Twitter Inc.'s decision to list on the New York Stock Exchange is a victory for the Big Board that opens the door for more Internet listings.
Twitter, which announced the decision in a regulatory filing yesterday, joins Pandora Media Inc., LinkedIn Corp. and Yelp Inc. as Internet companies that chose the NYSE since 2011. While Nasdaq OMX Group Inc. scored a coup by landing the Facebook Inc. (FB) initial public offering in 2012, its reputation was tarnished by a software malfunction that delayed trading for the social network. Competition for IPOs is critical for both exchanges, which get about a fifth of revenue from listing fees.
"Companies like to list where other, similar companies are listed," Richard Kline, a Menlo Park, California-based partner at the Goodwin Procter law firm who focuses on technology company funding, said in a phone interview. "Anybody associated with the offering will get an uplift from it, and next time they meet with a company's board they can say 'we won Twitter.'"
Twitter also said in the filing that its revenue more than doubled to $168.6 million in the third quarter. Twitter will probably start a roadshow with bankers to promote the deal in the last week of October, said people with knowledge of the matter, who asked not to be identified because the details aren't public.
'Decisive Win'"This is a decisive win for the NYSE," the exchange operator said in a statement over e-mail. "We are grateful for Twitter's confidence in our platform and look forward to partnering with them."
Choosing NYSE rather than Nasdaq highlights the different paths that Twitter, a microblogging website whose users communicate in 140-character posts known as tweets, and Facebook have taken to go public. Facebook chose Morgan Stanley for its listing, while Twitter picked Goldman Sachs Group Inc. as the lead underwriter and kept a low profile during the process.
The Twitter offering, which seeks to raise more than $1 billion according to the people familiar with the matter, will probably be one of the year's largest. Twitter is fairly valued at about $12.8 billion, based on the value of its common stock at $20.62 a share as of August, according to a regulatory filing. There are 620 million shares outstanding, people with knowledge of the matter have said.
Listings Scorecard"All of us at Nasdaq wish Twitter well as they pursue their initial public offering," Nasdaq OMX spokesman Rob Madden said.
The 25 technology and Internet IPOs through Sept. 24 had raised about $3.84 billion, according to data from Dealogic.
The competition between NYSE and Nasdaq in this area has become increasingly fierce.
From 2001 through 2010, Nasdaq won 261 technology and Internet IPOs and NYSE scored about a third as many. Since the start of 2011 through Sept. 24, NYSE won 50 such listings that raised $9.38 billion, according to Dealogic, while Nasdaq secured 55 and raised $25.63 billion. That figure includes the $16 billion raised by Facebook and $805 million by Groupon Inc.
Oracle Corp., the software maker with a market valuation of more than $150 billion, moved its listing to NYSE from Nasdaq in July, the biggest company to ever switch from one exchange to the other.
Confidential FilingTwitter said in a Sept. 12 tweet that it had confidentially filed for an IPO with the U.S. Securities and Exchange Commission. Twitter filed confidentially under the Jumpstart Our Business Startups, or JOBS, Act, allowing the company to keep its financial data under wraps until three weeks before marketing the offering to investors.
The news set off the competition for the right to host its market debut. Bloomberg News reported on Sept. 24 that Twitter was leaning toward NYSE, according to a person familiar with the matter.
Facebook's decision to list on Nasdaq was considered a win for that exchange, with Nasdaq's stock rising 1.2 percent the day after the news was made public. The start of trading on May 18, 2012, went wrong when a software bug caused its delay and prevented some orders from going through. Nasdaq paid $10 million to settle regulatory charges that the error violated securities laws.
'Third Inning'"Nasdaq won Facebook, NYSE won LinkedIn, and Groupon went to Nasdaq," Adam Sussman, director of research at Tabb Group LLC, said in a phone interview. "In terms of social-media company listings, we're in the third inning. And with Twitter going to NYSE, I think we can say it's a tie."
While there are 13 exchanges among the 50-some venues that trade stocks in the U.S., NYSE and Nasdaq are currently the only two that list companies.
Listing fees and related services made up about a fifth of 2012 net revenue for both exchanges. At NYSE, that amounted to $448 million of its $2.32 billion in revenue. For Nasdaq, fee-related sales contributed $375 million of the company's $1.66 billion in net revenue.
As the primary market for a company's stock listing, an exchange is responsible for providing the rest of the market data such as bids and offers and the price at which shares change hands. It was Nasdaq's quote dissemination service, known as the SIP, that crashed on Aug. 22, causing the halt in its listed stocks that lasted more than three hours.
Lister's DutiesPrimary exchanges often also perform some investor relations roles for their listed companies.
The company's home exchange is also a factor in closing auctions as mutual funds and other money managers typically require the closing price on the listing exchange as the stock's price of record. Volume on both NYSE and Nasdaq jumps in the final minutes of each trading session as millions of buy and sell orders are routed their way.
Sussman said that during the regular course of trading, where a company lists is of less importance thanks to the market fragmentation of the past decade that's seen the U.S. stock market grow to more than 50 venues across the country. Over the past 20 days, half of all trades in Facebook shares have taken place off-exchange, according to data compiled by Bloomberg. The share of the stock's trades on the Nasdaq Stock Market was about 22 percent.
"Regardless of which exchange Twitter decided to list on, it's likely a good portion of the secondary trading won't occur at that exchange," he said. "While it's a win, and a highly publicized win, it means less today than it did 10 years ago."
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