WEBVTT - ICYMI: A New Era for IPOs

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business

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<v Speaker 1>Week Daily reporting from the magazine that helps global leaders

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<v Speaker 1>stay ahead with insight on the people, companies, and trends

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<v Speaker 1>shaping today's complex economy. Plus global business, finance and tech

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<v Speaker 1>news as it happens. The Bloomberg Business Week Daily Podcast

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<v Speaker 1>with Carol Masser and Tim Steneveek on Bloomberg Radio.

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<v Speaker 2>Let's talk capital markets, because that's what we do, Yeah, Bloomberg.

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<v Speaker 2>I don't know if you have noticed this, Carol, well,

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<v Speaker 2>I know you've noticed it, but IPOs have kind of

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<v Speaker 2>been on a tear, led by triple digit percent increases

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<v Speaker 2>for Circle and Corewave, two of the year's five largest

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<v Speaker 2>IPOs on US exchanges. This year's class of debutants are

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<v Speaker 2>trading up by a weighted average about fifty three percent.

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<v Speaker 2>This is according to data compought by Bloomberg Full disclosure just

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<v Speaker 2>a little earlier this week. Kind of a market difference

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<v Speaker 2>from what we've seen in recent years. It's still not

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<v Speaker 2>what I think investors wanted to see.

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<v Speaker 3>But what's great is there's momentum, but it's also performance. Right,

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<v Speaker 3>investors are staying with these names. We've got a great

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<v Speaker 3>voice on.

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<v Speaker 2>This Michael Harris is back with us. He's got his

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<v Speaker 2>finger on the pulse of everything happening in capital markets.

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<v Speaker 2>He's Vice chair in Global Head of Markets at the

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<v Speaker 2>New York Stock Exchange. He joins us on site here

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<v Speaker 2>at the Unchartered Community Summit in beautiful Southampton, New York.

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<v Speaker 2>Last time we spoke with you was at another event,

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<v Speaker 2>equally beautiful by the way, equally beautiful down to New

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<v Speaker 2>York exactly that was. That was back in early March.

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<v Speaker 2>A lot has happened since then. We've kind of had

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<v Speaker 2>a round trip when it comes to equity markets. There

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<v Speaker 2>were some concerns a few weeks after we spoke about

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<v Speaker 2>companies pulling their IPOs as a result of what was

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<v Speaker 2>happening with trade. Those IPOs they ended up happening in

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<v Speaker 2>May and June. How would you describe the environment right now?

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<v Speaker 4>I mean, I think, you know, the round trip that

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<v Speaker 4>you described is exactly the way to think about it.

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<v Speaker 4>You know, we've seen a complete one hundred and eighty

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<v Speaker 4>return in terms of sentiment, in terms of where the

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<v Speaker 4>market backdrop is and it's playing out in the ipo

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<v Speaker 4>market on a couple different factors. On one hand, we're

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<v Speaker 4>seeing the subscription levels in terms of interest on IPOs

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<v Speaker 4>are through the roof. So these deals that are coming

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<v Speaker 4>to the marketplace are multiple times over subscribed interest from

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<v Speaker 4>a wide range of investors. The second part of it

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<v Speaker 4>is when they do come to the market, the actual

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<v Speaker 4>pricing outcomes are oftentimes very much in the favor of

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<v Speaker 4>the issuers. And then the third part of it is

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<v Speaker 4>the performance, which you mentioned just now. The performance on

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<v Speaker 4>day one, the follow through in the aftermarket, all the

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<v Speaker 4>way through the offer to today's performance has been absolutely phenomenal.

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<v Speaker 4>So that really keeps the cycle in terms of investor

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<v Speaker 4>interests continuing to go. And so what we're seeing that

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<v Speaker 4>play out is really in our backlock. So we see

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<v Speaker 4>a very active summer, we see an active September, and

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<v Speaker 4>we think it's going to be a very active twenty

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<v Speaker 4>twenty five forward.

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<v Speaker 3>What does that backlock look like? You say active, I mean,

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<v Speaker 3>how backed up is it and how eager are these

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<v Speaker 3>that are back I'm ready to go?

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<v Speaker 4>Yeah. Well, you know, for the first part, you're seeing,

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<v Speaker 4>on one hand, a lot of companies that were delaying

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<v Speaker 4>their IPOs because of some of the tensions that happened

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<v Speaker 4>in the beginning part of the year, so some of

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<v Speaker 4>them have taken a step back, and they were kind

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<v Speaker 4>of waiting to see, on one hand, just what happened

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<v Speaker 4>from a geopolitical standpoint, how things are playing out in

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<v Speaker 4>terms of just the tensions that were in the air.

