These are interesting times for technology companies that are contemplating initial public offerings. For companies of sufficient size, the exchange for the listing of their securities generally comes down to the New York Stock Exchange and the Nasdaq Stock Market. The NYSE has historical prestige and a long track record, while the Nasdaq has cultivated a progressive, tech-friendly reputation. If you are a high visibility technology company, you will probably find these exchanges actively competing for your listing. Such benefits as free advertising have been used, and business deals involving a company’s services may influence a company’s decision as to which exchange to list its securities. For example, Oracle’s switch to the NYSE from Nasdaq was reportedly in part due to an agreement by the NYSE to continue to use Oracle software in its operations.

Nasdaq has long been the favorite exchange for the listing of technology company offerings. This was probably due to the initial progressive use of automation and electronics in this exchange’s early operations which resonated with technology company executives. Rather than traders waving pieces of paper (the historical process at the NYSE), Nasdaq pioneered the use of electronic quotation boards and other advanced methods in its operations. Nasdaq was willing to list the offerings of smaller companies and was also cheaper than the NYSE. All of these factors allowed Nasdaq to build a reputation as the technology companies’ preferred exchange. This reputation was fostered and supported by the listing of a large number of technology companies, including big hitters like Apple and Microsoft.

Nasdaq’s role as the preeminent exchange for technology companies has been diminished. One of the major blows for this exchange was Twitter’s recent announcement that it will list its IPO shares on the NYSE. This had to be an embarrassment for Nasdaq given the prestige and visibility that this offering will enjoy in the technology and corporate finance communities and with the general public. The NYSE and Nasdaq had been actively pursuing the Twitter listing, and Nasdaq’s CEO made an unsuccessful last minute trip to Twitter’s headquarters to try to land this offering. Twitter’s updated S-1, in which it announces the NYSE listing selection, can be found here.

Nasdaq has also faced other high profile technology company rejections and defections which have harmed its reputation. Some large and prominent technology companies, such as Yelp, LinkedIn, and Pandora, have recently chosen to list their IPO securities on the NYSE. Oracle and Juniper Networks also recently moved to the NYSE from Nasdaq.

Probably the most significant blow to Nasdaq was the Facebook IPO debacle. This was one of the most hyped and visible securities offerings of all time, and Nasdaq received significant public exposure when it was chosen as Facebook’s exchange. Unfortunately for Nasdaq and the tech industry, this IPO turned out to be a disaster due to multiple substantial problems in managing and administering the IPO process. Many of these problems landed squarely on Nasdaq. Among other things, the SEC imposed a $10 million fine on Nasdaq for its role in this offering. Given the high profile of this offering and the expansive reporting of every last detail and problem, the public relations implications were probably worse for Nasdaq, although they are harder to quantify. The perception among the technology and corporate finance communities after this IPO was that Nasdaq did not have the technology, infrastructure or expertise to successfully manage an offering as large, visible, and complex as Facebook’s.

What factors drive a company to select a certain exchange? Cost may initially be an issue, especially for small companies. The listing fee on the NYSE is $250,000, while the listing fee on Nasdaq varies from $50,000 to $75,000. Taking the long-term view, however, there appears to be at least some evidence that an NYSE listing provides higher visibility, more liquidity, and larger stock price increases, as well as a reduction in the listed company’s cost of capital. An academic analysis by Simi Kedia and Venkatesh Panchapagesan discusses some of these items.

Surprisingly, despite all of these negative items there is some evidence that Nasdaq is actually doing well and that it may be surpassing the NYSE in certain areas. While the NYSE has added more companies, Nasdaq has shown substantial increases in total market capitalization of its listed companies over the NYSE in recent years. Some high profile NYSE companies, including Marriott, Kraft Foods, and MoneyGram International, have recently defected to Nasdaq, and this has helped Nasdaq to increase its market capitalization. While the NYSE may be winning the public relations battle by enlisting high visibility technology companies, Nasdaq appears to be strengthening its economic position through increases in its market capitalization and the addition of strong companies.

So which exchange makes more sense for a technology company? There is no clear answer at this point. Nasdaq still seems more tech friendly and efficient, especially for smaller technology companies, and I believe that these companies will continue to list their securities on Nasdaq. I also believe, however, that Nasdaq’s reputation and its credibility took a significant hit with the Facebook offering, and that the aftermath of that situation will continue to hurt Nasdaq with companies that contemplate large or complex offerings for some time. The right answer for most companies is probably to get listed on Nasdaq when the company is relatively small, and then evaluate a move to the NYSE if the company grows large enough.