NASDAQ said on Friday that it did not plan to raise its offer for the London Stock Exchange (LSE) just before a deadline to do so, putting a damper on investors' expectations.
Investors have until Feb. 10 to tender their shares for a deal, but any changes in the bid would have to happen this weekend unless a rival bidder emerges.
That is generally seen as unlikely, though any such deal would not happen quickly, because the NYSE is just starting to absorb pan-European exchange Euronext.
The London exchange's shares have fallen over the last week as investors who were hoping for a higher price than NASDAQ's initial US$5.3 billion bid head for the door. If the deal does not go through, NASDAQ has to walk away for a year, possibly leaving the door open to other bidders. Shares of the London Stock Exchange rose ?0.12 (US$0.24) on Friday, to ?12.95 above NASDAQ's ?12.43 a share offer.
What could happen until Feb. 10 is still unclear. About 25 percent of the exchange's investors are short-term holders such as hedge funds.
Many bought into the stock at a price higher than NASDAQ's bid and some invested in the stock through time-sensitive options, which expire early this year.
NASDAQ already owns 28.8 percent of the London exchange and needs an additional 21 percent to take control. NASDAQ has hinted that it could reduce its position, but many investors think that is a bluff designed to persuade them to tender their shares of stock for the hostile offer.
If enough investors sell and force the price below NASDAQ's offer price, then the remaining investors could race to NASDAQ to tender their shares, giving it the majority that it needs.
LSE executives contend that the bid is not even equal to the standalone value of their company and have repeatedly refused to meet with their NASDAQ counterparts. The situation between the two exchanges degenerated in recent days to an exchange of hostile, taunting news releases.
NASDAQ chief executive Robert Greifeld, and the chief of the London Stock Exchange, Clara Furse, have never discussed the deal face to face, and securing an agreed deal at any point in the future is probably unlikely, analysts say, because of the bad blood the bid has caused between them.