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<v Speaker 4>And also they're waiting to see from the investor community

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<v Speaker 4>what the reception was going to be for some of

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<v Speaker 4>the more recent crop of IPOs. So we've gotten those results.

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<v Speaker 4>Those results have been in many cases much better than

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<v Speaker 4>they thought they would be, and so they're now ready

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<v Speaker 4>to push forward. The other part of it is what

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<v Speaker 4>we're seeing now is a much more diverse array of

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<v Speaker 4>companies that are going public. You know, when you and

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<v Speaker 4>I talked, we were talking about who would be the

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<v Speaker 4>most likely companies to go public, and they would be

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<v Speaker 4>likely the more defensive names. Now we're seeing that start

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<v Speaker 4>to broaden out. So our pipeline looks more diverse than

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<v Speaker 4>it was back in March. It looks also for larger

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<v Speaker 4>companies that are also going to be coming So really,

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<v Speaker 4>in all respects, it tends to be a very healthy outcome.

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<v Speaker 2>How has that pipeline diversity shifted in recent years? I

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<v Speaker 2>remember when I spent three four years working from the

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<v Speaker 2>floor of the New York Stock Exchange as a reporter,

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<v Speaker 2>and there was a period in twenty seventeen twenty eighteen,

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<v Speaker 2>no joke, no exaggeration, almost every other day there was

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<v Speaker 2>a Chinese company going public in the United States. These

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<v Speaker 2>were companies we had never heard of. There were companies

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<v Speaker 2>that we haven't heard from since. I mean, it was

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<v Speaker 2>really really wild times. Then there was this crackdown on

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<v Speaker 2>a lot of these companies that were listed from China

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<v Speaker 2>in the US. Yeah, has that business completely dried up

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<v Speaker 2>for you? I mean she and has filed confidentially to

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<v Speaker 2>with Ibo in.

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<v Speaker 4>K We saw that today, Yeah, yeah, yeah, you know,

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<v Speaker 4>it's interesting. There's still a class of companies that are

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<v Speaker 4>for the most part microcap in nature, a lot of

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<v Speaker 4>them domiciled in China, that are still coming public. That's

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<v Speaker 4>a class of companies that quite frankly, we have the

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<v Speaker 4>New York Stock Exchange really don't really look to. Some

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<v Speaker 4>of our editors tend to focus on that market, and

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<v Speaker 4>we've seen a number of articles, whether it's from The

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<v Speaker 4>Wall Street Journal, Financial Times or others, that have really

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<v Speaker 4>pointed to some of the problems that have become as

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<v Speaker 4>a result of that, So that's not something we really

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<v Speaker 4>focus on. But we are still seeing some of those

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<v Speaker 4>companies come to the public markets. But I think there's

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<v Speaker 4>some challenges with that, and there's going to probably continue

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<v Speaker 4>to be challenges with that going forward. Still out of China,

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<v Speaker 4>some are you choosing to list in other areas of

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<v Speaker 4>the world. Yeah, you know, it depends a little bit

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<v Speaker 4>on market cap, it depends on the sector. I think

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<v Speaker 4>what you are seeing is a bit of a preference

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<v Speaker 4>for many companies just for liquidity. So the US market

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<v Speaker 4>still continues to be a place where they would like

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<v Speaker 4>to list, but for larger names, the home markets continue

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<v Speaker 4>to be also very attractive, you know, Cattle being a

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<v Speaker 4>great example of that. Early in the year sheann looking

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<v Speaker 4>to the Hong Kong relative to London. So depending on

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<v Speaker 4>the name, depending on the sector, depending on the specifics

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<v Speaker 4>of those companies, home markets can also be a very

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<v Speaker 4>viable alternative.

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<v Speaker 3>To Michael. In some of the cases with the IBOs,

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<v Speaker 3>we've really seen quite a pop and that for day

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<v Speaker 3>of trading, right, that's a good sign. You know, we

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<v Speaker 3>want to see that as certainly a company that going

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<v Speaker 3>public wants to see that. But it always begs the

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<v Speaker 3>question were they too conservative in you know, the numbers

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<v Speaker 3>that they put out there. I am curious what are

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<v Speaker 3>the conversations that you're hearing from those folks and those

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<v Speaker 3>companies that are looking to go public, are they would

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<v Speaker 3>they rather be a little conservative going in and making

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<v Speaker 3>sure that that's a good first day of trading.

