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Speaker 1: with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2: Let's talk capital markets, because that's what we do, Yeah, Bloomberg.
Speaker 2: I don't know if you have noticed this, Carol, well,
Speaker 2: I know you've noticed it, but IPOs have kind of
Speaker 2: been on a tear, led by triple digit percent increases
Speaker 2: for Circle and Corewave, two of the year's five largest
Speaker 2: IPOs on US exchanges. This year's class of debutants are
Speaker 2: trading up by a weighted average about fifty three percent.
Speaker 2: This is according to data compought by Bloomberg Full disclosure just
Speaker 2: a little earlier this week. Kind of a market difference
Speaker 2: from what we've seen in recent years. It's still not
Speaker 2: what I think investors wanted to see.
Speaker 3: But what's great is there's momentum, but it's also performance. Right,
Speaker 3: investors are staying with these names. We've got a great
Speaker 3: voice on.
Speaker 2: This Michael Harris is back with us. He's got his
Speaker 2: finger on the pulse of everything happening in capital markets.
Speaker 2: He's Vice chair in Global Head of Markets at the
Speaker 2: New York Stock Exchange. He joins us on site here
Speaker 2: at the Unchartered Community Summit in beautiful Southampton, New York.
Speaker 2: Last time we spoke with you was at another event,
Speaker 2: equally beautiful by the way, equally beautiful down to New
Speaker 2: York exactly that was. That was back in early March.
Speaker 2: A lot has happened since then. We've kind of had
Speaker 2: a round trip when it comes to equity markets. There
Speaker 2: were some concerns a few weeks after we spoke about
Speaker 2: companies pulling their IPOs as a result of what was
Speaker 2: happening with trade. Those IPOs they ended up happening in
Speaker 2: May and June. How would you describe the environment right now?
Speaker 4: I mean, I think, you know, the round trip that
Speaker 4: you described is exactly the way to think about it.
Speaker 4: You know, we've seen a complete one hundred and eighty
Speaker 4: return in terms of sentiment, in terms of where the
Speaker 4: market backdrop is and it's playing out in the ipo
Speaker 4: market on a couple different factors. On one hand, we're
Speaker 4: seeing the subscription levels in terms of interest on IPOs
Speaker 4: are through the roof. So these deals that are coming
Speaker 4: to the marketplace are multiple times over subscribed interest from
Speaker 4: a wide range of investors. The second part of it
Speaker 4: is when they do come to the market, the actual
Speaker 4: pricing outcomes are oftentimes very much in the favor of
Speaker 4: the issuers. And then the third part of it is
Speaker 4: the performance, which you mentioned just now. The performance on
Speaker 4: day one, the follow through in the aftermarket, all the
Speaker 4: way through the offer to today's performance has been absolutely phenomenal.
Speaker 4: So that really keeps the cycle in terms of investor
Speaker 4: interests continuing to go. And so what we're seeing that
Speaker 4: play out is really in our backlock. So we see
Speaker 4: a very active summer, we see an active September, and
Speaker 4: we think it's going to be a very active twenty
Speaker 4: twenty five forward.
Speaker 3: What does that backlock look like? You say active, I mean,
Speaker 3: how backed up is it and how eager are these
Speaker 3: that are back I'm ready to go?
Speaker 4: Yeah. Well, you know, for the first part, you're seeing,
Speaker 4: on one hand, a lot of companies that were delaying
Speaker 4: their IPOs because of some of the tensions that happened
Speaker 4: in the beginning part of the year, so some of
Speaker 4: them have taken a step back, and they were kind
Speaker 4: of waiting to see, on one hand, just what happened
Speaker 4: from a geopolitical standpoint, how things are playing out in
Speaker 4: terms of just the tensions that were in the air.
Speaker 4: And also they're waiting to see from the investor community
Speaker 4: what the reception was going to be for some of
Speaker 4: the more recent crop of IPOs. So we've gotten those results.
Speaker 4: Those results have been in many cases much better than
Speaker 4: they thought they would be, and so they're now ready
Speaker 4: to push forward. The other part of it is what
Speaker 4: we're seeing now is a much more diverse array of
Speaker 4: companies that are going public. You know, when you and
Speaker 4: I talked, we were talking about who would be the
Speaker 4: most likely companies to go public, and they would be
Speaker 4: likely the more defensive names. Now we're seeing that start
Speaker 4: to broaden out. So our pipeline looks more diverse than
Speaker 4: it was back in March. It looks also for larger
Speaker 4: companies that are also going to be coming So really,
Speaker 4: in all respects, it tends to be a very healthy outcome.
