NASDAQ OMX’s Bruce Aust told peHUB on Tuesday that NASDAQ has a new “lower-tier listing market” in the works that will be aimed at emerging companies and at financially solid companies that can’t meet the NASDAQ’s listing requirements.
The idea is to make it easier for companies to go public, which has been tough for over a year. Aust said NASDAQ has been working closely on this project — which would operate in Boston — with the National Venture Capital Association.
Not so, says the NVCA. “I think it’s fair to say that we are aware that NASDAQ is working on developing a platform — but they are not working ‘with’ us on this,” says Vice President Emily Mendell.
Furthermore, the new exchange wouldn’t ease the IPO drought because it doesn’t go far enough, says Pascal Levensohn of Levensohn Venture Partners. Levensohn said he attended a workshop put on by NASDAQ at the recent PEA conference and was told that the minimum size of capital raised by companies on the new exchange would need to be between $50 million and $100 million.
“That’s just like an IPO (now), so there’s no positive economics in trading in the securities,” he said. “If you can’t make money as a market maker, why be one?”
Levensohn said the U.S. needs to rebuild a support system for emerging companies that’s disappeared, and that means restoring commissions, market spreads and research.
“Commissions went down, and the only way people could make money was trading in high volume, so everybody spent more time on the IBMs and GEs and the little companies went by the wayside,” he said. “Look at the number of analysts, and how many cover NASDAQ-listed companies — there’s no research.
“Also, since 1991, 47% of all IPOs had nothing to do with venture capital or private equity — they were bootstrapped, built by entrepreneurs. The government is not paying attention here.”
Levensohn said he’s been meeting with government officials in Washington to figure out how to solve this problem. So has the NVCA.
“Bruce may have been referring to our efforts to restore the venture-backed IPO market, in which we are talking to many players in the ecosystem, including NASDAQ,” Mendell said. “But we don’t have any direct knowledge of this project or its status as far as I know.”