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<v Speaker 4>Yeah. You know, I think when you talk to people

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<v Speaker 4>in the world of IPOs, whether they're bankers or lawyers,

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<v Speaker 4>you know, it's often talked about being more of an

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<v Speaker 4>art than a science, and I think there is a

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<v Speaker 4>little bit of truth to that. Yeah, there's a balancing

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<v Speaker 4>act that always has to happen between getting the right investors,

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<v Speaker 4>those being the ones that are going to be supportive

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<v Speaker 4>of your company, not just on day one, but making

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<v Speaker 4>sure that there's adequate follow through as you think about

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<v Speaker 4>companies that are going through their cycles of maturity as

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<v Speaker 4>a public company, right and also companies that are investors

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<v Speaker 4>rather they're going to be supporting the company from a

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<v Speaker 4>liquidity perspective, And there's a balance of the two in

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<v Speaker 4>the aftermarket. And the reality is until you actually get

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<v Speaker 4>to that stage where you're in the pricing room and

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<v Speaker 4>you're actually confronting with management in terms of what the

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<v Speaker 4>dynamics look like. It's sometimes tough to tell, and so

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<v Speaker 4>I think the underwriters do a great job of being

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<v Speaker 4>able to offer what those trade offs are going to

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<v Speaker 4>be to management teams. Ultimately, the management teams are the

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<v Speaker 4>ones that have to make those really tough decisions. But

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<v Speaker 4>I always think about it in terms of the IPO process.

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<v Speaker 4>Ultimately it's a day one event, and really what management teams,

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<v Speaker 4>what their stakeholders need to focus on, is really trying

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<v Speaker 4>to set up a company for success over the long

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<v Speaker 4>term and not focus on necessarily the day one performance.

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<v Speaker 4>Obviously you want a great pricing outcome, but really you're

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<v Speaker 4>managing this company for the long haul. It's not really

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<v Speaker 4>just for the day one IPO event.

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<v Speaker 2>Can you give us an update on the New York

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<v Speaker 2>Stock Exchange Texas launch this year. We talked about it

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<v Speaker 2>back in March.

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<v Speaker 3>Yeah.

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<v Speaker 4>Yeah, we have, you know, multiple companies that are now

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<v Speaker 4>listed there. We have a pretty fairly healthy pipeline of

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<v Speaker 4>companies that are going to be going listing on the

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<v Speaker 4>exchange over the next several months. We are very close

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<v Speaker 4>to signing a lease in Dallas. We're going to be

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<v Speaker 4>very close to actually person that's going to be running

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<v Speaker 4>that business. So it's really continuing to take on momentum,

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<v Speaker 4>and so we really are excited about it.

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<v Speaker 2>Do you think it's perhaps a hedge in New York

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<v Speaker 2>City losing its place when it comes to capital markets?

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<v Speaker 2>And I ask this kind of came into sharp relief

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<v Speaker 2>this week with I think a lot of people would

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<v Speaker 2>argue with what happened in the Democratic primary for the

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<v Speaker 2>mayoral election, and we don't know who's going to win,

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<v Speaker 2>but we certainly have a lot of outspoken billionaires who've

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<v Speaker 2>talked about concerns when it comes to capital markets here

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<v Speaker 2>in New York in the position of New York City

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<v Speaker 2>as being the epicenter of Wall Street.

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<v Speaker 4>Yeah, I mean for Texas, the way that we've thought

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<v Speaker 4>about it is when we look at our own listed

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<v Speaker 4>community and we look at the number of companies in

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<v Speaker 4>terms of where they're domiciled, Texas really stands out tends

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<v Speaker 4>to be the area where we have the most number

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<v Speaker 4>of companies from a really diverse range of sectors that

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<v Speaker 4>are represented. And so when we kind of really thought

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<v Speaker 4>about it from the perspective of what Governor Abbott's doing

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<v Speaker 4>to try to make sure that the ecosystem of companies

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<v Speaker 4>within Texas is vibrant, and you know, it intersects with

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<v Speaker 4>a lot of what we're trying to do in terms

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<v Speaker 4>of getting a great environment for our own listed community.

