1 00:00:10,760 --> 00:00:14,520 Speaker 1: Hello, and welcome to another episode of the Odd LODs podcast. 2 00:00:14,560 --> 00:00:19,680 Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. So, Tracy, you 3 00:00:19,680 --> 00:00:23,400 Speaker 1: know how people talk a lot about how big financial 4 00:00:23,400 --> 00:00:27,800 Speaker 1: institutions and financial and financial stocks in particular, just like, 5 00:00:28,160 --> 00:00:30,440 Speaker 1: I haven't really done very well lately. It's been a 6 00:00:30,440 --> 00:00:35,920 Speaker 1: long time sort of a seeming permanent state of slump. Yeah. 7 00:00:36,080 --> 00:00:39,680 Speaker 1: I think it's easy to forget in when we have 8 00:00:39,760 --> 00:00:43,040 Speaker 1: all these headwinds for the banks, like loan losses, um 9 00:00:43,360 --> 00:00:48,040 Speaker 1: credit provisions, building up, things like that. That even before now, 10 00:00:48,159 --> 00:00:52,000 Speaker 1: there was this big debate about whether we were in 11 00:00:52,040 --> 00:00:56,320 Speaker 1: a secular or a cyclical downturn for banking and especially 12 00:00:56,360 --> 00:00:59,000 Speaker 1: investment banking. Right, you had all these new rules that 13 00:00:59,120 --> 00:01:01,720 Speaker 1: came in after the two thousand eight financial crisis, and 14 00:01:01,760 --> 00:01:03,520 Speaker 1: there was a lot of talk about whether or not 15 00:01:03,600 --> 00:01:06,640 Speaker 1: banks could ever get back to the days of making 16 00:01:07,000 --> 00:01:12,119 Speaker 1: big money. Yeah, that's exactly right. Even prior to this year, 17 00:01:12,880 --> 00:01:15,760 Speaker 1: if you just look at sort of the main financial 18 00:01:15,840 --> 00:01:19,880 Speaker 1: sectors of the SMP, lots of questions about financial companies 19 00:01:19,920 --> 00:01:24,040 Speaker 1: business model in an era of mediocre growth, very low 20 00:01:24,160 --> 00:01:27,119 Speaker 1: interest rates, Like there's just this has been a sector 21 00:01:27,200 --> 00:01:29,839 Speaker 1: that people haven't been into for a lot. Yeah, and 22 00:01:29,880 --> 00:01:33,000 Speaker 1: of course ultra low interest rates don't really help on 23 00:01:33,040 --> 00:01:36,000 Speaker 1: the lending side either. So yeah, it feels like there 24 00:01:36,000 --> 00:01:40,039 Speaker 1: have been well, there has been a decade of challenges 25 00:01:40,120 --> 00:01:44,120 Speaker 1: for banking. But okay, so, but also what I said before, 26 00:01:44,120 --> 00:01:47,000 Speaker 1: it was kind of a lie because, uh, not all 27 00:01:47,120 --> 00:01:51,760 Speaker 1: financial companies have struggled over the last decade, and some 28 00:01:51,920 --> 00:01:56,040 Speaker 1: are doing phenomenally well. You're gonna have to narrow that 29 00:01:56,080 --> 00:01:58,320 Speaker 1: down for me. So are you talking about non bank 30 00:01:58,440 --> 00:02:02,960 Speaker 1: financial companies? Yeah, So basically there are other parts of 31 00:02:03,040 --> 00:02:06,160 Speaker 1: Wall Street besides the big banks that are killing it. 32 00:02:06,240 --> 00:02:08,240 Speaker 1: And so if you look at say the last decade 33 00:02:08,560 --> 00:02:12,560 Speaker 1: company like Goldman sax uh stock you know, pre dividends 34 00:02:12,680 --> 00:02:16,120 Speaker 1: is only up over the last decade. But some of 35 00:02:16,120 --> 00:02:20,919 Speaker 1: the other sort of infrastructure parts of the business, UM 36 00:02:20,919 --> 00:02:24,600 Speaker 1: exchanges doing phenomenally well, and ICE, the parent company of 37 00:02:24,600 --> 00:02:28,760 Speaker 1: the New York Stock Exchange, they're up. Other big in 38 00:02:28,840 --> 00:02:34,520 Speaker 1: the