Alibaba worried about Facebook IPO as considered Nasdaq versus NYSE

Mon Sep 15, 2014 1:10am EDT
 
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By Jessica Toonkel and John McCrank

(Reuters) - Alibaba Group Holding Ltd could have sold nearly $2 billion worth of stock without lifting a finger. All it had to do was list its shares on Nasdaq.

That listing would have guaranteed Alibaba inclusion in the Nasdaq 100 Index by the end of the year, and funds which track the index would have had to buy.

But two sources familiar with the situation said Alibaba executives worried about Nasdaq's ability to handle their $21 billion initial public offering later this month, since the exchange botched Facebook's market debut two years ago. 

Nasdaq tried to persuade Alibaba that it had fixed the problem, the sources said, but it is not clear whether they were swayed. 

One of the sources said that Alibaba eventually was satisfied that Nasdaq had solved the issue and chose NYSE because its overall pitch was better. The other said Nasdaq executives believed that Alibaba decided that the possibility of a botched IPO, however small, outweighed the possible benefits of being in the index.

Alibaba and NYSE declined to comment, while a spokesman for Nasdaq, which has repeatedly said it has fixed the issues that went wrong in the Facebook IPO, said "It was a close race, and we wish Alibaba well."

Alibaba’s misgivings about Nasdaq’s technology, two years after Facebook’s glitch-ridden, $16 billion market debut, show the incident continues to threaten Nasdaq's reputation.

Listings contributed only 12 percent of Nasdaq's $1.9 billion in revenues in 2013, and large listings such as Alibaba’s are less profitable for exchanges, but within the financial community they are taken as a barometer of success.   Continued...

 
An employee sits next to a logo of Alibaba during a media tour organised by government officials at the company's headquarters on the outskirts of Hangzhou, Zhejiang province, June 20, 2012.   REUTERS/Carlos Barria