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<v Speaker 4>It really made sense. So we think about this more

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<v Speaker 4>from the long term perspective of offering the best environment

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<v Speaker 4>for our listed community, less in terms of like a

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<v Speaker 4>short term strategy in terms of what might be happening

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<v Speaker 4>in the New York ecosystem. We still are big believers

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<v Speaker 4>that New York continues to be a great place for

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<v Speaker 4>capital raising and also were companies to be domiciled, but

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<v Speaker 4>longer term.

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<v Speaker 3>Than does that mean, you know, and I'm sure you've

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<v Speaker 3>had questions about this, and I'm sure we've talked about it.

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<v Speaker 3>Does it expand the model? Like do you anticipate that

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<v Speaker 3>there's going to be other major cities that you guys

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<v Speaker 3>will also have in exchange.

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<v Speaker 4>It's hard to know, you know, working at the Crystal Ball,

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<v Speaker 4>it's really hard to know. Like we're really just focused

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<v Speaker 4>on kind of where we see the greatest opportunity for

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<v Speaker 4>our community right now, but we're always for thinking in

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<v Speaker 4>terms of really trying to see where the greatest opportunity

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<v Speaker 4>results for our community. Another great example of that I'd

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<v Speaker 4>point to is extended hours trading. You know, we were

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<v Speaker 4>the first exchange to look at twenty two to five

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<v Speaker 4>trading as an opportunity. We're really happy to see the

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<v Speaker 4>SEC kind of move towards that, and so we think

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<v Speaker 4>that there's going to be other opportunities. So we're gonna

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<v Speaker 4>try to take a leadership position to try to extend

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<v Speaker 4>our leader.

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<v Speaker 2>No, we need less because that means days off for us,

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<v Speaker 2>because we need a break.

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<v Speaker 4>That's the bad news for you guys. You're going to

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<v Speaker 4>be on twenty two hours a day. That's the outside.

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<v Speaker 3>There should be times except for M and A deals.

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<v Speaker 3>Weekends were quiet, the summer was quiet. A financial basis.

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<v Speaker 3>Has that it's just been kind of NonStop.

0:10:33.720 --> 0:10:34.439
<v Speaker 4>It's been exciting.

0:10:34.640 --> 0:10:39.840
<v Speaker 3>Yeah, white House though, in terms of volatility, that really

0:10:39.960 --> 0:10:43.080
<v Speaker 3>is the thing that impacts the markets, and that's what

0:10:43.240 --> 0:10:46.360
<v Speaker 3>ultimate little impact right in terms of new listings and

0:10:46.400 --> 0:10:47.600
<v Speaker 3>stuff everybody's watching.

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<v Speaker 4>I think it's a combination of what you're seeing in Washington.

0:10:51.280 --> 0:10:53.160
<v Speaker 4>It's a combination of what you're seeing with the FED,

0:10:53.720 --> 0:10:55.520
<v Speaker 4>and it's a combination of what you're going to see

0:10:55.760 --> 0:10:58.520
<v Speaker 4>on the company level in terms of earnings, yeah right,

0:10:58.600 --> 0:11:01.520
<v Speaker 4>But in many respects things that's not that different from

0:11:01.559 --> 0:11:04.080
<v Speaker 4>what it's always been, all right, And so I think

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<v Speaker 4>the way that we've always tried to approach it is

0:11:07.320 --> 0:11:09.600
<v Speaker 4>we always want companies to try to look at the

0:11:09.679 --> 0:11:11.840
<v Speaker 4>trade off of all those three things. What's the right

0:11:11.880 --> 0:11:13.800
<v Speaker 4>trade off for themselves as they think about being able

0:11:13.800 --> 0:11:17.000
<v Speaker 4>to build great companies. But ultimately investors are going to

0:11:17.040 --> 0:11:19.040
<v Speaker 4>want to invest in great companies that can weather those

0:11:19.080 --> 0:11:21.319
<v Speaker 4>cycles regardless. All right, it's going to leave with that.

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<v Speaker 3>Michael, thank you so much.

0:11:22.240 --> 0:11:22.640
<v Speaker 1>I thank you.

0:11:22.679 --> 0:11:24.160
<v Speaker 4>It is great seeing you both. Fun to check in

0:11:24.160 --> 0:11:24.560
<v Speaker 4>with you again.

0:11:24.559 --> 0:11:27.040
<v Speaker 3>Michael Harris bes Chairman and global head of Capital Markets

0:11:27.080 --> 0:11:28.720
<v Speaker 3>at the New York Stock has changed right here on

0:11:28.800 --> 0:11:30.720
<v Speaker 3>site at the Unsharted Community Summit.

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<v Speaker 1>This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,

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