Speaker 2: How has that pipeline diversity shifted in recent years? I
Speaker 2: remember when I spent three four years working from the
Speaker 2: floor of the New York Stock Exchange as a reporter,
Speaker 2: and there was a period in twenty seventeen twenty eighteen,
Speaker 2: no joke, no exaggeration, almost every other day there was
Speaker 2: a Chinese company going public in the United States. These
Speaker 2: were companies we had never heard of. There were companies
Speaker 2: that we haven't heard from since. I mean, it was
Speaker 2: really really wild times. Then there was this crackdown on
Speaker 2: a lot of these companies that were listed from China
Speaker 2: in the US. Yeah, has that business completely dried up
Speaker 2: for you? I mean she and has filed confidentially to
Speaker 2: with Ibo in.
Speaker 4: K We saw that today, Yeah, yeah, yeah, you know,
Speaker 4: it's interesting. There's still a class of companies that are
Speaker 4: for the most part microcap in nature, a lot of
Speaker 4: them domiciled in China, that are still coming public. That's
Speaker 4: a class of companies that quite frankly, we have the
Speaker 4: New York Stock Exchange really don't really look to. Some
Speaker 4: of our editors tend to focus on that market, and
Speaker 4: we've seen a number of articles, whether it's from The
Speaker 4: Wall Street Journal, Financial Times or others, that have really
Speaker 4: pointed to some of the problems that have become as
Speaker 4: a result of that, So that's not something we really
Speaker 4: focus on. But we are still seeing some of those
Speaker 4: companies come to the public markets. But I think there's
Speaker 4: some challenges with that, and there's going to probably continue
Speaker 4: to be challenges with that going forward. Still out of China,
Speaker 4: some are you choosing to list in other areas of
Speaker 4: the world. Yeah, you know, it depends a little bit
Speaker 4: on market cap, it depends on the sector. I think
Speaker 4: what you are seeing is a bit of a preference
Speaker 4: for many companies just for liquidity. So the US market
Speaker 4: still continues to be a place where they would like
Speaker 4: to list, but for larger names, the home markets continue
Speaker 4: to be also very attractive, you know, Cattle being a
Speaker 4: great example of that. Early in the year sheann looking
Speaker 4: to the Hong Kong relative to London. So depending on
Speaker 4: the name, depending on the sector, depending on the specifics
Speaker 4: of those companies, home markets can also be a very
Speaker 4: viable alternative.
Speaker 3: To Michael. In some of the cases with the IBOs,
Speaker 3: we've really seen quite a pop and that for day
Speaker 3: of trading, right, that's a good sign. You know, we
Speaker 3: want to see that as certainly a company that going
Speaker 3: public wants to see that. But it always begs the
Speaker 3: question were they too conservative in you know, the numbers
Speaker 3: that they put out there. I am curious what are
Speaker 3: the conversations that you're hearing from those folks and those
Speaker 3: companies that are looking to go public, are they would
Speaker 3: they rather be a little conservative going in and making
Speaker 3: sure that that's a good first day of trading.
Speaker 4: Yeah. You know, I think when you talk to people
Speaker 4: in the world of IPOs, whether they're bankers or lawyers,
Speaker 4: you know, it's often talked about being more of an
Speaker 4: art than a science, and I think there is a
Speaker 4: little bit of truth to that. Yeah, there's a balancing
Speaker 4: act that always has to happen between getting the right investors,
Speaker 4: those being the ones that are going to be supportive
Speaker 4: of your company, not just on day one, but making
Speaker 4: sure that there's adequate follow through as you think about
Speaker 4: companies that are going through their cycles of maturity as
Speaker 4: a public company, right and also companies that are investors
Speaker 4: rather they're going to be supporting the company from a
Speaker 4: liquidity perspective, And there's a balance of the two in
Speaker 4: the aftermarket. And the reality is until you actually get
Speaker 4: to that stage where you're in the pricing room and
Speaker 4: you're actually confronting with management in terms of what the
Speaker 4: dynamics look like. It's sometimes tough to tell, and so
Speaker 4: I think the underwriters do a great job of being
Speaker 4: able to offer what those trade offs are going to
Speaker 4: be to management teams. Ultimately, the management teams are the
Speaker 4: ones that have to make those really tough decisions. But
Speaker 4: I always think about it in terms of the IPO process.
Speaker 4: Ultimately it's a day one event, and really what management teams,
Speaker 4: what their stakeholders need to focus on, is really trying
Speaker 4: to set up a company for success over the long
Speaker 4: term and not focus on necessarily the day one performance.
Speaker 4: Obviously you want a great pricing outcome, but really you're
Speaker 4: managing this company for the long haul. It's not really
Speaker 4: just for the day one IPO event.
Speaker 2: Can you give us an update on the New York
Speaker 2: Stock Exchange Texas launch this year. We talked about it
Speaker 2: back in March.
Speaker 3: Yeah.
