Peter Fogel May 15, 2014
As investors and bankers eagerly await possibly the largest IPO of all time, the two major U.S. exchanges are jockeying for the honor of housing Alibaba Group’s ticker symbol. While Alibaba’s choice would have probably been a no-brainer 10 years ago, the two exchanges, NYSE and Nasdaq, have become much more competitive in the tech-listing game in recent years.
Prior to 2010, Nasdaq listed, on average, more than 80% of all U.S.-based VC-backed IPOs. But in early 2009, NYSE, in a bid to prevent a raft of struggling companies from having to delist as a result of the financial crisis’ negative effects on stock prices, dropped some of its previously cumbersome listing requirements. When some of these reduced requirements were extended indefinitely, it had the added benefit of attracting more emerging growth companies. These reduced listing requirements—which put NYSE more in line with Nasdaq in terms of minimum required revenue levels, shareholder equity and assets—allow promising technology companies to benefit from the prestige associated with listing on the “Big Board.” This has made the market for listing VC-backed tech IPOs much more competitive and has led to a shift in the distribution of IT-company listings.
According to PitchBook’s venture capital database, NYSE had never hosted more than 20% of U.S.-based VC-backed tech IPOs prior to 2008. Since then, the market for IT listings has become a more even playing field. NYSE captured almost two-thirds of VC-backed IT IPOs in 2013 and is on pace for a similar share this year, having listed six tech companies through May 1, compared to Nasdaq’s four. In the overall market for VC-backed listings, there has been a similar trend toward the Big Board over the last few years. But thanks to Nasdaq’s continued dominance in healthcare listings and the recent surge in biotech IPOs, the overall loss for Nasdaq has been less severe than on the tech side of things. NYSE’s best year for VC-backed IPOs was in 2012 when it took nearly 40% of all new listings, but since then, the exchange has seen its share recede. NYSE has captured 10 VC-backed IPOs through May 1 this year, compared to Nasdaq’s 39 (33 of which were healthcare companies).
With both exchanges offering similar levels of liquidity, the recent parity in listing requirements has made NYSE and Nasdaq extremely competitive. There are no more gimmes in the VC-backed listing game (unless you’re talking about healthcare companies), and it will probably come down to the wire before we know where Alibaba will choose to list.
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