Twitter Inc. (TWTR)’s trading debut went off without any of the destabilizing computer hitches that plagued Facebook Inc. (FB) 18 months ago, handing a win to the New York Stock Exchange as it tries to lure technology listings.
The 221-year-old equity market completed the auction used to set the opening price and then released Twitter for broader trading at 10:49 a.m. New York time today. Twitter surged as much as 93 percent from the $26 initial public offering price. While trader nerves were tested in the hours after the open as a venue for over-the-counter stocks was closed and one NYSE data feed slowed, investors said they saw no impact on Twitter.
“It seemed orderly, and as the NYSE rep said, ‘textbook,’” Dan McMahon, director of equity trading at Raymond James Financial Inc. in New York, said in an e-mail today. “I’ve been involved in my fair share of IPO openings, and don’t disagree.”
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The market was spared a reprise of Facebook, whose first trades were crippled by a design flaw in Nasdaq OMX Group Inc.’s opening auction. Pulling off the deal is a coup for Duncan Niederauer, the NYSE Euronext chief executive officer who has lured Internet companies such as LinkedIn Corp. and Yelp Inc. since 2011.
“Phew!” Anthony Noto, the Goldman Sachs Group Inc. banker who led the IPO, wrote in a message posted on Twitter after trading began.
The opened 79 minutes after the 9:30 a.m. start of trading, giving it one of the longer opening auctions in the last decade. By comparison, LinkedIn’s first trade was at about 10 a.m. on May 19, 2011, while Yelp needed about 15 minutes to open in March 2012, according to data compiled by Bloomberg.
“We were trying to get the message out early that it was going to take a while,” Niederauer said in an interview on Bloomberg Television with Erik Schatzker and Stephanie Ruhle. “Our evidence we got it right is that it’s been in a $4 to $5 range since the opening, which is what we pride ourselves in. It should be less volatile the way our model works here.”
Twitter rose as high as $50.09 just after 11 a.m. and ended the day at $44.90.
“The opening process took a while, but that’s OK,” Matt Billings, senior vice president of Scottrade Inc.’s trading services in St. Louis, said in a phone interview. “We would rather they take their time and transition into a smooth customer experience.”
“It was very seamless and our customers have had a very strong experience so far,” Billings said.
Twitter was one of three companies where customers may have seen slowness in an NYSE proprietary market data feed known as OpenBook Ultra around 11 a.m. New York time, the exchange said in an update to traders. Data published to public feeds was unaffected, and the issue was fixed in less than an hour, the notice said.
While Twitter sold shares into an equity market where the Standard & Poor’s 500 Index has gained 23 percent this year, the stock arrived at a time when computer mishaps, including issues of data transmission similar to those that hurt Facebook in May 2012, are more visible.
Nasdaq was forced to freeze trading in stocks it lists for three hours on Aug. 22 when data lines malfunctioned, and share and options venues from New York to Chicago have paused or suspended trading in the past three weeks due to errors.
For NYSE, the debut was an opportunity to encroach further on Nasdaq’s tech dominance. Between the start of 2011 and Nov. 5, NYSE won 46 technology and Internet IPOs, with $8.7 billion raised, according to data compiled by Bloomberg. Nasdaq secured 44 companies raising $24.7 billion, including the $16 billion that Facebook received.
Although there are 13 exchanges among the more than 50 venues where U.S. stocks trade, NYSE and Nasdaq are the only two where companies go public. Competition for IPOs is critical for both, which get about a fifth of revenue from listing fees and related services.
Scrutiny was high because IPOs have seen some of the biggest market-structure catastrophes. Nasdaq Stock Market member firms lost tens of millions of dollars in Facebook’s debut after the computer matching the first trade went into a loop and the open was delayed. Missing trade confirmations and confusion about prices were the first signs of trouble for a stock that fell more than 50 percent in less than four months.
Nasdaq was fined $10 million by the U.S. Securities and Exchange Commission and faces $41.6 million in claims from members. The exchange, home to tech pioneers including Apple Inc. and Microsoft Corp., learned last month that it wouldn’t be listing Twitter.
Two months before the Facebook IPO, Bats Global Markets Inc., an all-electronic exchange operator based in Lenexa, Kansas, stunned Wall Street by failing to get its own IPO trading hours after it was priced. Flawed software was blamed by CEO Joe Ratterman, who pulled the listing and now is in the process of merging with a rival, Direct Edge Holdings LLC.
In the past three months, exchanges have reported multiple instances of information lines being snarled. Price dissemination among options venues broke down on Sept. 16 when the central conduit operated by an NYSE Euronext unit that links a dozen exchanges faltered, forcing them all to shut briefly.
The mishaps have become so frequent and serious that Standard & Poor’s said in September that credit ratings for exchanges worldwide may be cut if they’re not addressed. After Nasdaq’s Aug. 22 data-feed error prevented thousands of U.S. stocks from trading for three hours, SEC Chairman Mary Jo White demanded an industry response.
Breakdowns “involved relatively basic, albeit serious, errors,” she said at a Security Traders Association conference in Washington on Oct. 2. “Many could have happened in a less complex market structure, but the persistent recurrence of these events can undermine the confidence of investors and public companies.”
Trading of over-the-counter stocks -- or companies not listed by either the NYSE or Nasdaq -- was halted for three-and-a-half hours today after a network failure at the main venue prompted regulators to order a shutdown.
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