Gold Badges and Boozy Breakfasts: Inside the Frenetic Fight for IPO Listings

The fight for new listings—and the perks Nasdaq and NYSE are willing to offer to lure potential clients—is set to be epic this year: Five of the 10 highest-valued private U.S. companies have made or are considering a debut, alongside scores of smaller firms. The biggest candidate, ride-sharing giant Uber Technologies Inc., which said it would list on NYSE, could raise roughly $10 billion in its IPO, some analysts estimate.

That could put the fundraising total above the best year on record, 1999, when new companies raised roughly $108 billion amid the dot-com frenzy. Never before has the competition been this fierce: Unlike at the height of the tech boom, when NYSE was hamstrung by strict listing standards, both exchanges can now compete for most deals.

In addition to multimillion-dollar marketing packages, the exchanges are throwing in appealing perks, including denim suits, Champagne receptions and catchy ticker symbols.

The battle is a stark demonstration of how much the business of trading stocks has changed—and how much more important listing fees have become. NYSE and Nasdaq used to be the dominant U.S. trading venues. In 2006, up to eight in 10 stock trades occurred on one or the other, according to Tabb Group, a research and consulting firm.

Today, stocks are traded on more than a dozen exchanges and off-exchange “dark pools.” Only about 40% of trading takes place on NYSE or Nasdaq, and trading revenue for both has fallen. By contrast, listing fees made up roughly 10% of the exchanges’ revenue last year.

In addition to Uber, NYSE hooked Pinterest Inc., which is expected to launch later this month. Other hot targets, still publicly undecided, include data-mining giant Palantir Technologies Inc. and room-rental website Airbnb Inc.

Ride-sharing firm Lyft Inc. chose Nasdaq and began trading last Friday. As part of its deal, Nasdaq and the company arranged an off-site bell-ringing ceremony in Los Angeles, a rarity for the exchange. Lyft thought a Los Angeles ceremony would set it apart, and would pay homage to one of its founders, who grew up there, as well as show off a venue that would soon be a drivers’ center, according to people familiar with the matter.

The exchanges are also throwing valuable offers at lower-profile companies. If a company is considering going public, it can be assumed NYSE is engaging with it, said John Tuttle, who is in charge of luring companies to list on NYSE.

NYSE rules say men on the stock-exchange floor must wear a buttoned shirt and tie, a jacket with long sleeves and full-length trousers, and women must wear suitable business attire. The rules got a twist for the day when Levi Strauss & Co. had its IPO last month. Floor traders and other personnel, including the exchange’s listing chief, wore head-to-toe Levi’s.

For Sonos Inc.’s IPO last year, Nasdaq let the speaker maker create a new “bell” using its sound technology—and the exchange continues to use it to mark the opening and closing of trading.

For San Francisco-based Okta Inc.’s IPO in 2017, Nasdaq threw a Champagne celebration at its San Francisco site to welcome the opening of trading—starting at 6:30 a.m. Pacific time.

Company executives know they hold power—and they say they are happy to leverage it to squeeze better offers out of the exchanges. Companies say they see the perks as valuable marketing, plus a way to drum up employee enthusiasm.

After meeting with representatives from both exchanges, BJ’s negotiated over the following weeks with NYSE’s listings team to obtain scoreboard commercials and radio ads at East Coast minor league baseball games (a value of $170,000, according to a NYSE pitchbook); a VIP catered listing reception with ceremonial medallions for up to 250 employees (worth $25,000); and other gifts to commemorate the IPO for up to 1,000 employees ($15,000).

The total value NYSE put on its final offer: roughly $10 million, according to a person familiar with the conversations. Most of that amount would be spent on the bell-ringing celebration and branding for the opening day of trading and other marketing campaigns, according to the person and documents reviewed by The Wall Street Journal.

A call to top executives from Thomas Farley, NYSE’s former president, sealed the deal. BJ’s IPO raised more than $700 million in the offering and began trading on NYSE in late June under the symbol “BJ.” A spokeswoman from BJ’s declined to comment.

Exchanges make money with each trade, but trading volume can fluctuate wildly from month to month. Listing fees from IPOs are steady, and at up to a quarter- to half-a-million dollars a year per company, they can add up quickly. Other fees and subscription services expand the total.

Nasdaq’s fees from listing services brought in $290 million in 2018, while at NYSE parentIntercontinental Exchange Inc., listings contributed more than $440 million in revenue in 2018.

Larger companies can be worth more to the exchanges because they often are included in index and exchange-traded funds and thus trade more often, and also bring in more data that the exchanges can sell.

