Facebook is friending Nasdaq in one of the most-desirable deals among the Internet companies jockeying ahead in the race for social-media IPOs. The addition of Facebook’s listing enhances Nasdaq’s reputation as the favored exchange among high-tech companies. The exchange is home to several tech firms, including Apple and Google. The stock will trade under the symbol FB, as Facebook prepares its initial public offering for May.
“This is a strong, substantial win for Nasdaq, and no doubt a momentum builder for future listings,” said Richard Repetto, an analyst at Sandler O’Neill & Partners. Facebook’s IPO — which could raise as much as $10 billion — -is likely to be the biggest Internet IPO since Google’s in 2004. “Winning Google further emboldened Nasdaq’s reputation as being the exchange of choice for the technology companies,” said Jay Frankl, senior managing director at FTI Consulting. “The Facebook listing I’ve seen as being similar to the Google listing, which had a similar competition between the exchanges, and a similar win for Nasdaq.”
Companies pay an annual fee to list their stock, while exchanges receive listings-related income from the sale of market data and additional services offered to their listed companies. A company can pay as much as $500,000 annually to be listed on the NYSE, while all Nasdaq fees are capped at approximately $100,000.
The decision is a big victory for Nasdaq, which competes intensely with NYSE Euronext, which operates the New York Stock Exchange. The listing will give Facebook financial clout as it works to expand its global audience of about 845 million users. It also might help Facebook avoid a challenge from Google, which wants to rival Facebook with its own social networking system.
Writing in Forbes, Robert Hof wonders if “Will Facebook’s sudden, outsized presence distort the Nasdaq index of 100 companies so that it becomes even more volatile than it already is? It’s not a premature question by any means. Already, just a few companies – Apple, Google, Microsoft, Intel, and Oracle – dominate the Nasdaq index, accounting for nearly half the value of the entire Nasdaq 100. Thanks to its incredible run, Apple stock once again accounts for almost 20 percent of the index, after exchange operator Nasdaq OMX Group reduced its weighting to 12 percent a year ago. It’s not clear yet, of course, what kind of presence Facebook will have in the index, since it obviously has to go public first and then get added by Nasdaq OMX. But it seems a good bet that trading in its shares, like those of many new issues, will be anything but calm. And given the huge interest in the company by investors and the press, and the relatively small float at the outset, every little announcement or hiccup seems sure to send the shares soaring or plummeting. If Facebook becomes a significant portion of the Nasdaq index, as seems likely, that could make the famously dynamic index even more volatile. This isn’t much of a problem for Facebook itself. Its fate rests less with what the stock does in the short term than with how CEO Mark Zuckerberg and his business executives Sheryl Sandberg and others build out the company’s advertising, payments, and other potential businesses.”
CNBC’s Bob Pisani says that Nasdaq’s securing the Facebook listing is an important psychological victory. According to Pisani, “What does matter are the co-branding opportunities, and it here it gets down to a simple issue: what are you offering in the way of a partnership? It’s not hard to imagine the pitch: the NYSE would certainly have argued that they have broader business-to-business connections with the biggest companies in the world, with whom they can partner to expand the brand name and co-venture with. I have mentioned before that, as an example, if Groupon (which listed on Nasdaq) was doing something with Starbucks, Groupon might send out 65 million emails that references a deal with Starbucks and Groupon, with the solicitation noting that Groupon is listed on Nasdaq. Nasdaq will pick up a portion of that cost. Zillow, to take another company (also on Nasdaq), might have been very interested that Nasdaq has an enormous electronic sign in Times Square that is a virtual billboard for a company that wants to attract eyeballs to its website. Get it? What can you offer us? And just what did Nasdaq offer to Facebook?”