By William Davis 

Or, everything old is new again, part 2.

So, yeah, Lyft Inc. began trading on the NASDAQ last week, kicking off what promises to be a big year for money-losing consumer tech startups. The company, which trails Uber in the ride-hail business by the length of Route 20, priced its IPO at $72 per share, valuing the company at a nifty $24 billion. And just in case you missed it, the company threw a little off-site bell-ringing party in Los Angeles, paid in full by the listing exchange. Seems there’s a real battle brewing for the opportunity to bring chronically unprofitable companies to market this year. Story’s going around that the perks and freebies NASDAQ and NYSE are willing to offer to lure potential clients is set to be epic.

For Sonos Inc.’s IPO last year, NASDAQ let the speaker maker create a new “bell” using its sound technology — and the exchange continues to use it to mark the opening and closing of trading.

True enough, and much to the delight of hot start-ups, the competition for listings has never been more fierce. And not just because total dollars raised are expected to easily beat the dot-com-era record set in 1999, but because both the NASDAQ and the NYSE are in the IPO hunt. Unlike at the height of the tech boom when the NYSE was hamstrung by strict listing standards, both exchanges can now compete for most deals. And with five of the 10 highest-valued private U.S. companies and scores of smaller firms considering a debut, compete they do. Trading experience and cost of execution are great, but nothing beats champagne receptions, boozy breakfasts, and catchy ticker symbols.

The NYSE enticed Oracle with a trading floor reception for 300 guests, advertising on Silicon Valley billboards, and a featured role in a television commercial paid for by the Exchange.

The battle is a stark demonstration of how much the business of trading stocks has changed and how much more important listing fees have become. NYSE and NASDAQ used to be the dominant U.S. trading venues — in 2006, up to eight in 10 stock trades occurred on one or the other. Today, stocks are traded on more than a dozen exchanges and off-exchange “dark pools.”. Even ticker symbols became portable, effectively ending NYSE’s monopoly on single-, double- or triple-letter monikers.

BJ’s Wholesale Club was given scoreboard commercials and radio ads at East Coast minor league baseball games, a VIP catered listing reception with ceremonial medallions for up to 250 employees, and gifts to commemorate the IPO for up to 1,000 employees.

Meanwhile, while trading revenue for both exchanges has fallen hard, listing fees from IPOs are adding up quickly: NASDAQ’s fees from listing services brought in $290 million in 2018, while at NYSE listings contributed more than $440 million in revenue to the Exchange’s parent. While larger companies can be worth more to the exchanges because they often are included in index and ETFs and thus trade more often, the exchanges are also throwing valuable offers at lower-profile companies. If a company is considering going public, there’ll be an exchange pitchbook in their waiting room.

The NYSE tried to draw the listing of web real-estate company Zillow by offering it the Z ticker symbol.

Company executives know they hold power and they’re apparently happy to leverage it to squeeze better offers out of the exchanges. The perks serve as valuable marketing, they say, plus they’re a way to drum up employee enthusiasm. Sure. Got any extra tickets to the Final Four?

What the facts are saying…

  • The S&P 500 has risen 3.3% in the two weeks ended Friday, its best two-week stretch since mid-January. The benchmark is on a seven-day winning streak, its longest such run since October 2017, when it rose for eight consecutive days.
  • U.S. crude oil climbed for the fifth consecutive week last week, its longest stretch of weekly advances since November 2017. Oil is now up 39% for the year.
  • About $7.7 billion flowed out of global equity funds during the week ended Wednesday, bringing the year-to-date outflow total to $87 billion. About $11.4 billion flowed into bond funds, bringing the 2019 inflow total to $98 billion.
  • 23 years ago this week, AT&T spun off Lucent Technologies, raising $3.02 billion in what was the biggest IPO of all time. More than 42 million shares were traded, accounting for 11% of the day’s volume on the New York Stock Exchange, and Lucent closed up 13%.

 

What’s being Heard on the Street…

“Earnings season probably won’t be the horror show that investors fear. The previews are another matter.”

    • Heard on the Street columnist Justin Lahart

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