uh sort of exchanges platforms, index providers doing phenomenally well. 39 00:02:34,639 --> 00:02:38,120 Speaker 1: So when we talk about financial is not doing well, 40 00:02:38,160 --> 00:02:41,320 Speaker 1: we're talking about banks. But actually a lot of parts 41 00:02:41,320 --> 00:02:45,080 Speaker 1: of Wall Street really are have been on a phenomenal run. Yeah, 42 00:02:45,120 --> 00:02:47,080 Speaker 1: I think that's right. And of course you've had a 43 00:02:47,320 --> 00:02:49,640 Speaker 1: you've had a pretty good year for trading revenue because 44 00:02:49,639 --> 00:02:52,040 Speaker 1: you had a lot of market volatility, and now you've 45 00:02:52,040 --> 00:02:56,239 Speaker 1: had a big boom in bond and debt underwriting as 46 00:02:56,280 --> 00:03:01,160 Speaker 1: well because everyone's rushing to issue. So yeah, there are 47 00:03:01,280 --> 00:03:04,600 Speaker 1: parts of the banking system that are doing well, and 48 00:03:04,639 --> 00:03:09,320 Speaker 1: the non banks of course, up until I keep caveating this, Wait, 49 00:03:09,320 --> 00:03:12,000 Speaker 1: what's your caveat so that it's not just this's a 50 00:03:12,000 --> 00:03:16,400 Speaker 1: brief period that we're talking about the Yeah, so today 51 00:03:16,480 --> 00:03:20,080 Speaker 1: we're going to be talking about one aspect of I 52 00:03:20,120 --> 00:03:23,120 Speaker 1: guess what you would call Wall Street that is doing 53 00:03:23,200 --> 00:03:27,600 Speaker 1: phenomenally well, one interesting business, one other thing, Tracy before 54 00:03:27,600 --> 00:03:30,800 Speaker 1: we before we get to our guests. Um, this has 55 00:03:30,840 --> 00:03:34,639 Speaker 1: been a quite a year for public offering. Yes, even 56 00:03:34,680 --> 00:03:37,400 Speaker 1: aside from traditional I p o s, we have seen 57 00:03:37,840 --> 00:03:41,280 Speaker 1: a lot of SPACs, for instance, a new type of 58 00:03:41,400 --> 00:03:44,840 Speaker 1: public listing or a new way of going public without 59 00:03:44,840 --> 00:03:47,480 Speaker 1: actually going through the I p O process. So it's 60 00:03:47,480 --> 00:03:51,480 Speaker 1: been an interesting time in equity capital markets. Yeah, it's 61 00:03:51,520 --> 00:03:53,480 Speaker 1: super interesting because in addition to I p o s, 62 00:03:53,520 --> 00:03:56,640 Speaker 1: we've had the spack boom, and we also have this 63 00:03:56,680 --> 00:04:00,200 Speaker 1: sort of emergence of direct listings, which is companies saying, note, 64 00:04:00,200 --> 00:04:03,520 Speaker 1: we're just gonna start trading our shares on the exchange 65 00:04:03,600 --> 00:04:06,240 Speaker 1: and the market will set the price and we don't 66 00:04:06,320 --> 00:04:08,520 Speaker 1: need to do the traditional I PO road show. And 67 00:04:08,840 --> 00:04:12,360 Speaker 1: you know this is a also a growing area of yeah, 68 00:04:12,400 --> 00:04:15,400 Speaker 1: area of new public listing. So today we're going to 69 00:04:15,520 --> 00:04:19,040 Speaker 1: talk about the exchanges and that in particular. I'm very 70 00:04:19,040 --> 00:04:21,880 Speaker 1: excited about our guest. We are going to be speaking 71 00:04:21,880 --> 00:04:25,279 Speaker 1: with John Tuttle, Vice Chairman of the New York Stock Exchange, 72 00:04:25,320 --> 00:04:29,240 Speaker 1: is a fourteen year veteran of the exchange. Uh he 73 00:04:29,360 --> 00:04:32,839 Speaker 1: works on all areas of capital markets, I p o S, 74 00:04:32,839 --> 00:04:36,400 Speaker 1: SPACs and direct listing, so sort of a fascinating person 75 00:04:36,520 --> 00:04:40,359 Speaker 1: to discuss the nicetiest role and all this. So John, 76 00:04:40,440 --> 00:04:42,599 Speaker 1: