Will Nasdaq weather the Facebook storm?May 23, 2012: 11:28 AM ET
Nasdaq's Facebook "snafu" may prove to be good news for rival NYSE Euronext (NYX) as the battle for exchange domination continues. While Nasdaq is seen as the logical choice for tech companies to go public, this latest disaster could make techies think twice.
It's still early days so it's too soon to tell if there will be a big shift away from the tech-heavy Nasdaq (NDAQ). But NYSE will likely be happy to tout the Facebook (FB) issue as they try to attract more tech firms to debut on their exchange.
There's a lot of pressure for bigger and faster trading and stock exchanges around the world as they face growing competition from electronic and high frequency traders. Over the past five years, there's been a raft of mergers as exchanges try to make sure they don't become obsolete.
NYSE said it listed 13 new tech IPOs during the first quarter, representing 59% of all technology IPOs, including Yelp (YELP), LinkedIn (LNKD), Millennial Media (MM), Vantiv (VNTV), and Guidewire Software (GWRE). But Nasdaq still gets kudos for reeling in the big fish, like Groupon (GRPN) and Facebook gaming site Zynga (ZNGA).
But it will take more than one IPO disaster to make a dent, according to Sandler O'Neill analyst Richard Repetto, who noted that roughly 14% of Nasdaq's total revenue comes from listing fees. But only a very small portion of that is the initial fee. Nasdaq gets a much larger portion in annual fees from all of its 2,600 listed companies.
It appears Nasdaq's shareholders also aren't overly concerned. They reportedly threw their support behind exchange CEO Bob Greifeld, who has led the Nasdaq since 2003, at the annual meeting Tuesday.
But not everyone is as confident. Deutsche Bank analysts cut rating on Nasdaq to "hold" from "buy," saying the near-term issues will put downward pressure on volume.
"While we still think the FB issue is manageable, given the uncertainty around the glitch, the potential liability, and insurance coverage, we expect it to weigh on the stock in the near term," wrote Deutsche Bank analyst Michael Carrier in a client note.
Nasdaq's stock has fallen nearly 6% over the past five days, while shares of NYSE Euronext have slid a much more modest 1.5%. Facebook got its first boost since it went public, with shares rising roughly 4% Wednesday.