, which are subject to final negotiation and court approval, were not disclosed. [FORBES: SHAREHOLDER OWNERSHIP]