thank you very much for joining us. Great to be 77 00:04:42,640 --> 00:04:45,520 Speaker 1: with you guys. So it has been I mean, is 78 00:04:45,560 --> 00:04:49,159 Speaker 1: that fair like this to characterize like there's a lot 79 00:04:49,160 --> 00:04:52,359 Speaker 1: of excitement these days about public markets. It feels like 80 00:04:52,360 --> 00:04:54,920 Speaker 1: in a way that we haven't seen in a while. Yeah, 81 00:04:54,960 --> 00:04:58,000 Speaker 1: I completely agree, and you know we are we're in 82 00:04:58,040 --> 00:05:01,159 Speaker 1: the fourth quarter now, but I'll you know, I'll give 83 00:05:01,160 --> 00:05:05,240 Speaker 1: you these two points. August was the busiest month we 84 00:05:05,320 --> 00:05:07,520 Speaker 1: had in over a decade in August. You know, when 85 00:05:07,520 --> 00:05:09,680 Speaker 1: it comes to new equity issuance I p o s 86 00:05:10,000 --> 00:05:13,000 Speaker 1: and August is traditionally this one of the slowest months 87 00:05:13,400 --> 00:05:16,560 Speaker 1: of the year, and September of this year was the 88 00:05:16,600 --> 00:05:19,080 Speaker 1: busiest month for I p o s in the over 89 00:05:19,279 --> 00:05:21,839 Speaker 1: two hundred year history of the New York Stock Exchange. 90 00:05:21,880 --> 00:05:25,000 Speaker 1: So the market is open. It's open for new equity issuance, 91 00:05:25,000 --> 00:05:27,360 Speaker 1: whether that come in the form of I p o s, 92 00:05:27,360 --> 00:05:30,880 Speaker 1: SPACs or direct listings. So can you talk to us 93 00:05:30,880 --> 00:05:34,640 Speaker 1: a little bit about that third option direct listings because 94 00:05:34,760 --> 00:05:36,840 Speaker 1: my understanding is that even though there's a lot of 95 00:05:36,880 --> 00:05:41,840 Speaker 1: talk about that, we haven't necessarily seen that many in 96 00:05:42,400 --> 00:05:45,400 Speaker 1: recent years. In fact, I guess the most famous direct 97 00:05:45,440 --> 00:05:48,240 Speaker 1: listing that I can think of is um Spotify, But 98 00:05:48,320 --> 00:05:51,000 Speaker 1: that was a few years ago. So what's going on 99 00:05:51,240 --> 00:05:54,839 Speaker 1: there and why the excitement over this particular route to 100 00:05:54,880 --> 00:05:58,720 Speaker 1: public markets? Yeah, really, if you take a look back 101 00:05:58,760 --> 00:06:01,159 Speaker 1: over the past four years, we created more pathways to 102 00:06:01,160 --> 00:06:04,280 Speaker 1: the public markets than had been created in the previous 103 00:06:04,440 --> 00:06:07,560 Speaker 1: two to three decades. The direct listing was one of them, 104 00:06:07,600 --> 00:06:10,039 Speaker 1: So you're right, the first one was a few years 105 00:06:10,040 --> 00:06:13,479 Speaker 1: ago in April of eighteen with Spotify. Barry McCarthy, the 106 00:06:13,480 --> 00:06:17,200 Speaker 1: CFO Spotify, is really an independent thinker. He helped pioneer 107 00:06:17,240 --> 00:06:20,039 Speaker 1: this process. Someone we are proud to work with uh 108 00:06:20,080 --> 00:06:22,440 Speaker 1: in in creating a new pathway to the public market. 109 00:06:22,880 --> 00:06:25,400 Speaker 1: And as we expected, you know, would be a slow start, 110 00:06:25,480 --> 00:06:28,839 Speaker 1: but now you're starting to see the uh the slope 111 00:06:28,839 --> 00:06:31,000 Speaker 1: of the curve rise. So we had one in two 112 00:06:31,040 --> 00:06:34,440 Speaker 1: thousand eighteen, one in two thousand nineteen with Slack, and 113 00:06:34,440 --> 00:06:36,920 Speaker 1: then we had two on the same day in September 114 00:06:36,960 --> 00:06:39,839 Speaker 1: with palat Here and Asana. And it might be helpful 115 00:06:39,839 --> 00:06:42,440 Speaker 1: just to take a step back and describe the differences 116 00:06:42,480 --> 00:06:44,400 Speaker 1: between a direct listing and an I p O, because 117 00:06:44,440 --> 00:06:47,839 Speaker 1: sometimes parts of them get conflated. But an I p 118 00:06:47,960 --> 00:06:50,760 Speaker 1: O is the most well worn path to the public markets. 