Alibaba chooses NYSE over NASDAQ
Two years after Facebook's glitch-ridden $16 billion market debut, Alibaba Group Holding Ltd, a privately owned Hangzhou-based group of Internet-based commerce businesses, doubts about NASDAQ's technology's ability to handle its $21 billion initial public offering.
NASDAQ systems collapsed under tremendous volume of orders on the first day of trading in Facebook's shares in 2012. Since then, NASDAQ's reputation is under threat.
NASDAQ, in its presentation to Alibaba, detailed the steps it had taken to prevent another Facebook-style glitch. The exchange mentions that it responded to Facebook by creating new positions within the company to improve communications with the industry and regulators when errors occur. They have established an engineering team to monitor and analyze daily performance.
Now, Alibaba may not join any major global index this year due to its decision of not going with NASDAQ. It chose NYSE (New York Stock Exchange) because its overall pitch was better.
A spokesman for NASDAQ, which reiterated it had fixed issues that went wrong in the Facebook IPO, said, "It was a close race, and we wish Alibaba well".
The NASDAQ and NYSE, both located in New York City, are the two largest stock exchanges in the world. The New York Stock Exchange (NYSE) has a larger market cap than NASDAQ, which is known for its large selection of technology stocks (e.g., Google and Facebook). While trading on the NASDAQ is fully automated, the NYSE still uses human specialists to monitor and occasionally carry out its electronic trading.
Alibaba could have sold nearly $2 billion worth of stock by listing its shares on NASDAQ, which would have guaranteed Alibaba inclusion in the Nasdaq 100 Index by the end of the year. Listings contributed only 12%of NASDAQ's $1.9 billion in revenue in 2013, and large listings such as Alibaba's are less profitable for exchanges. However, they are taken as an indicator of success.
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