May has been a monster month for IPOs, with 22 deals hitting the market averaging a return of 13%.
But the party hasn’t been an equal one — a look into the offerings shows that the NYSE Euronext (NYX) has been the primary beneficiary. The Nasdaq OMX Group (NDAQ) has launched only eight of the month’s offerings, while the New York Stock Exchange has hosted 14, not including four more that are slated to go live this week.
That’s no fluke, either. Year-to-date, the NYSE has snagged 37 IPOs to the Nasdaq’s 26.
But it’s difficult to isolate reasons for the NYSE’s performance. When I interview CEOs who have taken their companies public, they all talk about how the NYSE and Nasdaq have great organizations, provide tremendous support and have deep liquidity.
What they won’t talk about — but what’s almost certainly a consideration — is the Nasdaq’s botched Facebook (FB) IPO. The exchange’s software went haywire and was not able to handle the huge order volume. As a result, many trades were not confirmed, which cost millions for traders. It wasn’t just a costly mistake — it was an embarrassing, high-profile one that prompted Nasdaq CEO Robert Greifeld to take a 62% cut in his 2012 bonus.
There are other considerations at work. For one, the IPO market is much different today when compared to the heady days of the 1990s, when the Nasdaq was minting a fortune because of its focus on early-stage growth companies. But nowadays, such deals are hard to come by thanks to a lack of boutique investment banks, lack of analyst coverage and onerous regulations.
Instead, it’s mature companies that have made up much of the IPO volume — many of which were once public but were taken private. So they understand how to deal with the whims of Wall Street, and unlike companies like Facebook, the businesses tend to be fairly stable.
The NYSE not only has a long history with such companies, but it also has become more savvy with tech as well, and subsequently has landed fast-growing companies like Workday (WDAY), LinkedIn (LNKD), Yelp (YELP) and ServiceNow (NOW).
Whatever the reasons for the NYSE’s success, the trend is certainly not good for the Nasdaq. Tthe exchange might need to get more aggressive with its marketing to prospective IPO candidates — and talk about the benefits of its platform. This probably means looking at categories beyond its bread-and-butter of early-stage operators.
The Nasdaq probably needs to act fast, too. Listing fees are a nice generator and result in strong, ongoing trading revenues. And it certainly doesn’t want to miss out on an IPO boom.
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.
