What’s at Stake When Twitter (TWTR) Picks an Exchange: Reputation

Jacob Harper |

Social media service Twitter is expected to IPO in mid-November under the ticker TWTR. But a scant month from the most anticipated tech IPO since Facebook Inc. Twitter has not picked which exchange they will debut on: NASDAQ, or the New York Stock Exchange (NYSE).

While there’s certainly money at stake now – Twitter is expected to be valued by the market at around $10 billion – the more pressing issue is the money at stake going forward. Whichever exchange Twitter picks will serve as a bellwether, and greatly influence which exchange will be the go-to IPO choice for the Twitters of tomorrow.

Both NASDAQ and NYSE can make a strong case for Twitter’s business.

NYSE

The New York Stock Exchange is by far the older of the two, and over three times the size by market cap over NASDAQ. There’s certainly old-school prestige to be had by going with the “Big Board.” Being the largest stock exchange in the world, the NYSE has played host to some of the biggest IPOs in history, notably the biggest, Visa Inc.’s (V) .

Early reports have indicated Twitter was leaning towards NYSE, bucking the years-long trend of tech companies going NASDAQ with their IPO. Notably, it would set Twitter apart from Facebook.

Kevin Landis, a portfolio manager with Firsthand Funds, who owns shares in Twitter, said "The guys at Twitter want to do it as differently from Facebook as they possibly can, and that boils down to even what exchange ... to trade on."

By this rationale Twitter would be picking NYSE simply to be different. But there’s a reason Twitter wants to distance themselves from Facebook, and it’s not just because they want to be different.

It’s because Facebook’s IPO didn’t go so hot.  

NASDAQ

If you asked the question “Where will Twitter IPO?” two years ago, NASDAQ would have been the obvious answer. A friend to the tech sector since its nascent days, NASDAQ was long the unquestioned choice for a tech company looking to go public. NASDAQ was the first exchange to utilize online trading, and spent years building up a reputation as being on the cutting edge of trading tech, holding the successful IPOs of luminaries Microsoft Corporation (MSFT) , Google Inc. (GOOG) , and Oracle (ORCL) .

However, one rotten apple spoils the bunch. The biggest IPO NASDAQ has ever been asked to handle, Facebook’s, went horribly awry. Glitches that disrupted trading during the crucial first hours on the market wrecked the stock and shook investor confidence. NASDAQ ended up settling with Facebook for $10 million over the snafu, while Facebook blamed NASDAQ for costing them billions in valuation.  Though the Facebook IPO was in May 2012, NASDAQ has yet to recover.

NASDAQ’s advantage over the NYSE is their long history handling tech IPOs. Yet since the Facebook fiasco, tech companies like Gigamon Inc ($GIMO) and Trulia Inc. (TRLA) bucked the trend and opted to go NYSE. Nabbing Twitter would certainly help reverse that, and re-establish NASDAQ as the tech go-to.

And NASDAQ knows how important that is.

The Twitter IPO is NYSE’s to Lose

Analysts currently speculate that NYSE is the frontrunner for Twitter’s business, and NASDAQ is a long shot for the IPO. But despite the odds, it’s a battle NASDAQ is going to fight till the bitter end.

NASDAQ knows grabbing Twitter can right the massive blow their reputation took during the Facebook botching. NASDAQ’s CEO Robert Greifeld even went as far as visiting Twitter’s San Francisco offices in early October, making a personal plea for Twitter to list on his exchange.

Before Facebook, this would have been unthinkable that Greifeld would have to court Twitter. He even has gone as far as to say he’s fighting an “uphill battle,” and ate some humble pie when he blamed the Facebook disaster on “arrogance” and “overconfidence.”

Following the Facebook IPO, Silicon Valley insider/ incendiary PandoDaily blogger Sarah Lacy wrote, “Will a big tech company list on the Nasdaq again? It was a question I asked many a CEO and investor (following the IPO). The answer I heard over and over again: Not as long as Greifeld is there.”

However, if Greifeld can prove Lacy and the other naysayers wrong and score the biggest tech IPO of the year, Facebook will just be a bad memory.

 

(image courtesy of Wikimedia Commons)

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ORCL Oracle Corporation 40.52 0.17 0.42 11,219,098
FB Facebook Inc. 119.68 0.77 0.65 17,464,736
V Visa Inc. 79.14 -0.14 -0.18 10,728,310
GOOG Alphabet Inc. 789.29 12.87 1.66 1,821,914
GIMO Gigamon Inc. 47.50 -0.45 -0.94 1,055,785
MSFT Microsoft Corporation 61.97 0.96 1.57 27,349,356
KICK Master Glaz Krte Intl Inc 1.55 0.00 0.00 0

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