A Profitable Exchange
Where will you list your company's stock? Not all equity markets are created equal
A small company may not be able to list on the most prominent stock exchange from the start, but moving from exchange to exchange is not impossible. Some companies pay the fees and try several markets before settling down -- although the choices are often ruled by whether the company can meet an exchange's listing requirements. (See chart on page 2.)
The New York Stock Exchange (NYSE), or Big Board, and the American Stock Exchange (AMEX) operate as auction markets where securities are traded on an exchange floor, and investors can trade directly with one another. Trades are public, and spreads are narrow. In the absence of a buyer or seller for a stock, a specialist -- a stock-exchange member who's responsible for maintaining a fair, orderly, and liquid market -- steps in to buy or sell at a price closest to its most recent trade.
The National Association of Securities Dealers Automated Quotation (NASDAQ) system is the computerized, floorless alternative. It trades the more active over-the-counter securities on the National Market System (NMS) and the emerging small-capitalization issues, and it operates a broker-dealer system in which a network of respected securities firms compete for orders.
In the past, public companies too small to meet the standards of NYSE or AMEX traded their stock over the counter only until they could move on. But with the flourishing of communications technology, many companies, such as Microsoft Corp. and Apple Computer Inc., are staying with NASDAQ, making it the nation's fastest-growing stock market and the world's second-largest equities market in dollar volume.
T2 Medical Inc. (#90) has tried them all and wasn't easily impressed. In 1988, too small to meet the requirements of the NYSE, T2 went public on AMEX but soon headed to NASDAQ, feeling like "a little lost sheep" because analysts weren't covering it adequately, says Dale Benzine, vice-president of corporate affairs. Although the company's stock enjoyed better coverage on NASDAQ, Benzine complains that short sellers were profiting as the stock price fell. Now on the Big Board, T2 managers appreciate NYSE's uptick rule, which allows short sellers to sell only stocks with prices on the rise. "It's also the prestige,' he says.
Most regional auction markets have all the benefits of research, surveillance, and specialists of the national markets. They include the Midwest (MSE), Philadelphia (PHLX), Boston (BSE), and Pacific (PSE) stock exchanges.
Their prerequisites are generally less demanding. The BSE encourages young companies by keeping its requirements less stringent, spokeswoman Mary T. Mulkerin says.
The formidable listing requirements of the MSE are stricter than the blue-sky laws in 40 states. "A small, growing company is better off at a regional because it can save money, money that can be conserved to grow the business,' says Roger Hendrick, a vice-president at the MSE.
The PSE hopes to attract small companies with a plan that would allow eligible companies to raise up to $1 million a year by selling stock directly to individual investors. It is awaiting Securities and Exchange Commission approval for the plan, an outgrowth of small-corporate-offering registrations, or SCORs. (See "He SCORs!' [Article link].)
STOCK EXCHANGE MINIMUM LISTING REQUIREMENTS AND 1992 IPOS
Public markets Tangible assets Annual earnings Market float Shareholders Bid price Listing fee No. of IPOs
NYSE $18 million $2.5 milliona $18 million 2,000 None $51,550 165
AMEX None $750,000 $3 million 800 $3 $10,000 20
NASDAQ/NMS $4 million $750,000 $3 million 800 $5 $5,250 281
NASDAQ/small cap $4 millionb None $1 million 300 $3 $5,000 137
BSE $1.5 million $100,000c $1.5 million 500 $1 $7,500 32
MSE $2 million $100,000 None 1,000 None $10,000 0
PSE $1.5 million $100,000d $2.25 million 750 $1 $10,000 8
PHLX $1 million Profitablec $500,000 1,000 $2 $7,500 0
a: in most recent year, plus $2 million in two previous years; b: total assets; c: in two of past three years; d: in past two years