SpaceX (SPCX +15.83%) listed on the Nasdaq exchange, which is owned and operated by Nasdaq (NDAQ -0.12%). The initial public offering rose a massive $75 billion ($85.7 billion including overallotments offered to its investment bankers), with the stock rising nearly 20% on its first day of trading (and another 20% on the second day). However, the biggest winner from this massive IPO could actually be Nasdaq itself. Here's why.
Nasdaq is the place to be for tech companies
The Nasdaq exchange has always been technology-focused. That's likely one of the reasons why SpaceX chose to list on the exchange. That decision gives the Nasdaq exchange immense street cred. If SpaceX thinks the Nasdaq is the place to be, other tech companies are likely to follow suit. And there are some big names looking to hold IPOs right now, including artificial intelligence giants OpenAI and Anthropic. Exchanges generate listing fees from IPOs, so there's a financial benefit to hosting IPOs beyond simple street cred for Nasdaq as a business. And ongoing listing fees create an annuity-like income stream.
Image source: Getty Images.
There's more to the story than just the IPO
Listing fees are just the start of the story. Data sales are also an important part of Nasdaq's business. More prominent listings mean more demand for the trading data the company sells, supporting another annuity-like income stream. And then there are licensing fees the company generates by allowing other companies to use its name on investment products, such as a Nasdaq-100 ETF like Invesco Nasdaq 100 ETF (QQQM +1.17%). That's yet another annuity-like income stream.
NASDAQ: NDAQ
Key Data Points
So there's more to the story than just nabbing a big-name IPO. But for investors, there's another angle to consider. Perhaps you are fascinated by what appears to be a boom in giant technology IPOs. You don't have to actually buy the IPOs to benefit. You could, instead, buy Nasdaq, the company that owns the exchange where many of the headline-grabbing IPOs are likely to take place.
Is Nasdaq a better alternative?
Here's the interesting thing: it is hard to value what amounts to a money-losing start-up like SpaceX. Sure, the opportunity looks huge, but who knows what the future holds? Nasdaq is a profitable business with annuity-like income streams. And its price-to-earnings ratio is actually a touch below its five-year average, suggesting it is fairly priced, if not slightly cheap, right now. It could be the perfect option for conservative investors who want in on all the IPO excitement but don't want to take on the risk of buying an IPO.
