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Exchange plays catch-up with Nasdaq

The New York Stock Exchange, the largest equity exchange in the world, has been lowering its listing requirements to attract companies in Greater China away from its rival the Nasdaq stock exchange, bankers  said.

The NYSE has been fighting a losing battle with the Nasdaq for the past two years as the smaller of New York's two major boards proved more attractive to a larger number of companies operating in  the mainland.

In 2005 and last year, a dozen mainland firms picked the Nasdaq while four sold shares on the NYSE, according to Dealogic. In terms of volume the comparison is a closer US$1.3 billion on the Nasdaq to US$1 billion for the NYSE.

Previously the gap between the two was far wider and to the distinct advantage of the NYSE.

In 2003 and 2004, mainland firms raised US$6.5 billion while companies on the Nasdaq raised just under US$900 million.

'They've really been running scared because of the Nasdaq,' one banker said.

The willingness to bend listing requirements is on a case-by-case basis, according to one source who said the NYSE was prepared to relax profitability requirements by up to 20 per cent on one occasion.

An NYSE spokesman  said: 'About 95 per cent of the recent entrepreneurial listings on NYSE have qualified under the exchange's long-term criteria standards, moreover many of them qualify under US domestic standards as well.'

The NYSE's Listed Company Manual requires companies registered outside the United States to have earned a combined pre-tax profit of at least US$100 million over the three fiscal years before  listing.

A second series of rules state that companies with a market value of US$500 million and revenues of US$100 million or a market value of US$750 million with revenues of US$75 million would also be allowed to sell shares.

The board runs another series of requirements, approved by the US Securities and Exchange Commission, which many Asia listing candidates have listed under, a source  said. Under these rules companies with a pre-tax profit of between US$10 million and US$12 million are eligible.

Recent mainland  initial public offerings that satisfied one set of benchmarks but failed another include alternative energy companies LDK Solar and Yingli Green Energy, the source  said.  LDK's shares have gone down 11 per cent since trading began on June 1. Yingli shares started trading last Friday and dropped 50 US cents to US$10.50 a share.

Nasdaq, which has traditionally been geared towards start-up companies, allows firms that have not yet made a profit to sell shares.

The US$1.1 billion  initial public offering in December from Melco PBL Entertainment Macau was one example.

A source said the NYSE tried but failed to convince Melco PBL to switch venues, despite the company's previous two years of losses.

Other regulations under the NYSE code state that the company should have at least 5,000 shareholders with 100 or more shares and the number of shares sold should  be 2.5 million or more. The Nasdaq requires 2,200 shareholders and 1.25 million shares sold.

The moves to relax listing requirements mark an about face for the NYSE.

When the exchange failed to attract China Construction Bank's US$9 billion initial offering in 2005, exchange officials claimed that the company bypassed New York because it was afraid it could not meet the listing requirements.

People familiar with the bank  said the investment banks hired to arrange the deal advised them to bypass the NYSE because  there was more investor money in Hong Kong targeting mainland stocks.

'It's a sign that [NYSE] are around to stay and are smart about market positioning,' said one lawyer whose firm is active on deals listing in New York City. 'The 'we are NYSE' is not enough anymore and the flexibility is a good sign.'

The NYSE, Nasdaq, London Stock Exchange, Tokyo Stock Exchange and Deutsche Borse are opening offices in the mainland after the securities regulator  last month allowed foreign bourses to set up representative offices in Greater China.



NYSE eases rules to lure mainland listing applicants