Internet search firm Google said Monday it would list its hotly anticipated $2.7 billion initial public offering on the Nasdaq Stock Market, dealing a blow to the New York Stock Exchange, which had campaigned hard to win the coveted listing.
Both organizations had a lot at stake in the Google listing, which the Mountain View, Calif.-based company disclosed in a filing with the Securities and Exchange Commission.
The NYSE and Nasdaq fiercely compete for stock listings, which generate significant revenue as well as prestige. The NYSE earned 27 percent of its $1 billion in revenue last year from listing fees; Nasdaq earned close to 28 percent of its $590 million in revenue from such fees.
Google spokesperson Cindy McCaffrey declined to say why the firm chose Nasdaq over the NYSE. Nasdaq conducts trading via a network of linked computers, while the NYSE connects buyers and sellers through a live auction on its LowerManhattan trading floor.
Nasdaq Fighting Erosion
Nasdaq spokesperson Bethany Sherman also declined to comment. In a prepared statement, the NYSE said, “Google is an outstanding company with a great management team, and we wish the company well with its initial public offering.”
Nasdaq is fighting erosion in market share to electronic communications networks. The NYSE is trying to emerge from the shadow of its former chairman, Dick Grasso, who was forced from office last summer after revelations of his $139.5 million pay package outraged investors.
In addition, five of the largest “specialist” firms that conduct trading on the NYSE floor agreed earlier this year to pay a total of $240 million to settle charges that they shortchanged investors by trading for their own accounts.
But while both firms courted Google, Wall Street observers said Nasdaq, traditional home to technology giants such as Microsoft, Amazon.com and eBay, had far more to lose than the NYSE had to gain.
“It’s an enormous IPO and so whoever gets the listing is regarded as a big winner,” said William Gorin, a partner at law firm Cleary, Gottlieb in New York and an expert in the IPO process. “But the NYSE already gets a very large percentage of major new listings, and Nasdaq relies more on technology and Internet deals.”
Joseph Bartlett, a securities attorney with Fish and Richardson in New York, said Nasdaq was the natural home for Google, which plans to sell its IPO shares through an auction format rarely used in the United States. “The guys at Nasdaq are venture capital-type guys, entrepreneurs,” he said. “Nasdaq has been the place where the [venture capital] community has been going for years.”
Nonetheless, John A. Thain, who replaced Grasso as head of the NYSE, made no secret of his desire to win Google. Asked in May whether he was personally lobbying Google executives, Thain replied, “As you can imagine, this is important at the highest levels of the exchange.” Thain’s former firm, Goldman Sachs, failed to win a lead position managing Google’s IPO.
Earning Wide Acclaim
Thain has a difficult act to follow when it comes to wooing new listings. Grasso earned wide acclaim for shifting the exchange’s image from that of a stodgy home for established blue-chip companies to one of a vibrant haven for younger firms. Listings at the NYSE soared under Grasso’s tenure, as the chairman made endless visits to corporate executives to win new business while making sure no existing NYSE companies jumped ship to Nasdaq.
But, while Thain may have failed in his efforts to win Google, a spokesperson said the NYSE has won listings from 28 of the 30 IPOs this year that met criteria for both the exchange and Nasdaq. Nasdaq, meanwhile, has won 77 of all 110 IPOs this year, a spokesperson said.
Executives close to the exchange and on Wall Street said that while the NYSE sent delegations to Mountain View and made a strong pitch, there was never much question that Google would eventually list on Nasdaq.
“I don’t think that it was a real fight,” said an executive close to the exchange, who declined to be named for fear of angering the NYSE or Google. “I don’t know how easy it is to have a dialogue with [Google]. They don’t talk to anyone. They don’t even really talk to their bankers.”
An executive at one of 30 securities firms helping bring Google public said the NYSE made a strong case but that the outcome was never in doubt. “I don’t think it was ever close,” said the executive, who asked not to be named for fear of raising Google’s ire.
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