A surging U.S. market for initial public offerings has intensified competition between the two largest U.S. stock exchanges for new listings, with both markets campaigning for many of the companies that have recently gone public.
The New York Stock Exchange and Nasdaq Stock Market Inc. have stepped up the wooing process as a spate of higher-profile deals worth more than $1 billion have raised the stakes.
You can look at any of the recent IPOs that came to our market and pretty much take for granted there was a competition, said Noreen Culhane, an executive vice president at NYSE Euronext, which owns NYSE.
The exchanges have differing approaches. NYSE sells its market to companies on stringent listings standards, higher visibility and its hybrid model combining floor traders with electronic trading.
Nasdaq touts lower listings fees, the efficiency of an all- electronic market and various nontrading services for issuer companies, from Web casting to insurance. It also holds IPO boot camps for companies wishing to go public.
Morningstar Inc. analyst Patrick O'Shaughnessy said NYSE's reputation as the Cadillac of all exchanges has helped it win some big IPOs recently, but Nasdaq's strategy of providing additional client services may be slicing into that advantage.
The NYSE has no plans to start nontrading services, said Culhane.
Nasdaq Executive Vice President Bruce Aust said his company wants to gets in front of every IPO out there to make a pitch.
We compete for all the biggest deals ... but you win some, you lose some, he said in response to a question about whether Nasdaq fought to win the IPO for private equity giant Blackstone Group, the biggest U.S. IPO in five years.
Blackstone raised $4.13 billion in its NYSE debut last month. Nasdaq's biggest IPO this year was Interactive Brokers Group, which raised $1.2 billion.
The Big Board is also taking a more global approach in attracting companies, Culhane said. The recent merger with Euronext, a European exchange operator, allows companies to access capital in more markets now, she said.
U.S. exchanges are enjoying some of the strongest IPO activity since 2000, according to U.S. IPO Watch, a quarterly survey published by accounting firm PriceWaterhouseCoopers.
Nasdaq is enjoying its best IPO year since 2000, Chief Executive Robert Greifeld told analysts during an earnings call last week.
There were 135 IPOs on U.S. exchanges in the first half of 2007, raising more than $33 billion, compared with 105 IPOs that raised about $23 billion a year ago, according to PWC. Since 2003, when 88 IPOs raised a total of $18.3 billion, IPO volumes and proceeds have grown every year.
The NYSE had 34 IPOs in the first half of 2007, including domestic and foreign companies, raising more than $16 billion, according to NYSE data. Nasdaq had 86 IPOs that raised about $13 billion, according to the company.
A favorable business climate and a burst of private equity firms returning companies to the market are among the reasons for the IPO boom, said Patrick Healy, whose company Issuer Advisory Group helps companies decide where to list.
The appetite for capital is voracious right now, and exchanges are really the beneficiaries of that, Healy said.
Competition between old rivals NYSE and Nasdaq has turned more vigorous since they became public, for-profit entities, even though the bottom-line impact of new listings is limited because the exchanges make most of their money from transactions.
It's really more an issue of image than it is of profitability, said O'Shaughnessy of the listings rivalry.
Listings account for less than a third of total revenue at each exchange. But historically, it was a much bigger deal for them and they haven't moved beyond that mind-set, he said.
Listings are even less important now because of the rise of alternative trading venues and because exchanges can execute trades in stocks not listed on their markets. But O'Shaughnessy said there is still a correlation between where a stock is listed and where it trades.
It is another motivation for pursuing listings, he said.
The exchanges also do battle to keep existing clients.
This year, six companies transferred from Nasdaq to NYSE, including clothing retailer American Eagle Outfitters.
Nasdaq has not won any companies from NYSE this year after wooing brokerages Charles Schwab Corp. and E*Trade Financial Corp. away from NYSE in 2006. E*Trade initially listed on Nasdaq but moved to NYSE in 2001. Neither company returned calls seeking comment.
Healy, a former specialist trader on the NYSE floor, said NYSE's listings business has been hit by a more aggressive Nasdaq.
It used to be a one-way street, Nasdaq to NYSE, but what we have now is a back-and-forth slugfest, Healy said.