In order to avoid a repeat of the debacle that shrouded Facebook Inc (NASDAQ:FB)’s IPO in problems, the New York Stock Exchange announced today that it will allow firms to test their trading systems in a mock opening auction of Twitter’s stock prior to the company’s initial public offering. The exchange, run by NYSE Euronext (NYSE:NYX), is looking to avoid the issues that NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) had with Facebook’s IPO last year. The “dry run” will take place next Saturday, October 26.
Twitter confirmed this week that when it begins trading in November it will be doing so under the ticker symbol TWTR.
NYSE Euronext’s expectations for Twitter’s IPO
It’s quite common that weekends are used for testing the exchanges’ systems. It is, however, uncommon to test systems in anticipation of an initial public offering. Clearly, the NYSE Euronext (NYSE:NYX) is expecting a big day when the IPO is launched.
It’s still not set in stone when the IPO will go live, though most are suggesting that it will happen in November. According to sources close to the discussions, Twitter will launch its roadshow to market the deal to investors some time next week.
Facebook IPO issues
During Facebook Inc (NASDAQ:FB)’s IPO, issues with NASDAQ OMX Group, Inc. (NASDAQ:NDAQ)’s system caused a 30-minute delay in the debut. Brokers were left waiting, in some cases up to two hours, for confirmation of their purchase, and in numerous cases the system simply got them wrong. Hundreds of millions of dollars were lost, and scores of lawsuits were launched by the affected investors and trading firms.
In May, NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) paid $10 million to settle the affair with the Securities and Exchange Commission, who also brought a suit against the exchange. The charges were related to rule-breaking that the Nasdaq neither admitted to or denied following the settlement.
Dry run of Facebook IPO
Somewhat ironically, the Nasdaq also did a “dry run” of the Facebook Inc (NASDAQ:FB) initial public offering, but none of the problems that occurred during the debut morning were detected in the warm-up trading session.
It is believed that one of the primary reasons that the tech company chose the NYSE Euronext (NYSE:NYX) rather than NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) was the debacle that occurred during the Facebook offering at the exchange.