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October 2, 2006
Nasdaq Solves the IPO Problem -- Not!
Nasdaq has figured out how to address the current dearth of IPOs. Clever kids that they are, they have decided to ... increase listing fees.Waitaminute, you're thinking. Increase listing fees? You got it. The braintrust at Nasdaq is lifting annual listing fees by 22% for smaller companies, and by 27% for larger ones. In cold cash, that means a small company would see its annuals go from $24,500 to $30,000; a larger company would see its fees get boosted from $75,000 to $90,000.
And how do the Nasdaq people justify this screwing over of listed companies, just when it should be trying to make listing less expensive? Well, because it will be offering more services, it says. Like what? Here you go:
[Nasdaq spokesthingie Bethany Sherman] declined to elaborate on plans to offerWhoa, I'm convinced. Unbelieveable.
expanded services to companies as part of their annual listing fees.
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Let me see, a small company like VistaPrint pays each of its outside directors ~$27K/yr + options, + expenses, yet $30K/yr to provide a liquid market for the company's $1B+ in marketcap is too much?
Doesn't seem all that unreasonable to me, esp. given the alternatives.
the cost of regulation has gone up (think back-dated options)
I don't disagree with any of these points, in a vacuum. Nasdaq can charge more, it's not usurious, per se, and reg costs have gone up.
But ... these are not the only costs faced by a newly-public company. And while Nasdaq may not make the bulk of its money from new listings, that is not the same thing as it should continue to actively encourage would-be listees to look at other venues.
OK Paul, so what do you believe Nasdaq's profit-maximizing price for listings (currently) is?
And how should we reconcile your comment about "screwing over of listed companies" with "Nasdaq can charge more, it's not usurious, per se, and reg costs have gone up"?
There's more than meets the eye here. It's not only a fee hike that will rub some companies the wrong way, but the fact that issuers are being asked (no, being told) to pay for services they don't want or use.
This story is really about Nasdaq taking advantage of its exchange status to muscle in on the corporate disclosure and investor relations communications business.
Some might say this is clever, but I it could backfire.
Here's my take:
Nasdaq Sets Collision Course With IR Vendors
NASDAQ's model isn't very good for smaller companies that need the services of a specialist to assure a quality market.
I expect the AMEX to gain market share if they play their cards right.
The current problem is: firms are going to London for their IPO, shunning Nasdaq.
Dont forget that Nasdaq has 20% of the LSE and, come May, they will be able to make a new bid for it in different terms from the previous one. Since then, Nasqad shares are up 20%, and LSE down 5%.
If Nasdaq can get good profits from here to May, and get a boost to the stock price, they are more likely to be able to buy majority in the LSE, therefore solving the problem.
I've been wondering what has taken them so long. 1) Increases in listings revenue goes right to the bottom line. 2) They are already vastly cheaper than listing on the NYSE. 3) Their installed based of listings is a far greater revenue generator than new listings. 4) Listed issuers are very very sticky. How does that not signal a price increase to an astute management team?