Wall Street exchanges are jockeying to persuade Silicon Valley's biggest unicorns to hit the public markets on their venues.
As companies like Uber Technologies Inc., Lyft Inc. and Airbnb Inc. weigh initial public offerings in 2019, the Intercontinental Exchange Inc.-owned New York Stock Exchange and Nasdaq Inc. are engaged in the lengthy courtships behind securing any IPO. But the listings rivalry between the two New York-based exchanges might reach a new boiling point in 2019 as the slate of potentially massive IPOs could push the year to a record amount of proceeds raised.
"It'll be a brass-knuckle fight," said Pat Healy, who advises issuers during the IPO process through his company, the Issuer Network, in an interview. "[The exchanges are] heavyweights, and they both hit very, very hard."
After competing for listings for nearly 50 years, the New York Stock Exchange and Nasdaq have achieved what is effectively a duopoly on U.S. corporate listings. The newest U.S. exchange operator, IEX Group Inc., recently launched a listings business to take on its larger competitors but so far has attracted one corporate listing: Interactive Brokers Group Inc. The exchange operator has not yet facilitated an IPO, though it does have the regulatory and technical ability to do so.
While the number of IPOs in 2019 will likely match recent years, proceeds from those offerings could rival the record $64.80 billion that was raised in 2000, Jay Ritter, a finance professor at the University of Florida who studies IPOs, said in an interview.
To secure those companies' listings, the exchanges typically begin discussing a company's IPO with its management team for months, if not years, ahead of the actual offering, said John Tuttle, COO and global head of listings for the New York Stock Exchange.
Experts have historically considered Nasdaq the preferred venue for the technology industry, with listed companies including Facebook Inc., Apple Inc. and Microsoft Corp. But the New York Stock Exchange has worked in the last decade to modernize its listing standards to compete for modern-day companies, recently luring in the likes of Alibaba Group Holding Ltd., Snap Inc. and Spotify Technology SA.
"Up until about 10 years ago, I would say our listing standards were more accommodating to 17th-century companies than 21st-century companies," Tuttle said in an interview.
The differences between listing on the New York Stock Exchange and Nasdaq can be small for some issuers, though. Trading on both exchanges occurs through similar systems, and the listing fees from both venues are largely equal.
However, Nasdaq, which declined to comment for this story, tends to bring more companies public through its exchange each year. The New York Stock Exchange, on the other hand, lures in larger companies that raise more money during their IPOs.
The reasons why a company would elect to go public on a certain exchange can vary. For some issuers, the slight difference in the exchanges' listing fees can be enough to justify picking the less expensive of the two. Others may simply follow peers' choice of exchange.
But it is the exchanges' ties to Wall Street and their marketing strategies that ultimately end up drawing in companies, said the Issuer Network's Healy, who previously was the head of listings at IEX. Healy has advised companies like Facebook, Groupon Inc. and Zillow Group Inc. during their IPOs.
For an issuer not tied into the financial realm, exchanges can often act as middlemen, sometimes even recommending CFOs or investor-relations executives as a company weighs an IPO. Some companies will even look to former exchange and finance executives to guide their IPO: Uber's recently named CFO, Nelson Chai, worked as the New York Stock Exchange's CFO from 2007 to 2009.
Listings businesses are not growing revenue drivers for the likes of ICE and Nasdaq. But promoting companies to the public markets remains a core part of those exchanges' businesses, as it allows them the opportunity to market themselves alongside the issuing company.
From the New York Stock Exchange's historic trading floor to Nasdaq's Times Square billboard, the exchanges do not hold back when marketing the listing company either — something that will likely continue with the high-profile IPOs expected for 2019.
"The exchanges know that the big IPOs are incredibly powerful branding opportunities," said Jim Angel, a finance professor at Georgetown University, in an interview. "They pull out all the stops to do whatever they can to land those listings."