Twitter’s IPO Could Be A Turning Point For NASDAQ And NYSE’s Listing Businesses

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Twitter’s IPO is likely to be an important one for the U.S. listing businesses of NASDAQ OMX (NASDAQ:NDAQ) and NYSE Euronext (NYSE:NYX). With a possible valuation of around $10 billion, it is likely to be one of the largest offerings in a while. [1] Some estimates suggest that it hopes to raise over $1 billion from the offering. [2]

Given the size of the offering, it is natural that both exchanges want Twitter’s business and are already making efforts to woo the company to their platforms. [3]

See our full analysis for NYSE Euronext | NASDAQ OMX

The Twitter IPO is also important because the stakes are likely to be much higher for the two exchanges in this transaction. Both NASDAQ and NYSE have been wrangling with each other to attract more technology companies, and Twitter’s IPO may prove to be a major turning point for their fortunes.

Traditionally, NASDAQ has had a stronghold on the listing of technology firms. Its clients include almost all of the largest technology companies in the U.S. Some of the recognizable names on its roster include Apple, Cisco, Dell, EBay, Facebook, Google, Intel, Microsoft, Netflix, Qualcomm and Yahoo. On the other hand, NYSE only has some old names such as HP and IBM to show off until recently.

However, NYSE has been gaining ground lately. According to Venture Beat’s analysis, it attracted 16 of the top 20 most highly valued venture capital backed tech IPOs of 2012. [4] Although none of these IPOs were as high profile as Twitter, it suggests that NASDAQ’s lead in the tech segment may be slowly eroding.

If NYSE wins over Twitter, it will be the first high profile technology IPO win for the exchange against NASDAQ and could increase the momentum with which it has been attracting tech IPOs. The win is also likely to strengthen its appeal to companies that are already listed on NASDAQ. NYSE scored a big win in this department earlier this year when Oracle became the first major U.S. tech firm to transfer its stock listing from NASDAQ to NYSE. With Twitter in its kitty, it will be much better placed to approach other tech giants with listing proposals. (See our article: NYSE Poses A Serious Threat To NASDAQ As It Grabs More Tech Listings)

For NASDAQ, the situation warrants that it redoubles efforts to preempt the threat which is still in its infancy. U.S. Listings is an important segment for the company, comprising around 10% of its annual revenue and 17% of its value, according to our estimates. Winning over Twitter would also help NASDAQ reduce the stigma attached to its role in the controversial Facebook IPO. It is also likely to allay fears regarding its loss of reputation in the aftermath of last month’s ‘flash freeze’. You can read more about these events in our previous articles here and here.

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Notes:
  1. Twitter Seen Valued at $10 Billion Based on GSV Holding, Bloomberg, May 11, 2013 []
  2. IPO Pipeline Bulges; Twitter Joins Crowd With Offering Plans, Yahoo Finance, September 12, 2013 []
  3. Twitter’s IPO Spurs Horse Race Between NYSE and Nasdaq, Bloomberg, September 17, 2013 []
  4. Look out, Nasdaq: NYSE proclaims itself the new king of tech IPOs, Venture Beat, May 31, 2013 []
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