119 00:06:50,800 --> 00:06:54,120 Speaker 1: It's been around for a long time. A company hires 120 00:06:54,120 --> 00:06:57,960 Speaker 1: an investment bank and other advisors to sell shares into 121 00:06:57,960 --> 00:07:00,280 Speaker 1: the market, and they're going to raise capital that can 122 00:07:00,360 --> 00:07:03,800 Speaker 1: use to grow and expand their business, launch new products, 123 00:07:03,839 --> 00:07:09,000 Speaker 1: tap into new geographies, and they conduct you know, they 124 00:07:09,000 --> 00:07:11,480 Speaker 1: file an S one if they're a US company, they 125 00:07:11,480 --> 00:07:14,080 Speaker 1: file an F one perspectives if they're non us issuer, 126 00:07:14,680 --> 00:07:16,720 Speaker 1: and then they go out and they talk to institutional 127 00:07:16,760 --> 00:07:20,360 Speaker 1: investors market the transaction, and the night before they're listing 128 00:07:20,360 --> 00:07:22,320 Speaker 1: on the New York Stock Exchanged, they get together and 129 00:07:22,320 --> 00:07:25,040 Speaker 1: they say, okay, we agree to sell our shares for 130 00:07:25,080 --> 00:07:29,160 Speaker 1: this price. Well, that's where they're sold to the institutional investors. 131 00:07:29,200 --> 00:07:31,080 Speaker 1: That's not necessarily where the stock is going to open 132 00:07:31,120 --> 00:07:33,520 Speaker 1: the next day. And so what happens after you see 133 00:07:33,520 --> 00:07:35,559 Speaker 1: the bell ring and the price discovery on the trading 134 00:07:35,600 --> 00:07:39,320 Speaker 1: floor take place is the beginning of secondary trading. And 135 00:07:39,400 --> 00:07:42,560 Speaker 1: when that happens, that's really the market valuing this company, 136 00:07:42,840 --> 00:07:46,160 Speaker 1: not necessarily a small group of bankers and other advisors, who, 137 00:07:46,360 --> 00:07:48,120 Speaker 1: by the way, are the best in the world at 138 00:07:48,160 --> 00:07:52,280 Speaker 1: what they do. But there's still a dislocation. It's not 139 00:07:52,320 --> 00:07:55,640 Speaker 1: the most efficient pricing mechanism for an offering, and so 140 00:07:55,720 --> 00:07:59,360 Speaker 1: you see a stock open at maybe percent and in 141 00:07:59,400 --> 00:08:02,560 Speaker 1: some cases recently over two higher than that I p 142 00:08:02,680 --> 00:08:06,080 Speaker 1: O price, which is referred to as quote unquote the 143 00:08:06,120 --> 00:08:09,280 Speaker 1: pop um. Sometimes people want the pop most of the 144 00:08:09,280 --> 00:08:12,640 Speaker 1: times they don't want that big of a pop. Now, 145 00:08:13,000 --> 00:08:16,680 Speaker 1: a direct listing is a little bit different because every 146 00:08:16,680 --> 00:08:21,040 Speaker 1: company goes public for different reasons. There's a variety of reasons, 147 00:08:21,040 --> 00:08:25,080 Speaker 1: including that raising capital, liquidity for their shareholders, for their 148 00:08:25,160 --> 00:08:29,040 Speaker 1: employees and other investors, having a share currency that they 149 00:08:29,080 --> 00:08:31,920 Speaker 1: can use to conduct mergers and acquisitions down the road, 150 00:08:32,320 --> 00:08:35,840 Speaker 1: to be branding as well, or even just things further 151 00:08:35,880 --> 00:08:38,520 Speaker 1: down the list about credibility. If your software company and 152 00:08:38,520 --> 