American stock market Nasdaq abruptly pulled its £2.4 billion bid for the London Stock Exchange, but laid out a string of conditions under which it might return to the fray.

Shares in the LSE plunged more than 90p in early deals, to stand more than 8 per cent lower at 1,029.5p before the end of the first hour of trading.

The shares surged through the £11 barrier on the back of Nasdaq's earlier offer.

Having previously indicated it might be prepared to go hostile - and with the LSE's two largest shareholders indicating their willingness to talk - Nasdaq today said it reserved the right to make an another offer if the exchange's board agree to a takeover deal.

It also said it might relaunch a bid if a "third party" emerges with a rival offer. The New York Stock Exchange, although silent in recent days, has previously indicated it is interested in the London market.

Euronext, the pan-European stock exchange that owns the French, Dutch, Belgian and Portuguese markets, has also made plain its interest, although it has been moving towards an agreed merger deal with its previous arch rival Deutsche Borse of Germany.

It is understood that the German and French-led groups recently began exploratory "good-will" merger talks.

Michael Long, an analyst at Keefe, Bruyette & Woods, said he was reviewing his target price and rating for the shares in the wake of Nasdaq's withdrawal. He estimated the stand-alone value of the LSE at 990p a share.

Mr Long argued that the refusal of the LSE, led by chief executive Clara Furse, to hold talks with Nasdaq would have acted as a deterrent to the American exchange. He also noted that the LSE was now worth more than Nasdaq and funding a hostile bid for a larger target "could have been an issue".

In a brief reference this morning to its 950p a share indicative offer, Nasdaq said simply that it "no longer intends to make an offer for the LSE".

However, it added no fewer than five conditions under which it may resubmit a bid, including a predatory move or disposal by the exchange, or any "material change in circumstances".

Nasdaq said it reserved the right to offer less than its previous proposal of 950p a share.

"If Nasdaq announces an offer or possible offer for the LSE after three months from the date of this statement, it reserves the right to do so at any price and at a price less than 950p per the LSE share (adjusted to take into account any return of cash, dividend or other distribution declared, paid or made by the LSE on or after the date of this announcement and any reorganisation of share capital," the American exchange said.

The LSE's shares closed last night at 1,120p, valuing the stock and derivatives market at just under £2.9 billion.

To see what more happens to the shares today click here

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