Reasons Why Do Companies Choose NASDAQ for Their IPO?

NASDAQ for Their IPO

Why list on the Nasdaq versus other stock exchanges?

The NASDAQ (New York Stock Exchange) got founded in 1971. Although it feels like a long time ago, the New York Stock Exchange (NYSE) got made in 1792. The NASDAQ is known for its technological companies, whereas the NYSE is known for its older brick-and-mortar companies.

The NYSE is more likely to trade larger, bottom-line-driven companies that pay dividends and steadily build their top lines. Companies are more likely to be growth-oriented on the NASDAQ. There are exceptions on both sides, of course.

When it comes to deciding between the NYSE and the NASDAQ, certain companies’ perceptions do matter. LinkedIn Corp. (LNKD), for example, chose the NYSE over the Nasdaq because it didn’t want to be associated with social networking sites.

That isn’t to argue that companies listed on the NASDAQ aren’t good. That isn’t true at all. It’s simply a different setting. If a corporation wants to be prestigious, it will list on the NYSE.

On the other hand, information technology, biotech, and other small-cap tech companies are unconcerned with their reputation. Their goal is to keep costs low more cash on hand to fund expansion.

The fee difference between the NYSE and the NASDAQ will not make or break a company in most situations, but if a smaller company lists on the NASDAQ, it will still be a cost-effective listing option.

Key Reasons Why European Companies Choose NASDAQ

Cost Differences

If you check into the variations in listing costs between the NYSE and the NASDAQ, you’ll find a wealth of information. It’s possible that you’ll become perplexed. To put it another way, it all comes down to how many shares a firm is offering for sale.

Let’s pretend a corporation is going to list 75 million shares. That would cost $360,000 on the NYSE, plus a $71,000 annual listing fee. (The reported price per share is $0.0048, according to the NYSE Listed Company Manual.)

The NASDAQ makes things a little more complicated because it has three submarkets: Global Select Market, Global Market, and Capital Market. The listing price is $295,000 plus a $79,000 yearly listing fee if 75 million shares get listed on the Global Select Market or Global Market. The listing fee for 75 million shares on the Capital Market is $75,000, an annual listing fee of $79,000.

Important Factors

An independent remuneration committee and an independent nomination committee gets required for each firm listed on the NYSE. On the NASDAQ, corporations have the option of having CEO salary and nomination decisions determined by a majority of independent directors.

Therefore, this is not obligatory. Internal audit functions and corporate governance guidelines get also required for NYSE-listed companies. For corporations listed on the NASDAQ, neither of these get required.

The NASDAQ has an additional benefit that some people overlook. Times Square has an electronic billboard that lists its firms and products.

One of the reasons Kraft Foods Group, Inc. (KRFT) moved to the NASDAQ in 2012 got because of this (increased exposure).

Conclusion

The NYSE is both more expensive and more prestigious. However, given the cost reductions, many companies in today’s tech-heavy world see the listing on the NASDAQ as a sensible option. To date, companies listed on the NASDAQ have been perceived as more growth-oriented, implying higher volatility and good upside potential.

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