The NASDAQ and New York Stock Exchange would both love for Facebook to IPO its stock there. Last week, it was reported that Facebook had reserved the symbol FB for use “on either exchange,” which gave some business news readers pause. Wait a second, a two-letter symbol? Doesn’t that mean anything anymore?
It used to be that traders could tell at a glance whether a company was listed on the NASDAQ or NYSE: the former used a four character symbol convention and the latter allowed for one to three character symbols. But the vanity tickers became a bargaining chip in the battle for IPOs between the exchanges, which has grown increasingly heated. Most companies want a symbol that fits with their brand, like LNKD, AMZN, GRPN, AAPL, or NYT.
As competition for new IPOs grew fiercer between the two exchanges, NASDAQ told the government it wasn’t fair. Companies should be able to choose an exchange based on real factors like costs, marketing resources, investor relations support and other incentives the exchanges have recently started throwing in.
In 2007, the Securities and Exchange Commission agreed to drop the character restrictions. Cue the jockeying for the coveted single letter symbol on the NASDAQ: over the summer, Zillow grabbed “Z” on the geekier exchange. And get ready for name changes: Electronic Arts switched from “ERTS” to “EA” last month, but is still traded on the NASDAQ.
Facebook still hasn’t announced which exchange it will trade on, and both exchanges are keeping mum. (Companies can reserve a symbol with the exchanges directly, or it can do so via the agnostic Intermarket Symbols Reservation Authority, new as of November 2008.) But if rumors and early reports are true, we could find out as early as tomorrow morning, when some outlets are reporting Facebook will file its first prospectus for a $5 billion IPO.
The NYSE has started catching up to the NASDAQ in number of tech IPOs after a concerted effort. “To court them, the NYSE created a set of start-up-friendly alternative listing requirements in 2008, addressing a gap where rival Nasdaq had a huge advantage,” writes Institutional Investor. “The NYSE also invested heavily during the past few years in electronic trading, another Nasdaq stronghold. Then it brought in tech bankers to help sell the revamped NYSE and its still-potent brand, pitching CEOs of start-ups and rival companies that were listed elsewhere.”