NYSE-NASDAQ Rivalry Continues as Texas Instruments leaves the Big Board

NYSE-NASDAQ Rivalry Continues as Texas Instruments leaves the Big Board

One does not need to be a sports fan to know that rivalries are just a part of the game. They know a thing or two about it in New York where antagonism towards teams like the Devils, Red Sox, Patriots, or Celtics just hangs in the air. The city, however, is also home to a completely different, more subtle rivalry that goes on in downtown Manhattan where the stock exchanges, particularly NYSE and NASDAQ, compete for companies.

Exchanges not all about the money…

Chris Allen, an analyst from New York based Evercore Partners Inc., admits that the decision on which stock exchange a company should trade is not an easy one. When it comes to Wall Street, “it’s highly competitive,” he said about the city’s securities sector in a phone interview for Bloomberg. “The exchanges obviously compete on price, they also offer secondary services along with the listing in terms of corporate communications, market surveillance. So this could be a combination of things.”

David Ethridge, NYSE senior vice president and head of capital markets, shares Allen’s point of view that various factors should be taken into consideration, and businesses should make market decisions based on the big picture, not specific incentives. “We don’t believe any company should be choosing an exchange based solely on these services,” he says with conviction that NYSE is the better exchange of the two. “Our market brings more significant, tangible benefits in terms of visibility, global reach and dedicated capital from our designated market makers.” Unsurprisingly, Ethridge’s opinion did not convince a spokesman for NASDAQ, who said that the exchange he represents offers “corporate solutions” services that “help listings be better public companies.”

…But money matters for Texas Instruments

Texas Instruments (TXN), which has been a publicly traded company since the 1950’s, certainly wants to be even better. However, the company’s ambitions played only a minor role in transfer from the Big Board, as NYSE is called, to NASDAQ, whose technology-focused Composite Index (CCMP) includes companies like Apple Inc., Intel Corp., and Microsoft Corp. Ron Slaymaker, the company’s head of investor relations, explained that the move, which will make TXN the biggest company to ever switch from one listing to another, “is a natural fit.”

Jonathan Casteleyn, an analyst at Susquehanna International Group LLP, in the email sent to Bloomberg explained that both money and the tech-oriented index played their role. “The likely motivation is annual cost saves from NASDAQ’s cheaper listing venue versus NYSE’s. It is not abnormal for a company to want to trade on a venue of companies in a similar sector,” he wrote. Texas Instruments’ spokeswoman openly stated that leaving NYSE will be beneficial for the company’s finances, but refused to disclose any financial details about the transfer that became a reality today, the 3rd of January, 2012.

Two-way traffic

Texas Instruments is not the only company that makes cost-based decisions. Wendy’s Co. (WEN), a popular fast-food restaurant chain, is also moving from NYSE to NASDAQ. The large-screen theater operator Imax Corp. (IMAX) and Viacom Inc. (VIA, VIAB), operating such channels as Comedy Central and MTV also moved to the smaller index earlier in 2011. All companies provided seeking cost-effective solutions as the reasoning behind their transfers. Still the securities sector is a two-way street on which Prosperity Bancshares Inc. (PRSP) announced that it was moving in the opposite direction, and it is leaving NASDAQ for NYSE.

Battle for IPOs

The rivalry between NYSE and NASDAQ goes beyond fighting for already listed companies. The stock exchanges do not forget about IPOs. So far we have seen a close battle on this front. NYSE got a social network LinkedIn Corp (LNKD) and the Internet radio Pandora Media Inc. (P). NASDAQ secured Groupon Inc. (GRPN) and famous for Facebook games Zynga Inc. (ZNGA.) All these companies may be new on the public listings, but the subtle rivalry between the New York markets is old. It also seems that it is not about to die down.

The move good for TXN shareholders

Whether it is sports or the stock market, some level of rivalry is always healthy, but what is in it for TXN investors? Well, if the transfer is good for Texas Instruments’ finances, shareholders will benefit from it, too. NYSE listing fees for large companies with a significant amount of shares outstanding can be as much as $500,000. At NASDAQ, this cost is limited to around $100,000. Numbers do not lie and Slaymaker believes that they are also good for TNX investors. “This move will enhance our public visibility while offering our shareholders cost-effective access to advanced trading technologies,” he explains.

Since the switch between exchanges was announced on December 15th, as of January 3rd TXN shares were 6.12% up and, at the price of $29.75, they fall somewhere in the middle of the 52 week range of 24.34 – 36.71.