ALIBABA Group Holding Ltd. could have sold nearly US$2 billion 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 the end of the year, and funds that track the index would have had to buy.

    But two sources familiar with the situation said Alibaba executives worried about NASDAQ’s ability to handle their US$21 billion initial public offering (IPO) later this month, since the exchange botched Facebook’s market debut two years ago.

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

    One of the sources said that Alibaba eventually was satisfied that NASDAQ had solved the issue and chose New York Stock Exchange (NYSE) because its overall pitch was better. The other said NASDAQ executives believed that Alibaba decided that the possibility of a botched IPO, however small, outweighed the possible benefits of being in the index.

    Alibaba and NYSE declined to comment, while 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.”

    Alibaba’s misgivings about NASDAQ’s technology, two years after Facebook’s glitch-ridden, US$16 billion market debut, show the incident continues to threaten NASDAQ’s reputation.

    Listings contributed only 12 percent of NASDAQ’s US$1.9 billion in revenues in 2013, and large listings such as Alibaba’s are less profitable for exchanges, but within the financial community they are taken as a barometer of success.

    NASDAQ systems buckled under the tremendous volume of orders on the first day of trading in Facebook’s shares in 2012, leading to hours of delay.

    In its presentation to Alibaba, NASDAQ detailed the steps it had taken to prevent another Facebook-style glitch, two sources familiar with the pitch said. The exchange has said it responded to Facebook by putting extra safeguards in place, creating new positions within the company to improve communications with the industry and regulators when errors occur, and establishing an engineering team to monitor and analyze daily performance.

    The decision not to go with NASDAQ meant that Alibaba may not join any major global index this year.

    “There is a pretty strong argument that index inclusion equals stability,” Kevin Landis, chief investment officer of Firsthand Capital Management, a Silicon-Valley-based technology-investing specialist with US$400 million in assets under management.

    ETFs and mutual funds that track such benchmarks have to buy and hold their stock.

    The NASDAQ 100, which includes companies such as Apple and Google, has a market capitalization of US$4.75 trillion. Funds such as the US$46.8 billion QQQ PowerShares exchange-traded fund, the fifth-biggest ETF in the world, track the NASDAQ 100, according to data from Thomson Reuters’ Lipper service.

    If the IPO values the company at US$200 billion, Alibaba would have been about 3.3 percent of the index. There are more than US$54 billion in ETF assets alone linked to the index, which means at least US$1.7 billion would have flown into Alibaba shares.

    (SD-Agencies)