Stock exchanges want Alibaba, bad

JAPAN-TELECOM-COMPANY-EARNINGS-SOFTBANK

Japan's mobile communication giant Softbank president Masayoshi Son announces the company's financial result ended in March in Tokyo on May 7, 2014. Softbank is also the company which owns the chinese e-commerce giant Alibaba, who yesterday, May 6, 2014, finally filed its IPO.

 

Alibaba is huge. We know that. It received $5.6 billion in revenue in 2013 with $1.6 billion in income, and has a nearly unheard of profit margin of 48 percent. 

You would imagine any stock exchange would be dying for Alibaba to decide to list with it. They do want Alibaba, bad. But not necessarily for the reasons you might think.

It’s not totally about the money. Yes, the stock exchange that hosts Alibaba will receive annual fees for being listed. And an exchange will also receive fees every time a stock is traded. 

But as far as stocks go, those fees are minimal. Listing fees top out at around $500,000 a year, for the largest of companies, and trading fees are on the order of hundredths of a cent per trade.

So why do exchanges care about listing Alibaba? Prestige. The flip side of prestige is advertising. If a huge flashy tech company like Alibaba lists with a certain exchange, that might attract other huge flashy tech companies to do the same.

About the author

Sabri Ben-Achour is a reporter for Marketplace, based in the New York City bureau. He covers Wall Street, finance, and anything New York and money related.

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