Big and boring is in, fast and furious is out. Just look at the two largest stock exchanges. Only two years ago, some considered Nasdaq poised to take over as the premier ex-change. Now, even the stock market’s name is used to mean going down-hill, as in “the team ‘Nasdaqed’ and missed the playoffs.”
Nowhere is this more noticeable than in the initial public offering market. Through April, the NYSE had 16 of the 24 major IPOs this year. It was the first time in 10 years that the Big Board listed more new companies than did its rival. It’s true that the companies currently going public tend to fit the typical characteristics of the NYSE–bigger and more stable. However, the dot-com bust and the telecom flameout have left a bad impression in the minds of many.
“There’s a perception that the Nasdaq is more volatile,” says Carlton Crenshaw, CFO of Fairfax, Va.-based Anteon International Corp. When Anteon went public in March, it chose the NYSE. “It brings some credibility to the companies listed there,” says Crenshaw. As a defense company in the IT space, he says the company has peers on both exchanges and could have picked either one. Crenshaw adds that he had previously been CFO of two Nasdaq-listed companies, and “I was not happy there.” The reason, he says, is that during secondary offerings, arbitrageurs were able to manipulate the price of the stock, a problem that Nasdaq has since addressed.
In an effort to restore investor confidence, Nasdaq is making additional rule changes to crack down on unethical behavior. It will call for companies to hold shareholder votes for all stock-option plans for company officers and board directors, and has also threatened to delist companies that provide false information.
Some companies continue to believe in Nasdaq. Circle Group Internet Inc., a Mundelein, Ill.-based IT consulting firm, began trading on the Nasdaq OTC in June. “We’re a small company, so we still think Nasdaq is the right exchange for us,” says CFO Arthur Tanner.
Tanner doesn’t expect Nasdaq to be downcast for long. “It’s still a very sexy exchange. Investors will [keep looking] there for growth opportunities.”