Alibaba worried about Facebook IPO as it considered Nasdaq and NYSE

Alibaba Group could have sold nearly $2bn (€1.54bn) worth of stock without lifting a finger.

All it had to do was list its shares on Nasdaq.

That listing would have guaranteed Alibaba inclusion in the Nasdaq 100 Index by year end, and funds which track the index would have had to buy. But two sources said executives worried about Nasdaq’s ability to handle their $21bn initial public offering later this month, since the exchange botched Facebook’s market debut two years ago.

Nasdaq tried to persuade Alibaba it had fixed the problem, the sources said, but it is not clear whether they were swayed.

One source said Alibaba eventually was satisfied that Nasdaq had solved the issue and chose NYSE because its overall pitch was better. The other said Nasdaq executives believed Alibaba decided that the possibility of a botched IPO outweighed the benefits of being in the index.

A spokesman for Nasdaq, which has repeatedly said it has fixed the issues that went wrong in the Facebook IPO, said “It was a close race, and we wish Alibaba well.”

Listings contributed only 12% of Nasdaq’s $1.9bn in revenues in 2013, and large listings are less profitable for exchanges, but within the financial community they are taken as a barometer of success.

The decision not to go with Nasdaq meant that Alibaba may not join any major global index this year. If the IPO values the company at $200bn, Alibaba would have been about 3.3% of the index. There are over $54bn in ETF assets linked to the index, which means at least $1.7bn would have flown into Alibaba shares.