00:08:40,840 Speaker 1: you're listed on the public markets, your clients, no, you're 153 00:08:40,840 --> 00:08:43,120 Speaker 1: not going to go out of business overnight and leave 154 00:08:43,160 --> 00:08:46,640 Speaker 1: them high and drive. So in a direct listing, the 155 00:08:46,720 --> 00:08:49,360 Speaker 1: priorities are a little bit different for these companies. These 156 00:08:49,400 --> 00:08:52,319 Speaker 1: are companies that want the benefits of being a publicly 157 00:08:52,320 --> 00:08:55,200 Speaker 1: traded company, most of which I just enumerated, but they 158 00:08:55,240 --> 00:08:58,320 Speaker 1: don't necessarily need to raise capital at the time of 159 00:08:58,320 --> 00:09:00,920 Speaker 1: their listing. So if you think about Spotify, they had 160 00:09:00,960 --> 00:09:03,880 Speaker 1: cash on their balance sheets. Slack had raised I believe 161 00:09:03,920 --> 00:09:07,000 Speaker 1: close to a billion dollars in the private markets prior 162 00:09:07,040 --> 00:09:10,440 Speaker 1: to their listing. Same with palant Here and Asana, and 163 00:09:10,520 --> 00:09:13,120 Speaker 1: so they didn't want to come to the market raised 164 00:09:13,160 --> 00:09:17,120 Speaker 1: capital at a arguably higher than necessary cost of capital 165 00:09:17,760 --> 00:09:21,720 Speaker 1: being exemplified by that pop, and they said, is there 166 00:09:21,760 --> 00:09:24,160 Speaker 1: a new pathway to the market. So so we worked 167 00:09:24,200 --> 00:09:27,199 Speaker 1: with Spotify. We worked with the SEC and other stakeholders 168 00:09:27,240 --> 00:09:31,960 Speaker 1: to create this direct listing pathway and so now now 169 00:09:32,480 --> 00:09:34,920 Speaker 1: you know this is an option for companies. Like I said, 170 00:09:34,920 --> 00:09:38,280 Speaker 1: we started slow, we're seeing more companies planned for them. 171 00:09:38,800 --> 00:09:41,960 Speaker 1: You know, in every conversation I'd have with CFOs and 172 00:09:42,040 --> 00:09:46,080 Speaker 1: company founders, this is always a topic and we're going 173 00:09:46,120 --> 00:09:48,480 Speaker 1: to see more of them as we go into one. Now, 174 00:09:48,600 --> 00:09:52,559 Speaker 1: it's also an important distinction to make between the IPO. 175 00:09:52,679 --> 00:09:54,920 Speaker 1: That bank also helps you set up your road show. 176 00:09:55,360 --> 00:09:59,360 Speaker 1: They provide stabilization activities, so they helped support the stock 177 00:09:59,800 --> 00:10:03,480 Speaker 1: and it's early days. That doesn't happen in a direct listing. 178 00:10:03,559 --> 00:10:06,240 Speaker 1: There's no underwritten offering, no no shares are being sold 179 00:10:06,280 --> 00:10:08,760 Speaker 1: to the public. So really you're relying on the NYC 180 00:10:08,880 --> 00:10:11,959 Speaker 1: S market model. You're relying on the company to meet 181 00:10:12,000 --> 00:10:14,640 Speaker 1: with investors as well as part of this public debut. 182 00:10:15,040 --> 00:10:18,120 Speaker 1: In planning for the public debut, you know, before I 183 00:10:18,160 --> 00:10:19,719 Speaker 1: was gonna ask you a sort of question about the 184 00:10:19,720 --> 00:10:22,120 Speaker 1: mechanics of the direct listening, but before I do it, 185 00:10:22,160 --> 00:10:26,400 Speaker 1: before I forget, do you think that like in the 186 00:10:26,520 --> 00:10:31,080 Speaker 1: road show, the sort of informational services that the banks 187 00:10:31,360 --> 00:10:35,800 Speaker 1: offer where they introduce a new company to perspective investors 188 00:10:36,440 --> 00:10:39,760 Speaker 1: has become less necessary. I'm just thinking about, like with 189 00:10:39,840 --> 00:10:42,640 