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Investors finally have the answer to where Facebook Inc. will choose to list shares when the social media powerhouse starts trading this year.
Say hello to NASDAQ: FB.
Facebook had no comment as to why it chose Nasdaq. The news was reported in The New York Times citing a source speaking on anonymity.
Facebook plans to raise up to $5 billion in its initial public offering (IPO), which it filed for Feb. 1. It's expected to start trading in May.
Nasdaq (NDAQ) is home to many popular tech stocks, and the addition of the long-awaited Facebook listing will cement its position as the favored exchange for big names in U.S. tech. The Nasdaq has about twice as many tech companies as the NYSE Euronext (NYX) trading for more than $1 billion, according to Bloomberg News.Some of the biggest U.S. blue-chip companies, like IBM (NYSE: IBM), are listed on NYSE. The market capitalization of NYSE shares is nearly triple that of Nasdaq, and NYSE is associated with big, global names - which is why CEO Mark Zuckerberg's decision for NASDAQ: FB surprises some.
Now Nasdaq will enjoy association with one of the hottest companies hitting the markets in years. Facebook now has reached more than 800 million users and $3.7 billion in revenue.
Nasdaq also will get healthy boost in revenue and trading fees.
"There's cachet to winning one of the biggest IPOs ever," Tim Hoyle, the director of research at Haverford Trust Co., which manages $6 billion including NYSE shares, told Bloomberg. "The straight- up value of this IPO will make for a nice gain in listing fees, which make up a meaningful portion of the revenue stream for exchanges."
NASDAQ: FB Boosts NASDAQ
Nasdaq shares extended gains after reports came out that Facebook would trade as NASDAQ: FB, and closed up 1.19% to $25.52. NYSE Euronext fell 1.26% to $28.31.
Nasdaq failed to snag all of last year's hyped Internet IPOs. LinkedIn Corp. (NYSE: LNKD) and Pandora Media Inc. (NYSE: P) both chose NYSE.
In 2011, NYSE hosted 44% of technology IPOs in the United States, bringing 19 new listings to the market and ranking first globally in IPO proceeds raised. It's listed about 63% of qualified tech IPOs this year, and 60% of all qualified transactions.
But Nasdaq still holds seven of the 10 largest tech companies by market value, including the two largest, Apple Inc. (NASDAQ: AAPL) and Microsoft Corp. (NASDAQ: MSFT).
Besides being known as a home for tech stocks, Nasdaq also differs from NYSE in expenses and trading models. Nasdaq operates on an electronic trading model, while NYSE is a hybrid model with both electronic and floor trading activity.
Also, NYSE is more expensive, charging an upfront fee to list, and an annual fee. Listing fees range from $38,000 to $500,000 a year on NYSE, and between $35,000 and $99,500 a year on Nasdaq.
The NASDAQ: FB decision could sway future tech IPOs to join the tech-heavy Nasdaq exchange.
It's a high profile win for their listings business," Michael Adams, an analyst with Sandler O'Neill, told The New York Times. "In terms of earnings, the impact won't be dramatic, but it's something to be proud of."
News and Related Story Links:
- Money Morning:
Who Wins with the Facebook IPO - Money Morning:
Buy, Sell or Hold: When to Buy Shares of Facebook - Bloomberg:
Nasdaq Said to Win Facebook Listing in Win Over NYSE - CNBC:
Facebook picks Nasdaq for marquee listing: source - The New York Times:
Facebook Is Said to Pick Nasdaq for I.P.O.