Battle over IPO listings to heat up

Thu May 14, 2009 6:11pm EDT
By Phil Wahba
NEW YORK (Reuters) - The initial public offerings market might still be cool despite a few recent deals, but the main North American stock exchanges are already wooing companies so they can snag new listings and the revenues and branding that IPOs bring once the market recovers.
Compared to the last downturn, after the tech bubble bust earlier this decade, the pipeline remains full of mature, profitable companies, the heads of major exchanges said at the Reuters Global Exchanges and Trading Summit this week.
With the exchanges' traditional specialties fading, they are now aggressively going after a diverse array of companies.
"We're not looking at the floodgates to open," NYSE Euronext Inc (NYX.N) Chief Executive Duncan Niederauer said, adding that the exchange would fight for listings.
Earlier this year, the New York Stock Exchange made its rules more flexible to make it easier for earlier stage tech and biotech companies to qualify for a listing.
"We had abdicated the high tech space to the competition," Niederauer said.
That competition, chiefly archrival Nasdaq OMX Group (NDAQ.O), has made it clear it won't leave any IPOs on the table either, saying it will go after financial services companies even if they have traditionally preferred the Big Board.
"Remember that the financial services companies within Nasdaq have performed better because we did not have some of those issues maybe that the large ones had," said Nasdaq OMX President Magnus Bocker, referring to the toxic assets that nearly felled NYSE-listed banks such as Bank of America (BAC.N) and Citigroup
(C.N)
While the two key exchanges are duking it out for new companies, they could face increased competition for smaller listings from foreign bourses.
For example, TMX Group (X.TO), which operates the Toronto Stock Exchange, is on a tour of U.S. cities seeking to lure smaller U.S. mining and energy companies that might normally be attracted to NASDAQ or NYSE's smaller-cap exchange.
TMX Group CEO Thomas Kloet said he expects IPOs to gather steam later this year and is getting ready.
BIG BUSINESS
Winning a new IPO or stealing a listing from a rival gives an exchange the advantage of bragging rights that help market it as a destination exchange.
"It's clearly a branding business -- depending on your brand you can charge higher fees," said Diego Perfumo, an analyst with Equity Research Desk, a Connecticut-based advisory firm specializing in exchanges.
Beyond branding and marketing benefits, new listings simply translate into more revenue.
"From a cash flow perspective, it's an annuity and listing fees are very profitable," Perfumo said.
In addition to prestige, listings bring ancillary income from market data and business services, for combined revenues that can make up to about a third of an exchange's intake.
NOT SO SLIM PICKINGS SOON
Even as they gird themselves for battle over listings, the heads of exchanges around the world do see the IPO slow-down ending within a year.
NYSE's Niederauer forecast more IPOs later this year, while Nasdaq's Bocker said there are 98 companies with active U.S. IPO registrations hoping to list on Nasdaq.
The recent flurry of deals -- there have been five IPOs in the United States this year, with two more set for next week -- shows that the market is tentatively beginning to recover, though it has a long way to go.
So far this year, IPOs have raised $4.5 billion globally, or 93 percent less than at this point last year, according to Thomson Reuters data, in deals done primarily in the United States, China and Qatar, with little elsewhere.
Brazilian exchange operator BM&F Bovespa's (BVMF3.SA) Chief Executive Edemir Pinto said he expects the number of companies going public in Brazil to come close to the 100 deals in the boom year of 2007.
"All signs are that, indeed, there will be a resumption of IPOs," Pinto said.
(For summit blog: blogs.reuters.com/summits/)
(Reporting by Phil Wahba; additional reporting by Elzio Barreto in Sao Paulo; Editing by Phil Berlowitz)