According to the latest Alibaba IPO filing, the company will list its offering on the NYSE — a part of the IntercontinentalExchange (ICE) — under the ticker BABA. While this is not necessarily a surprise, it is nonetheless another sign that the Nasdaq OMX Group (NDAQ) is losing its long-time dominance of tech deals.
If anything, the NASDAQ has deep innovative roots. Keep in mind that — when it was launched in the early 1970s — it was the world’s first electronic stock exchange. For the most part, it was a way to make it easier to trade in smaller stocks that could not meet the stringent requirements of the NYSE.
But this turned out to be a huge advantage, especially with the PC revolution in the 1980s. During this time, the NASDAQ benefited from the listings of breakout companies like Apple (AAPL), Microsoft (MSFT), Intel (INTC) and Oracle (ORCL).
Even though tech IPOs were lucrative, the NYSE essentially ignored them. So by the 1990s, the Nasdaq was generating substantial revenues from the Internet revolution. The exchange became the launchpad of companies like Amazon (AMZN), eBay (EBAY) and Yahoo! (YHOO).
But during the past decade or so, the NYSE finally changed its strategy. The exchange realized that it needed to focus more on smaller tech companies. And yes, the NYSE got traction, snagging notable listings like Salesforce (CRM), Yelp (YELP) and LinkedIn (LNKD).
But perhaps the biggest factor in helping the NYSE get an edge was Nasdaq’s botched IPO of Facebook (FB), which hit the markets back in May 2012. Simply put, the NASDAQ software had some glitches, which resulted in a delay of the deal and a host of unconfirmed trades. It was an horrible embarrassment.
Now it’s true that the Nasdaq has invested heavily in its infrastructure and hasn’t had any complete IPO failures. But there is probably still some lingering concerns, especially for high-profile deals. So it seems reasonable that this was a key factor for the Alibaba IPO. After all, for a deal of that size, why take the risk?
However, this does not imply that the Alibaba IPO listing was easy to get. According to a spokesperson at the NYSE: “We participated in a comprehensive and deliberate exchange selection process and we are pleased to welcome Alibaba Group to the New York Stock Exchange where they will join our network of the world’s best companies and leading brands.”
It’s also true that the NASDAQ has been able to get other high-profile listings, such as JD.com (JD) and GoPro (GPRO). But then again, the NYSE has managed 20 of the 36 tech offerings for this year (according to Renaissance Capital).
More importantly, the Alibaba IPO is a huge loss for the Nasdaq. Consider that the deal could be the largest in history, with a capital raise of over $20 billion. To put this into context, the total proceeds of all IPOs for the NYSE in 2014 is about to $19 billion.
Not long ago, the Alibaba IPO would have been a cinch for the NASDAQ. But as of now, the exchange has to continue to prove it is a better venue for tech deals — and for the most part, it has been a tough battle.
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.