Not so NYSE

Total Capitalization for the combined NYSE and Euronext has gone up 44% to 26.6 billion (as of this post). The breakdown for each stock is a 32% increase in Euronext Price, 56% increase in NYSE price since 5/31 closing prices (the day prior to the release of the merger details).

Euronext shares are getting hammered today, off 5.3% thus far on the news of Deutsche Bourse backing out of merger talks, however NYSE shares are up.

The point of all this is that NYSE stock is extremely overbought - I can't imagine that the merger with Euronext will make the company 44% more valuable (profitable) than they were as separate entities, and I think the new NYSE/Euronext stock is in for a bumpy ride as a result. Especially when you consider NYSE shares have outgained Euronext shares by more than 20%, and have not been affected to this point by the news that DB is no longer pursuing Euronext. Less competition means less bidding up of the stock, and NYSE shares would be expected to drop on this news.

The fact that NYSE shares have not been dragged down by the DB news and Euronext share plummeting isn't the only unique aspect of this merger. Typically the acquiring company doesn't outperform the target company's stock by 20%, especially considering each company will operate in a different regulatory environment. Combine this with some of the public statements by Mr. Thain guaranteeing the deal will go through (back when the NYSE share price was not that attractive and DB was still in play), and the NYSE appreciation smells a little funny. A lot of institutional investors have a vested interest in ensuring that the NYSE share price is attractive enough to see the deal through, and some of the one-day returns are abnormal to say the least. Seems as if the share price has become detached from the reality of the deal and any type of outlook on future profitability and is being driven more by the collective self-interest of NYSE shareholders. Almost every day after the NYSE price jumps significantly, it drops back on profit-taking. Can't say I blame them, I'd probably cash out at this point as well.