A Seemingly Simple Question: What Is an IPO?

Nasdaq and NYSE have differing definitions of the term

   

I’ve been covering IPOs for quite a while and have written books on the topic … but the first step in any of that is pretty obvious: Knowing what an IPO is.

Unfortunately, that’s far from as obvious as it seems.

FacebookPhone 200x200 A Seemingly Simple Question: What Is an IPO?
‘Facebook Phone’ Is Dead! Long Live ‘Facebook Home’!

To start with the basics, an IPO is when a company issues stock to the public, which involves filing disclosures with the SEC. Often, these deals involve cool companies like LinkedIn (NYSE:LNKD) or Facebook (NASDAQ:FB) that are trailblazing new industries. In fact, IPOs have been a driving force for innovation in the U.S.

But only considering such transactions is fairly narrow view of the market. Keep in mind that there are many real estate investment trusts (REITs) that issue shares. Plus, there are also plenty of round-trippers — that is, companies that have gone private and are now coming public again. Oh, and then there are spin-offs.

For me, all these transactions are IPOs.

Of course, not everyon agrees with this. Just look at the current brouhaha between Nasdaq and New York Stock Exchange. Each claims they have pulled off more IPOs in the first quarter, according to a story in Reuters … all because the two have different definitions of what an IPO is.

As the article reported, Nasdaq said it had 18 listings in Q1, while NYSE only had 16. It “includes real estate investment trusts, spin-offs and deals known as ‘best efforts,’ in which the underwriter does not firmly commit to selling shares” in the tally.

The New York Stock Exchange, on the other hand, claimed it had 25 listings, while the Nasdaq only had 17. It’s list includes traditional IPOs, REITs and closed-end funds. As for Thomson Reuters … well … its data indicates that there is actually a tie.

Sounds like a diplomatic solution.

Of course, all this is kind of academic and really does not mean much — especially for investors and companies. Exchanges are about providing service and execution and both exchanges have great track records when it comes to IPOs.

In other words, the periodic disputes on the numbers are just silly sideshows.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/a-seemingly-simple-question-what-is-an-ipo/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.