Like a blockbuster free agent angling for the best deal from star-hungry sports teams, Facebook is being wined and dined by execs from the Big Board and Nasdaq Stock Market who would kill to land the social network’s much-celebrated IPO.
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While the battle between the exchanges will ultimately mean nil to Facebook shareholders, the prestigious assignment will be a marketing coup for the winning exchange and could create a halo effect of future IPOs.
“I can guarantee in both instances people are going to roll out the red carpet and do everything they can to get this listing,” said David Weild, former vice chairman of Nasdaq. “They’re pulling out all the stops on this.”
Let’s Make a Deal
So what can the New York Stock Exchange, which is (still) owned by NYSE Euronext (NYSE:NYX), and Nasdaq offer a social network that seems to have everything? Think free, high-profile advertising.
Weild, who is a senior advisor at Grant Thornton, said Nasdaq could create a “coming out party” in Times Square, utilizing the electronic display at its prominent market site and relationships with other tower providers like Thomson Reuters (NYSE:TRI) across the street.
For its part, NYSE could throw Facebook a block party on Wall Street, closing down the area and displaying huge banners on the building, Weild said. The company could also offer up VIP access to its iconic trading floor and conference rooms.
Of course, it’s a given that both exchanges would offer Mark Zuckerberg and other Facebook executives the chance to ring the opening bell, as is typical when big companies go public.
Given the stakes, Nasdaq CEO Bob Greifeld and NYSE CEO Duncan Niederauer are likely personally lobbying Facebook for the IPO listing.
Groupon (NASDAQ:GRPN) said one of the things that swayed its decision to list its IPO last year on Nasdaq was the fact that the exchange agreed to do “quite a bit of advertising” on its market site, said Edward Kim, managing director at Capital Markets Advisory Partners.
Scramble for Monster’s Inc. ‘Listing’
Even faux listings garner competition from the two exchanges.
In an effort to gin up media buzz for the 2001 premiere of Pixar’s Monster’s Inc., then-CEO Steve Jobs considered creating a mock IPO, including a phony prospectus, Times Square tower ads, Internet campaigns and market open ceremonies.
“NYSE and NASDAQ were summoned to a command performance by Steve Jobs at PIXAR studios…to pitch our best ideas in a winner-takes-all (listing) competition,” said Weild, who recalled running into former NYSE CEO Dick Grasso in the “cavernous” Emeryville, Calif. headquarters of Pixar.
While Pixar, which was listed on Nasdaq and is now owned by Walt Disney (NYSE:DIS), ultimately decided not to go through with the idea, the episode underscores the competitive nature of the business.
Likewise, Facebook knows how bad the exchanges want its business and is basking in the praise.
“From what I understand, Facebook is playing Nasdaq and NYSE off against each other and trying to get them each suggest their most creative and compelling support packages,” said Weild, who has had conversations with executives from both exchanges.
It’s not clear when Facebook will announce its choice. Facebook, which is in the midst of a mandated “quiet period” ahead of its IPO, declined to comment.
Not surprisingly, the exchanges were quiet as well, with one claiming it has a rule against speculation.
Nasdaq, which is owned by Nasdaq OMX Group (NASDAQ:NDAQ), didn’t respond to a request for comment, while a NYSE spokesman said, “We’re not addressing Facebook specifically, as it would only speculate and we don’t speculate.”
The two exchanges regularly battle over prominent IPO listings, such as when they attempted to land Google (NASDAQ:GOOG) in 2004. But Facebook, which is seeking to raise $5 billion and may be valued at as much as $100 billion, takes the cake.
“The most important thing about Facebook is the bragging rights and halo effect,” said Weild, who wouldn’t reveal how Nasdaq secured the Google listing. “The stock exchanges are largely branded by the companies that list on them.”
NYSE is clearly winning the overall listing competition with Nasdaq, securing 16 of the top 20 U.S.-listed IPOs since 2010, according to Dealogic. It secured the rights to the top five IPOs over that span, including the $18.1 billion General Motors (NYSE:GM) offering in 2010 and last year's $4.3 billion IPO by HCA (NYSE:HCA).
Last year NYSE listed 388 IPOs that raised $105.4 billion, compared with Nasdaq, which listed 366 deals that raised $40.5 billion.
The Big Board is also making a serious push into the tech world, which has normally been the domain of Nasdaq.
According to Dealogic, NYSE has been the choice of 12 of the top 20 U.S.-listed Internet IPOs since 2010, including Chinese social network Renren (NYSE:RENN), LinkedIn (NYSE:LNKD) and Bankrate (NYSE:RATE). Last week Yelp disclosed plans to list with NYSE as well.
Yet Nasdaq scored three of the top four Internet IPOs over the past two years: Russia’s Yandex (NASDAQ:YNDX), online game maker Zynga (NASDAQ:ZNGA) and Groupon.
Even as it lands more tech IPOs, NYSE has diversified into other areas, with cash trading and listings equaling just 29% of 2010 net revenue, compared with 37% for derivatives.
Who Will Win?
The listing decision won’t mean much at all to Facebook shareholders because both markets are very similar and will allow the stock to trade all around the world.
“Facebook is going to be a very, very liquid stock and I don’t think it’s going to be discernable to the public whether it’s traded on the Nasdaq or the NYSE,” said Peter Wendell, managing director at venture capital firm Sierra Ventures and a professor at the Stanford Graduate School of Business.
While it may be a moot point for Facebook shareholders, Weild said there is cash to be made beyond the simple listing fees for the exchanges. That’s because there is incremental profitability associated to the listed exchange, which controls the auction process.
Rob Enderle, principal analyst at the Enderle Group, said he thinks Nasdaq “has the odds" to win the Facebook listing, though he believes NYSE will be in the mix.
“History would be on the side of Nasdaq,” said Wendell. “Since the presumptive outcome is the Nasdaq, it would be a real coup for the NYSE to get Facebook. The converse is less true.”