Scoring what may be the biggest listing by a technology company ever will help Robert Greifeld, chief executive officer of Nasdaq OMX Group Inc., forget about his last clash with NYSE Euronext (NYX) (NYX)'s Duncan Niederauer.
Facebook Inc. (FB) (FB) plans to list its shares on the Nasdaq Stock Market, further cementing the exchange's position as the favored venue for the biggest U.S. technology companies, a person with knowledge of the matter said yesterday. The person declined to be named because the discussions are private. The social media giant spurned the New York Stock Exchange, whose stocks have a market value about triple that of Nasdaq's companies.
The two biggest American exchange operators are rivals for virtually every IPO in the country and competed for Facebook, which filed for a $5 billion initial public offering on Feb. 1. Winning the IPO would mean more fees, a boost in trading revenue and the chance to link an exchange's brand with the largest social-networking website in the world.
"People are asking about what it means for NYSE to lose it, but it was critical for Nasdaq to win," Richard Repetto, an analyst at Sandler O'Neill & Partners LP in New York, said in a phone interview. "What it does is it keeps the momentum and likely leads to further IPOs in the future. Whatever brand Facebook attracts, whether it's tech or social media, it likely helps Nasdaq's cause."
Robert Madden, a Nasdaq OMX spokesman, declined to comment on the decision. So did Jonathan Thaw of Facebook and Rich Adamonis of NYSE Euronext.
Blow to Niederauer
The decision is the latest blow to Niederauer, who saw his own attempt to merge with Deutsche Boerse AG fall apart when European antitrust regulators blocked the deal. Shares of the company slid 13 percent in 2011, while Nasdaq OMX (NDAQ) (NDAQ) climbed 3.3 percent and the Standard & Poor's 500 Index was little changed.
Greifeld will get bragging rights about luring Facebook after his unsolicited attempt to acquire the New York Stock Exchange parent in conjunction with IntercontinentalExchange Inc. fizzled out when the Justice Department said last May it would sue to block such a transaction. Niederauer was on the board that rejected Greifeld's offer and referred to it as "loosely worded and full of unanswered questions" in an interview with Bloomberg on April 10.
Nasdaq rose 1.2 percent to $25.52 yesterday, while NYSE Euronext fell 1.3 percent to $28.31.
Biggest Technology Companies
Nasdaq OMX lists seven of the 10 biggest U.S. technology companies by market value, including Apple Inc. (AAPL) (AAPL) and Microsoft Corp., the two largest, as well as Google Inc. (GOOG) (GOOG) and Intel Corp. The NYSE is the home venue for International Business Machines Corp., ranked third.
Inclusion in the Nasdaq-100 Index may have spurred Facebook toward Nasdaq, Josef Schuster, founder of Chicago-based Ipox Schuster LLC, which has about $2 billion tied to indexes that track IPOs, said in a phone interview. The benchmark gauge comprises nonfinancial companies including Apple and Google.
The Nasdaq-100 has surged 165 percent since equity markets bottomed in March 2009, beating the 107 percent gain by the Standard & Poor's 500 Index.
Should Facebook get a weighting of 4 percent to 5 percent in the Nasdaq-100, the PowerShares QQQ Trust exchange-traded fund that tracks the measure "could create $2 billion to $3 billion of systematic demand" for the stock, Schuster said. The ETF has a market value of $35.9 billion, according to data compiled by Bloomberg. Other securities tracking the index would need to make similar purchases.
'Supportive' of Price
"It would be very supportive for the stock price and may be one of the main reasons Facebook chose Nasdaq," Schuster said. "They'd be with Microsoft, Yahoo and Apple. Being included would create demand no matter how expensive or cheap the stock is."
While listings bring in less than a quarter of net revenue and even less of profit for NYSE Euronext and Nasdaq OMX, the exchanges fight for IPOs because it leads to more trading and brand value, said Larry Tabb, founder of financial-market research and advisory firm Tabb Group LLC. Listings accounted for 17 percent of NYSE Euronext's net revenue last year and 19 percent of Nasdaq OMX's.
Tabb said March 27 that Facebook's trading may translate into about $500,000 to $1 million revenue per year, split among the exchanges and other venues. That means that NYSE Euronext and Nasdaq OMX could get an additional $260,000 in trading and market data revenue alone.
"It's a huge prestige thing for the exchanges and I'm sure NYSE is very disappointed, but I don't think it matters in terms of the exchange's share of trading," Mike Bleich, chief executive officer of Scout Trading LLC, a market-making firm in New York, said in a phone interview. Facebook "will trade across a variety of exchange platforms as all other stocks do. The particular platform they list on isn't special."
Percent of Trading
Markets owned by NYSE Euronext and Nasdaq OMX had about 30 percent of trading this year in shares listed on NYSE and Nasdaq, respectively, according to data compiled by Barclays Plc in a report March 26. The NYSE owner accounted for 11.2 percent of volume in Nasdaq companies while Nasdaq OMX's venues had 16.8 percent of trading in NYSE companies, the data showed.
Nasdaq OMX had more at stake because of the perception it gets all the technology companies, according to Sang Lee, managing partner at Boston-based Aite Group LLC. Among Internet IPOs since the beginning of 2011, LinkedIn Corp. and Pandora Media Inc. picked NYSE, while Nasdaq won Groupon Inc. and Zynga Inc.
'Very Nice Position'
"Having that brand name on that listings side would be huge," Lee said of Facebook's selection. "If they're able to do it correctly, the other social-media sites and players would certainly be talking to Nasdaq initially," he said. "It would certainly put them in a very nice position."
Facebook's decision follows Bats Global Markets Inc., the third-largest U.S. exchange operator, withdrawing its IPO on March 23. Bats planned to compete with NYSE and Nasdaq in corporate listings, making its own shares the first to call the Bats BZX Exchange home. A computer bug prevented Bats from getting its own shares to trade.
Facebook, based in Menlo Park, California, filed Feb. 1 to raise $5 billion in the largest Internet IPO on record. The amount was a placeholder used to calculate fees and may change. The combined U.S. and German debut of Infineon Technologies AG in 2000 totaled about $5.85 billion, making it the biggest technology offering in history.
"I think Mark Zuckerberg wants to be mentioned with the likes of Bill Gates, Michael Dell and Steve Jobs," Philip Panaro, president and chief executive officer of IM2 Consulting LLC, said in an e-mail about Facebook's founder. He was an adviser to Nasdaq in the mid-1990s and to NYSE in 2004 and 2005. "Facebook's culture and brand identity more closely align to those names and their associated brands," he said. "At the end of the day, I think it was all about legacy."
To contact the reporters on this story: Nina Mehta in New York at nmehta24@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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