Speaker 4: Yeah, we have, you know, multiple companies that are now
Speaker 4: listed there. We have a pretty fairly healthy pipeline of
Speaker 4: companies that are going to be going listing on the
Speaker 4: exchange over the next several months. We are very close
Speaker 4: to signing a lease in Dallas. We're going to be
Speaker 4: very close to actually person that's going to be running
Speaker 4: that business. So it's really continuing to take on momentum,
Speaker 4: and so we really are excited about it.
Speaker 2: Do you think it's perhaps a hedge in New York
Speaker 2: City losing its place when it comes to capital markets?
Speaker 2: And I ask this kind of came into sharp relief
Speaker 2: this week with I think a lot of people would
Speaker 2: argue with what happened in the Democratic primary for the
Speaker 2: mayoral election, and we don't know who's going to win,
Speaker 2: but we certainly have a lot of outspoken billionaires who've
Speaker 2: talked about concerns when it comes to capital markets here
Speaker 2: in New York in the position of New York City
Speaker 2: as being the epicenter of Wall Street.
Speaker 4: Yeah, I mean for Texas, the way that we've thought
Speaker 4: about it is when we look at our own listed
Speaker 4: community and we look at the number of companies in
Speaker 4: terms of where they're domiciled, Texas really stands out tends
Speaker 4: to be the area where we have the most number
Speaker 4: of companies from a really diverse range of sectors that
Speaker 4: are represented. And so when we kind of really thought
Speaker 4: about it from the perspective of what Governor Abbott's doing
Speaker 4: to try to make sure that the ecosystem of companies
Speaker 4: within Texas is vibrant, and you know, it intersects with
Speaker 4: a lot of what we're trying to do in terms
Speaker 4: of getting a great environment for our own listed community.
Speaker 4: It really made sense. So we think about this more
Speaker 4: from the long term perspective of offering the best environment
Speaker 4: for our listed community, less in terms of like a
Speaker 4: short term strategy in terms of what might be happening
Speaker 4: in the New York ecosystem. We still are big believers
Speaker 4: that New York continues to be a great place for
Speaker 4: capital raising and also were companies to be domiciled, but
Speaker 4: longer term.
Speaker 3: Than does that mean, you know, and I'm sure you've
Speaker 3: had questions about this, and I'm sure we've talked about it.
Speaker 3: Does it expand the model? Like do you anticipate that
Speaker 3: there's going to be other major cities that you guys
Speaker 3: will also have in exchange.
Speaker 4: It's hard to know, you know, working at the Crystal Ball,
Speaker 4: it's really hard to know. Like we're really just focused
Speaker 4: on kind of where we see the greatest opportunity for
Speaker 4: our community right now, but we're always for thinking in
Speaker 4: terms of really trying to see where the greatest opportunity
Speaker 4: results for our community. Another great example of that I'd
Speaker 4: point to is extended hours trading. You know, we were
Speaker 4: the first exchange to look at twenty two to five
Speaker 4: trading as an opportunity. We're really happy to see the
Speaker 4: SEC kind of move towards that, and so we think
Speaker 4: that there's going to be other opportunities. So we're gonna
Speaker 4: try to take a leadership position to try to extend
Speaker 4: our leader.
Speaker 2: No, we need less because that means days off for us,
Speaker 2: because we need a break.
Speaker 4: That's the bad news for you guys. You're going to
Speaker 4: be on twenty two hours a day. That's the outside.
Speaker 3: There should be times except for M and A deals.
Speaker 3: Weekends were quiet, the summer was quiet. A financial basis.
Speaker 3: Has that it's just been kind of NonStop.
Speaker 4: It's been exciting.
Speaker 3: Yeah, white House though, in terms of volatility, that really
Speaker 3: is the thing that impacts the markets, and that's what
Speaker 3: ultimate little impact right in terms of new listings and
Speaker 3: stuff everybody's watching.
Speaker 4: I think it's a combination of what you're seeing in Washington.
Speaker 4: It's a combination of what you're seeing with the FED,
Speaker 4: and it's a combination of what you're going to see
Speaker 4: on the company level in terms of earnings, yeah right,
Speaker 4: But in many respects things that's not that different from
Speaker 4: what it's always been, all right, And so I think
Speaker 4: the way that we've always tried to approach it is
Speaker 4: we always want companies to try to look at the
Speaker 4: trade off of all those three things. What's the right
Speaker 4: trade off for themselves as they think about being able
Speaker 4: to build great companies. But ultimately investors are going to
Speaker 4: want to invest in great companies that can weather those
Speaker 4: cycles regardless. All right, it's going to leave with that.
Speaker 3: Michael, thank you so much.
Speaker 1: I thank you.
Speaker 4: It is great seeing you both. Fun to check in
Speaker 4: with you again.
Speaker 3: Michael Harris bes Chairman and global head of Capital Markets
Speaker 3: at the New York Stock has changed right here on
Speaker 3: site at the Unsharted Community Summit.
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