After Facebook’s Flop, Nasdaq Gets Some Love From Kraft Foods

June 11th, 2012 by Trefis Team
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With Kraft Foods’ (NYSE:KFT) announcement that it will move its stock listing from NYSE to Nasdaq, [1] the latter finally has a reason to smile after three weeks of anxiety caused by its mishandling of Facebook’s (NASDAQ:FB) historic IPO, which attracted severe criticism from all directions. (See Facebook’s Relationship Status With Nasdaq: It’s Complicated) Kraft is the biggest company to ever switch an exchange and follows Texas Instruments (NYSE:TXN), Western Digital Corp  and Analog Devices Inc. that moved their stock listings from NYSE Euronext (NYSE:NYX) to Nasdaq OMX (NASDAQ:NDAQ) earlier. The company’s shares will begin trading on Nasdaq on June 26.

See our full analysis of Nasdaq OMX

Killing Two Birds With One Stone

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Kraft Foods expects the move will increase cost efficiency and brand visibility through Nasdaq’s marketing initiatives. [2] Additionally, it will bring not one, but two companies to Nasdaq, as Kraft Foods will later be split into Kraft Foods Group, which will entail the North American grocery business and use the symbol KRFT, and Mondelez International, which will incorporate the global snack division and will trade under the ticker MDLZ. (See Kraft Split No Guarantee of a Success, Too Early to Assess Impact)

The shift is a major sign of trust in Nasdaq’s capabilities to handle trade and, we expect other companies, which were doubtful about the exchange after the Facebook IPO disaster, to regain confidence. U.S. listings account for 37% of our price estimate for Nasdaq, which has established a strong reputation as the prime destination for technology companies in the country. We expect the number of U.S. listings on the exchange to grow over 3,000 by the end of our forecast period.

Size Does Matter

Kraft Foods is one of the largest companies in the U.S, with market capitalization of over $60 billion and is part of the Dow Jones industrial average. We expect Nasdaq’s trade volumes, which have dropped over the last few weeks, to pick up and investors to regain confidence as the dust on the Facebook incident settles down.

We have a price estimate of $27 on Nasdaq OMX’s stock, about 20% above the current market price

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Notes:
  1. Nasdaq’s big win: Kraft leaving the NYSE, CNN Money, June 8th, 2012 [↩]
  2. Kraft Foods Inc. To Transfer Stock Listing to NASDAQ, June 8th, 2012 [↩]