Nasdaq bungled the Facebook IPO by testing new trading software the same day one of Silicon Valley’s most influential companies went public. Now the exchange is paying for its mistake.
The Wall Street Journal reports that the New York Stock Exchange hosted more technology IPOs than Nasdaq in 2013, the first time that’s happened in at least 19 years. Twitter decided to list on the NYSE. Now it seems that Alibaba might choose the NYSE when it IPOs this year.
For some reason, mishandling one of the biggest tech IPOs in recent history doesn’t endear oneself to companies looking to survive on the public market. Imagine that.
Many in Silicon Valley blame Nasdaq (and Nasdaq CEO Robert Greifeld in particular) for Facebook’s rocky IPO day. The company was testing unproven software, its executives weren’t anywhere near the Nasdaq headquarters, and the reaction to the technical problems that occurred involved a lot of backpedaling and downplaying of Nasdaq’s role in the offering. As Pando editor-in-chief Sarah Lacy reported in June 2012:
The most galling part to people I spoke with: Greifeld wasn’t even at Nasdaq HQ making sure the system was working; rather he was standing next to Mark Zuckerberg in Menlo Park mugging for cameras. ‘He should have been in New York running the thing,’ a source said. Meanwhile, ‘the head of Nasdaq’s technical operations was in Philadelphia.’
And this is the exchange that’s known for being tech-savvy.
Last week it looked like there was enough blame on this IPO to go around. But as more information comes out, it seems to keep coming back to Nasdaq. Or at least that’s who the tech decision-makers have picked to be the fall guy. And everyone’s pissed — firms like Fidelity and Knight Capital who lost tens of millions of dollars have specifically blasted the Nasdaq in the press, individual shareholders who weren’t protected have done the same, and companies who were planning to use the tailwind from Facebook to file and now have to pull IPOs or price lower than they’d hoped.
Nasdaq has yet to shake that perception. Facebook was still a taboo subject during the F.ounders 2013 conference, where startup founders and executives gathered at Nasdaq’s MarketSite in Times Square to talk all things business. One of the talks at the conference was ostensibly about discussing which companies might go public next, but it quickly became a conversation where investors and a Nasdaq executive warned against going public:
Never mind that some argued that NASDAQ’s technical failure botched the most important tech IPO of the last decade. No, seriously, don’t mind it – Facebook’s IPO wasn’t mentioned during the panel, despite the fact that it’s one of the most recent tech IPOs and provided the perfect platform for NASDAQ to convince nascent startups that, if they do decide to go public, it won’t cause the same problems it did a year ago.
Don’t go public. Stay private for as long as you can. Please, for the love of everything capitalist and wonderful in this world, don’t mention Facebook. And don’t ask us who’s going to go public next.
Nasdaq lost Twitter to NYSE, and the exchange differentiated itself from Nasdaq by allowing CNBC to broadcast its processes as Twitter was about to go public, which led Sarah to temporarily rename the exchange:
I’ll tell you who ‘won’ CNBC this morning: The New York Fucking Stock Exchange. They pulled off such a baller move this morning, let’s call them the NYFSE for the rest of the day.
As everyone — including Twitter’s CEO Dick Costolo — has said, this IPO was designed to be the anti-Facebook IPO. That included going with the New York Stock Exchange, not the NASDAQ. For those who forgot, the NASDAQ played a large role in Facebook’s opening day debacle, demoing new trading software that didn’t work. Worse, the NASDAQ’s head chose to spend the morning in Silicon Valley mugging for pictures while it all went down.
The whole thing played right into the core difference between the two: The NYFSE has a human ‘Specialist’ who controls it all, not just machines with (possibly) buggy software. I’ve talked to half a dozen CEOs off the record since who made the decision to go with the NYFSE in the aftermath of Facebook solely because of that. Big ones.
It’s been two years since the Facebook IPO, but tech companies haven’t forgotten just how irresponsible Nasdaq was during what should have been a marquee moment for it. So they are flocking to its rival exchange. Facebook has largely forgotten its botched public offering — Nasdaq, and the companies that might have listed on it, haven’t.
[Image adapted from Wikimedia]