Make no mistake: The Twitter IPO will be the most high-profile deal since Facebook (FB) pulled off its deal back in May 2012, so you can bet the New York Stock Exchange and Nasdaq will be working overtime to snag the listing.
The winner probably won’t get a windfall in fees — keep in mind that with revenues still below $1 billion, Twitter won’t be nearly the blockbuster Facebook was — but it might help convince other tech companies to list on the exchange. After all, if the IPO market continues its winning ways, there may be a nice pipeline of deals over the next couple years.
So which exchange will get the Twitter IPO listing? My hunch is it’ll go to the NYSE. Here are three reasons why:
While the NYSE has had its share of problems, the Nasdaq seems to have been even worse. The most poignant example is the Facebook IPO, which saw Nasdaq computers go haywire and 30,000 orders become stuck in the system for more than two hours.
As a result, the SEC recently levied a fine against the exchange for $10 million and had this to say:
“(Even with) widespread anticipation that the Facebook IPO would be among the largest in history with huge numbers of investors participating, a design limitation in Nasdaq’s system to match IPO buy and sell orders caused disruptions to the Facebook IPO. Nasdaq then made a series of ill-fated decisions that led to the rules violations.”
While the Nasdaq has taken steps to revamp its system, glitches continue, such as the recent “flash freeze” that caused a three-hour-plus outage on the exchange and forced all exchanges to agree with regulators on creating “kill switches” in case of future emergencies.
Still, even with all these precautions, it’s safe to say management is at least considering what effect Facebook’s worst-case scenario would have on the Twitter IPO.
An exchange is kind of like a community. By being a part of it, a newly listed company will have some nice opportunities for networking — which might lead to getting customers.
The attraction of the NYSE is that its companies tend to be larger, traditional brands. They include biggies like Chevron (CVX), Coca-Cola (KO), Pfizer (PFE) and Walmart (WMT). Not that Twitter has problems with exposure, but every connection helps, considering these are the types of customers Twitter will need on board to keep up its strong growth rate.
One upper hand the Nasdaq would seem to have concerning the Twitter IPO is its supposed tech slant. However, the NYSE has done a good job of swinging the tech needle in its direction.
In the past few years, the NYSE has landed marquee tech listings including Yelp (YELP), Workday (WDAY), Trulia (TRLA), LinkedIn (LNKD) and Pandora (P). And in July, Oracle (ORCL) switched over from the Nasdaq.
According to CNBC, since the Facebook IPO, “the Nasdaq has taken 15 tech companies public, raising $1.35 billion. In the same period, the NYSE handled 21 tech IPOs, which raised $3.5 billion.”
So much for the tech advantage.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.