Speaker 1: the Internet and all different ways of sort of doing 190 00:10:42,679 --> 00:10:48,240 Speaker 1: research and getting information out there, is that particular aspect 191 00:10:48,240 --> 00:10:51,120 Speaker 1: of the going public, the sort of the introduction aspect, 192 00:10:51,760 --> 00:10:57,199 Speaker 1: is that declining in terms of its necessariness for companies 193 00:10:57,200 --> 00:10:59,520 Speaker 1: when they go public. It is changing and that is 194 00:10:59,559 --> 00:11:01,800 Speaker 1: a fact. There's no way we're going back to the 195 00:11:01,840 --> 00:11:05,440 Speaker 1: two thousand nineteen style road show where a company's management 196 00:11:05,440 --> 00:11:08,000 Speaker 1: team gets on an airplane, flies around the world or 197 00:11:08,040 --> 00:11:11,840 Speaker 1: across the country, and back to back meetings with institutional investors. 198 00:11:12,240 --> 00:11:15,960 Speaker 1: We saw during that there are new tools, so whether 199 00:11:16,040 --> 00:11:20,480 Speaker 1: it be video conferencing, teleconferencing, etcetera, where you can have 200 00:11:20,559 --> 00:11:24,120 Speaker 1: meaningful interactions with investors and not have to get on 201 00:11:24,160 --> 00:11:26,800 Speaker 1: an airplane to do it. So that is a when 202 00:11:26,800 --> 00:11:29,600 Speaker 1: we talk to the companies that have gone public, you know, look, 203 00:11:29,720 --> 00:11:31,760 Speaker 1: they'll they'll be the first ones to tell you there's 204 00:11:31,800 --> 00:11:34,000 Speaker 1: nothing like a face to face interaction, whether that's with 205 00:11:34,040 --> 00:11:37,520 Speaker 1: a customer, with an employee, or with an investor. But 206 00:11:37,760 --> 00:11:40,959 Speaker 1: when it comes to coming to market, the efficiency uh 207 00:11:41,160 --> 00:11:44,520 Speaker 1: that they're able to have by conducting the quote unquote 208 00:11:44,559 --> 00:11:48,360 Speaker 1: road show virtually is well received, and I don't think 209 00:11:48,400 --> 00:11:50,880 Speaker 1: we're going back to the ways of twenty nineteen and prior. 210 00:11:51,840 --> 00:11:54,960 Speaker 1: I have a related question before we go into the 211 00:11:54,960 --> 00:11:58,080 Speaker 1: details on direct listings. But all of the criticisms of 212 00:11:58,080 --> 00:12:00,800 Speaker 1: the I p O process, the idea of the bank's 213 00:12:00,880 --> 00:12:03,959 Speaker 1: charge big fees, and the idea that maybe the stock 214 00:12:04,040 --> 00:12:06,920 Speaker 1: gets miss priced in some way or the company is 215 00:12:07,000 --> 00:12:10,520 Speaker 1: effectively leaving money on the table when they get the 216 00:12:10,559 --> 00:12:13,439 Speaker 1: big pop on the first day of trading. You could 217 00:12:13,480 --> 00:12:18,360 Speaker 1: have made any of those criticisms over the past um decades, certainly, 218 00:12:18,400 --> 00:12:23,120 Speaker 1: and maybe even beyond that. What's changed recently so that 219 00:12:23,400 --> 00:12:27,520 Speaker 1: you know people are talking more about the direct listing 220 00:12:27,600 --> 00:12:30,840 Speaker 1: or this back process. What was the catalyst for this 221 00:12:30,960 --> 00:12:34,800 Speaker 1: current conversation. Well, I think there's been a pent up 222 00:12:34,880 --> 00:12:37,480 Speaker 1: demand for new pathways to the public markets that are 223 00:12:37,600 --> 00:12:40,600 Speaker 1: arguably more tailored to meet the companies objectives. So again, 224 00:12:40,640 --> 00:12:43,160 Speaker 1: the I p O is a well worn route. A 225 00:12:43,240 --> 00:12:46,520 Speaker 1: lot of companies will take that route and and and 226 00:12:46,640 --> 00:12:50,240 Speaker 1: like the process, even though it may result in arguably 227 00:12:50,480 --> 00:12:52,800 Speaker 1: less efficient price and than you would have through other routes. 