NYSE Steals NASDAQ’s Thunder, Asian Exchanges Emerging Challenge
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Scott Cutler is Executive Vice President and Head of Global Listings at NYSE Euronext (NYSE NYX), and manages the NYSE’s relationship with over 2,100 companies in Asia and the Americas.
[continued from NYSE Continues to Be Strongest Global Exchange]
Slepko: Many have speculated that the disappointing and problematic IPO of Facebook (NASDAQ: FB) on the NASDAQ (NASDAQ: NDAQ) has hurt overall investor confidence in theUS this year. Is that true, and has the Facebook fallout impacted your exchange as well?
Cutler: In the short term, Facebook has certainly eroded the confidence of a new generation of investors. What the long-term results will be are still up to Facebook and the market to determine. It did not, however, have an impact on the number of companies coming to the market. While it may have hurt investor confidence, it did not hurt the deal flow coming into the market. Some of the more high-profile transactions in technology came after the Facebook IPO including: Palo Alto Networks (NYSE: PANW), ServiceNow (NYSE: NOW), and Workday (NYSE: WDAY). All represented unique growth stories independent of social media – infrastructure, software-as-a-service, cloud-based offerings. These are all long term trends that will benefit companies that have products or technology in those areas.
Slepko: How did those IPOs turn out? Did they meet or exceed the NYSE’s and the companies’ expectations?
Cutler: If you look at our technology franchise, NYSE won the majority of the technology listings that have come to the U.S. market this year. We’ve had 23 tech IPOs list on the NYSE in 2012, and the median return of this group is up 30%. Not only are we attracting the majority of the tech IPOs, we’re attracting the right IPOs (the top performing). I think that’s a reflection of the quality of companies that choose to list on the NYSE.
Slepko: Besides tech, is the NYSE particularly strong in certain areas that investors should appreciate?
In most other sectors we have a significant market share position as well, but technology has been important in terms of new market opportunity. A decade ago, NYSE’s market share ofU.S.technology IPOs was in the low single-digit percentages and now we are winning the majority of these deals.
Slepko: The NYSE-NASDAQ rivalry has been compared to the Cola Wars, but is NASDAQ really your rival or are there other exchanges or entities that are more of an emerging competitor?
Cutler: In the US there are two very strong exchanges that compete for IPOs. However, we view our competitive landscape far beyond the borders of this country. As I mentioned, eleven of our IPOs on the NYSE in 2012 came from international venues. We have nearly a hundred percent market share position in Latin America, a dominant market position inChina and a dominant position with European issuers coming to theUnited States. Approximately 25% of the issuers that are listed with us are from international venues. NYSE is a global marketplace and we compete against exchanges globally for deal flow.
If you look at the global stats over the last few years, our closest competitors would be Hong Kong,Shanghai, Shenzhen,London,Singapore, and then NASDAQ. So when you look at the global competition, it’s not a two horse race.
The story in Asia is interesting in that the domestic opportunity inAsiahas been very significant over the past few years, though muted this year. The long-term domestic opportunity trend is still significant. In 2010,Hong Kongraised USD 60 billion in IPO proceeds – this year USD 7 billion. Shenzhen did USD 45 billion in 2010 – this year USD 10 billion. Shanghai USD 40 billion, this year USD 4 billion.
Slepko: Is that a slowdown or have they run out of things to IPO?
Cutler: It could be unique to this year, but they are still the number two, three, and four exchanges in terms of capital that’s been raised in over the last couple of years and are therefore still strong, competitive marketplaces.
Slepko: What is with all these problems with Chinese companies?
Cutler: The NYSE has historically focused on traditional IPOs which involve offerings for issuers that have never been to the marketplace before, are underwritten by major underwriting firms, and are audited by accounting firms. Many of the problems inChina have centered on companies that came to exchanges via the OTC marketplace through reverse mergers. So, there’s a heightened scrutiny by the SEC and other regulators on these reverse merger companies which are micro-cap marketplace companies. This has shaken the confidence of many investors in the market as a whole.
Certainly not every Chinese company has accounting problems. What’s been based on a few has plagued the many. Again,Chinaas a marketplace is a big, significant opportunity, and companies continue to invest a significant amount of capital to fund growth.
[continued in NYSE Makes the Most of Europe]
Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of Facebook and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!