Facebook early entry to index said negotiating point With Nasdaq

Facebook Facebook

April 26 (Bloomberg) -- Nasdaq OMX Group Inc.’s waiting period for entry into one of its best-known stock indexes was a negotiating point with Facebook Inc. as the company weighed where to list its shares, according to a person with direct knowledge of the matter.

The second-biggest U.S. stock exchange operator said on April 13 that it was shortening the so-called seasoning period before new companies are admitted to the Nasdaq-100 Index to three months from at least one year. Facebook confirmed this week it is listing on Nasdaq Stock Market. The social-networking website based in Menlo Park, California, filed to raise $5 billion in February.

Gaining entry to gauges tracked by investors is attractive to public companies because it provides a guaranteed shareholder base. Exchange-traded funds and other products linked to the Nasdaq-100 managed about $49.4 billion at the end of last year, according to data compiled by Nasdaq.

“The more liquidity support that the stock has, the better, in their view,” Perry Piazza, director of investment strategy at Contango Capital Advisors in San Francisco, who helps oversee about $3.3 billion, said in a telephone interview. Going into the Nasdaq-100 “would help the trading volume of Facebook dramatically,” he said.

A person with direct knowledge of the decision said April 5 that Facebook decided to list on Nasdaq. Eight days later, the New York-based exchange operator shortened the time a company must be listed on a “recognized market” before becoming eligible for the Nasdaq-100. It used to be at least two years, or one if a stock would be among the top 25 shares in the index by market value.

Picking Nasdaq

The rule change was implemented on April 23, the day Facebook disclosed in a regulatory filing that it picked Nasdaq over the New York Stock Exchange. The shift also applied to the Nasdaq Financial-100 Index and Nasdaq Biotechnology Index.

Facebook’s Jonathan Thaw, a spokesman, declined to comment. John Jacobs, executive vice president and head of the global index group at Nasdaq OMX, declined to comment on Facebook or any other company.

“It was very simply a housekeeping of index methodology,” Jacobs said in a phone interview. The exchange studied the benefits of shortening and lengthening the waiting time and decided that reducing the period “makes the index more relevant” by incorporating the biggest companies more rapidly, he said.

Listing Requirements

Annual changes to the Nasdaq-100, a gauge of non-financial companies, are announced in early December. Should a company fail to meet listing requirements at any time during the year, it is replaced by the Nasdaq-listed security with the highest market value, according to the exchange’s website.

Nasdaq lured Dallas-based Texas Instruments Inc. from the NYSE in January, the biggest company ever to make the switch. Three months later, the world’s largest maker of analog semiconductors entered the Nasdaq-100.

The exchange has been fending off increasing competition from NYSE, which accounted for 57 percent of proceeds raised in equity offerings for technology companies last year and increased that to 67 percent this year through April 19, according to Ipreo Holdings LLC, a New York-based provider of markets data and analytics. The NYSE has claimed more than half of all IPOs every year starting in 2008, the firm said.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome