A rear view mirror lets Twitter map a different path to IPO than Facebook, one planned perhaps in the hopes of evading pitfalls that plagued the latter’s 2012 public offering. On Tuesday, Twitter announced in an updated S-1 filing that the company brings its listing to the New York Stock Exchange.
“This is a decisive win for the NYSE,” was the New York Stock Exchange’s official comment. “We are grateful for Twitter’s confidence in our platform and look forward to partnering with them.”
The NYSE traces its roots to 1792. The pipe-smoking dad to Nasdaq’s bachelor uncle, the NYSE historically attracted established companies while its rival drew technology listings. But recently, the NYSE has seemed less fusty and Nasdaq less reliable, especially after Nasdaq’s glitchy technology led to the supposed loss of millions on Facebook’s IPO day. The SEC held Nasdaq accountable for the offering’s issues and fined the exchange $10 million. Fallout trailed Nasdaq through to the next year, as CEO Robert Greifeld received a lighter bonus check––more than 60 percent lighter––in 2013 than he did in 2012.
Twitter isn’t the first tech company to list on the NYSE. Major industry player like LinkedIn and Yelp chose the Big Board in 2011 and 2012 respectively. But in the past, birds of a feather flocked together, stock-market-wise, with Apple, Microsoft and Google roosting at Nasdaq. Since Facebook, though, major technology companies like Tableau Software and Chegg have turned to the NYSE for their IPOs, and Oracle hopped the fence this summer, transferring from Nasdaq. The NYSE reports that in the first half of 2013, “14 new technology listings accounted for a record 64% of all new technology offerings and 58% capital raised in the sector.”
If all exits were created equal, the loss of Twitter to the NYSE might feel less momentous. But Twitter, like Facebook, epitomizes the millennial digital age. Its choice of real estate could spur other tech companies to go public on the NYSE, to Nasdaq’s detriment.
Rigorous listing standards traditionally kept the NYSE a gated community, as some tech companies couldn’t pass muster. More recently, the NYSE has dug in its heels to tug away at Nasdaq’s reputation as the high-tech sector’s IPO destination.
In the last 15 years, the number of listings in the U.S. has seesawed dramatically. Between 2000 and 2011, the U.S. listed more than 150 companies on average per year––but that deck started stacked, as the millennial year saw 446 IPOs. Traders looked to tech companies with starry eyes. “In the early part of [2000], rosy growth projections and easily available capital led many fledgling technology companies to the IPO market,” says a 2001 Hale and Dorr, LLP report. But the party wouldn’t last, and in 2001, investors became disenchanted with tech, which led to bargain-basin pricings and renewed attention to the sector.
But coming years brought tidings of war and waves of economic anxiety. The year 2003 witnessed 71 IPOs, the fewest since 1979. As the market struggled to recover, the financial crisis hit in 2008, kicking down a market on its way back up. The result: 31 IPOs, the “worst performance in a generation,” a Hale and Dorr, LLP 2009 report reads.
In the same year, the stock exchange tables turned.
“The percentage of IPO companies listing on Nasdaq––the preferred listing choice for many venture-backed companies––decreased from 62 percent in 2007 to 39 percent in 2008, while the NYSE’s market share increased from 36 percent to 55 percent,” the 2009 report states.
In 2012, both exchanges claimed the title of reigning champ in the realm of tech exits. NYSE chalked up 23 IPOs to Nasdaq’s 21, while Nasdaq believed it trumped the NYSE 15 to 13, Wall Street Journal reports. “In 2012, 52 percent of U.S. technology IPOs listed on NYSE, making NYSE Euronext the leader in technology IPOs in the U.S. and new home for a new generation of tech innovators,” the NYSE stated in a December press release. Regarding total market caps, NYSE thumps Nasdaq $18.91 trillion to $5.3 trillion; but Nasdaq lists 3,200 companies to NYSE’s 2,800.
The battle between the NYSE and Nasdaq feels like a game played by inches (or individual deals), but success in the long run relies on positioning. A yearly review by Renaissance Capital revealed that though six fewer technology companies went public in 2012, those offerings accounted for almost half the proceeds raised: $20.4 billion.
The exchange tech companies feel comfortable exiting with will tap the industry’s energy in the future. Contingent on a good IPO, Twitter could provide references for the NYSE.
The NYSE encroaches on Nasdaq’s target market, but will never fully capture it. As the NYSE’s little brother, Nasdaq naturally draws smaller and scrappier companies (many in the technology sector) to trade on their market. These ventures won’t list in the land of giants, the NYSE; so even as pundits call Twitter’s decision as a harbinger of bad news for Nasdaq, it stays likely no seismic shift will occur.
But Nasdaq did lose this round––blame it on missteps made over a year ago now. But the longer match for preeminence continues. “All of us at NASDAQ wish Twitter well as they pursue their initial public offering,” said Nasdaq in an official statement.