Although stocks can trade on any number of exchanges for most of the day, when the closing auction rolls around, a company’s shares must trade on its listed exchange. In 2017 NYSE collected $87 million—45% of its net revenue from the exchange’s core stock-trading business—from trading at the close, according to research firm Equity Research Desk.

In addition to offering perks, both exchanges tout their trading experience when they compete for IPOs, focusing on the ability to control volatility, the cost of execution as well as how tight the spread, or the difference between a stock’s bid price and offer price, is for individual stocks. Nasdaq runs an all-electronic exchange, while NYSE still has human floor traders, though their role in stock trading has diminished over the years and the differences between the exchanges have become less distinct.

In the late 1990s and early 2000s—the last time there was such a rush of big-name IPOs—NYSE didn’t compete for many of the listings because the largely unprofitable companies didn’t meet its requirements. In 2000, only five tech companies, or 2% of all tech IPOs that year, listed on NYSE, according to Dealogic.

When Amazon.com Inc. launched its IPO in 1997, the online retailer lacked any profits. It listed on Nasdaq, where it has grown to be one of the largest companies in the U.S. with one of the most actively traded stocks.

Since then, NYSE, ruing the loss of revenue, has loosened its listing requirements, and its share of the value of annual tech IPOs has grown to more than half over the past five years, Dealogic data show.

Another notable change: Ticker symbols became portable, ending NYSE’s monopoly on single-, double- or triple-letter symbols.

NYSE tried to draw the listing of web real-estate company Zillow by offering it the Z ticker symbol in 2011. The company ended up listing on Nasdaq as Z, the first time a single letter was used on that exchange. A few years later, NYSE tried and failed to steal Zillow away with promises of a custom tweet campaign, commercials across CNN’s airport network and billboard ads in Times Square and Silicon Valley, according to materials reviewed by the Journal.

Listing perks can extend for years; Zillow took advantage of one this week by announcing the launch of Zillow Home Loans on Nasdaq’s tower in Times Square and having the exchange promote it on social media, a Zillow spokeswoman said.

NYSE did succeed in stealing Oracle Corp. from Nasdaq in 2013. Among the enticements: a trading floor reception for 300 guests, advertising on Silicon Valley billboards and a featured role in a television commercial paid for by NYSE, according to materials reviewed by the Journal. Nasdaq, for its part, lured PepsiCo Inc. to drop NYSE and move in 2017.

The pursuit often starts years before any formal meetings. Rob Bernshteyn, chief executive of Coupa Software Inc., remembers Nelson Griggs, president of Nasdaq Stock Exchange, introducing himself at a cocktail party in 2013, three years before the cloud-based financial-software company went public. That same year, NYSE’s Mr. Farley cornered him at a cloud event hosted by the exchange.

By the time the exchanges presented their formal on-site pitches, Mr. Bernshteyn said he knew both men well. Coupa chose to list its shares on Nasdaq, but not before securing what Mr. Bernshteyn called a more creative marketing package from the exchange.

This year’s listings showdown will be a test for Mr. Tuttle, NYSE’s global head of listings and chief operating officer, and Stacey Cunningham, the exchange’s president, who took over after the departure of Mr. Farley last spring. The charismatic salesman wooed some of the buzziest and biggest IPOs, including Alibaba Group Holding Ltd. and Snap Inc., during his tenure at the Big Board.

During its courtship of Pinterest, NYSE in early February unveiled a large, bright-red banner across its columned facade bearing a logo of the social-media site. The free advertising said: “NYSE. Follow us on Pinterest.” Nasdaq also tried to nab Pinterest, reserving the ticker symbol “PINT,” a person familiar with the matter said. NYSE won, and Pinterest, last valued at about $12 billion, is expected to list in coming weeks under the ticker PINS. A big marketing package offered by NYSE played into the decision to list with the Big Board, according to a person familiar with the matter.

A trademark of Mr. Tuttle’s is to launch into a metaphor during pitches to executives about how listing with Nasdaq is like flying on a plane without a pilot. NYSE, in comparison, provides pilots in the form of designated market makers who help ensure orderly trading of NYSE-listed stocks during takeoff (market open), landing (market close) and if there’s turbulence, he says.

It’s an analogy that executives who have attended Mr. Tuttle’s pitches interpret as a reminder of Facebook Inc.’s opening-day debacle on Nasdaq in 2012, when trading was delayed for hours by technical glitches.

In his competing pitches, Mr. Griggs laughs off the analogy and argues his exchange offers better execution for a lower price. He said in an interview the obligations of designated market makers have decreased dramatically over the past two decades and that the majority of IPOs last year chose Nasdaq over NYSE.

Write to Corrie Driebusch at corrie.driebusch@wsj.com