Nasdaq Sets Collision Course With IR Vendors

By Dominic Jones (3 updates added)

THE Nasdaq Stock Market Inc. appears ready to wrap the cost of investor relations websites and newswire services into its annual listing fees — putting it on a collision course with many of its listed companies’ current service providers.

In a filing with the SEC yesterday, the stock exchange said its fees would rise about 22% for the smallest companies and 27% for the biggest. The new fees would include previously excluded services that help listed firms with “compliance, shareholder communications and visibility objectives.”

Over the past year, Nasdaq has bought PrimeZone Media Network, the third-largest (see update below) U.S. press release service, and Shareholder.com, the second-biggest investor relations website vendor. Last year it also purchased Carpenter Moore Insurance Services Inc., which provides coverage for directors and officers.

By including the services in its listing fees, Nasdaq is essentially making all issuers pay for services that they may not use or want.

It also puts pressure on companies to use the exchange’s services rather than choose services from other providers.

Nasdaq’s PrimeZone newswire service competes directly with PR Newswire, MarketWire and Business Wire.

Its Shareholder.com unit, which we have criticized for its privacy breaching technology, competes with Thomson Financial’s corporate services unit as well as many smaller website developers and outsourcing services.

The fee increases must still be approved by the Securities and Exchange Commission.

Update, October 4: There’s some dispute over PrimeZone’s market share. I used PrimeZone’s fact sheet as my reference for this story. It says: “PrimeZone Media Network is the nation’s third largest distributor of original, full-text corporate news through its newswire services.”

A reader has written in to correct me on this. He states: “According to independent database, Factiva, PrimeZone’s press release volume is just over 3 percent for June 26-Sept. 26, while press release volume for Market Wire is more than 12.5 percent. Compared to PrimeZone, Market Wire has greater percent market share and a higher number of releases in every major vertical that Factiva indexes.”

I don’t know for sure what the facts are, but simply based on volumes of releases, I tend to agree that PrimeZone is not the third largest wire service.

Update, Oct. 6: IR Magazine has now reported this story under the headline Nasdaq’s listing fee hike sparks debate. It quotes Dave Armon, COO of PR Newswire, as saying that PR Newswire believes Nasdaq’s plan “is anticompetitive and is bad for both issuers and the investor community.”

He says it is bad for issuers because it forces them to pay for services that they may not want or use from a provider they haven’t chosen. “It also penalizes issuers who would prefer to maintain their existing newswire relationships by forcing them to pay twice to do so,” the magazine quotes Armon as saying.

Nasdaq, of course, insists there’s nothing unfair about its plans, which it still hasn’t clearly explained. For example, it’s not clear that Nasdaq companies will get services included in their fees or whether they will only qualify for exclusive discounts (which they already get, by the way).

One reason Nasdaq may not want to spell out what it’s doing is to avoid ticking off clients of Shareholder.com and PrimeZone who don’t qualify for the discounts because they’re listed on NYSE or Amex or on international exchanges.

Revealing that you charge less to your listed companies than to others isn’t exactly as recipe for happy customer relations. In a sense it means NYSE, Amex and other clients of Shareholder.com and PrimeZone are subsidizing the IR costs of their competitors that happen to be listed on Nasdaq. Who can feel good about that?

All of which causes me to wonder why the heck Nasdaq got into this mucky business in the first place.

Update, Oct. 10: NIRI has now waded in, but ever so lightly. It asks in a poll of members if they favor the bundling of services with listing fees. Here are the results as of 4:00 p.m. EST today.

Okay, the poll can be easily rigged and there’s no information on how many have voted. But if this is an accurate indicator of IROs’ opinions, then Nasdaq screwed up. For the record, I voted no. Hey, I have opinions, too.

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