228 00:12:53,280 --> 00:12:55,760 Speaker 1: But for companies that again didn't need to raise capital 229 00:12:55,800 --> 00:12:58,000 Speaker 1: at the time that they're listing, either because they had 230 00:12:58,080 --> 00:13:00,679 Speaker 1: cash on their balance sheet from operation or they were 231 00:13:00,679 --> 00:13:03,520 Speaker 1: able to get investment in the private markets. They have 232 00:13:03,559 --> 00:13:05,839 Speaker 1: a new pathway that's more tailored to meet their objectives. 233 00:13:06,200 --> 00:13:10,960 Speaker 1: Companies that want certainty of execution and want their public 234 00:13:11,080 --> 00:13:13,600 Speaker 1: entrance to be more akin to an M and a 235 00:13:13,720 --> 00:13:16,960 Speaker 1: transaction than the traditional I PO now have this spack 236 00:13:17,559 --> 00:13:20,000 Speaker 1: And now we're even working to combine the best of 237 00:13:20,080 --> 00:13:23,800 Speaker 1: some of these where we filed with the SEC last year, 238 00:13:23,920 --> 00:13:26,120 Speaker 1: received approval from the staff and are just waiting on 239 00:13:26,160 --> 00:13:28,880 Speaker 1: final sign off from the commissioners to bring together the 240 00:13:28,880 --> 00:13:32,160 Speaker 1: direct listing with a capital raising component as well. So 241 00:13:32,480 --> 00:13:34,800 Speaker 1: there are more pathways to the public markets now, that's 242 00:13:34,800 --> 00:13:39,120 Speaker 1: why you see companies more actively pursuing different routes. Now, 243 00:13:39,160 --> 00:13:41,200 Speaker 1: I should also make a point but that there's been 244 00:13:41,320 --> 00:13:44,400 Speaker 1: innovation within each one of those pathways. So some of 245 00:13:44,400 --> 00:13:48,800 Speaker 1: the frustrations companies had or institutional investors had around things 246 00:13:48,840 --> 00:13:52,840 Speaker 1: like the lock up or the allocation process are all changing. 247 00:13:53,040 --> 00:13:56,320 Speaker 1: So if you look at some recent IPOs, instead of 248 00:13:56,320 --> 00:14:00,200 Speaker 1: the traditional one day lock up period, you've seen some 249 00:14:00,360 --> 00:14:03,520 Speaker 1: companies incorporate more dynamic lock up periods so if there 250 00:14:03,559 --> 00:14:06,960 Speaker 1: are certain thresholds or trigger points that are met, certain 251 00:14:07,000 --> 00:14:10,000 Speaker 1: events happen. When it comes to uh, the ability to 252 00:14:10,040 --> 00:14:12,120 Speaker 1: sell more shares to the public or employees, a will 253 00:14:12,120 --> 00:14:15,760 Speaker 1: sell more shares. One of the criticisms by some investors 254 00:14:16,280 --> 00:14:18,200 Speaker 1: about the direct listing was that there was no lock 255 00:14:18,320 --> 00:14:21,040 Speaker 1: up period, and they thought there was not enough control 256 00:14:21,400 --> 00:14:24,760 Speaker 1: over the float and who had who had access to 257 00:14:24,800 --> 00:14:27,360 Speaker 1: selling shares. So so with Palace here they incorporated a 258 00:14:27,440 --> 00:14:29,640 Speaker 1: lock up period. So not only there are more pathways, 259 00:14:29,920 --> 00:14:32,280 Speaker 1: but there's more innovation within each one each of those 260 00:14:32,280 --> 00:14:53,000 Speaker 1: pathways as well. Tok to us about that the combining 261 00:14:53,000 --> 00:14:55,280 Speaker 1: of the direct listing of the capital rays. So as 262 00:14:55,320 --> 00:14:58,200 Speaker 1: you set it up, most of are the direct listings 263 00:14:58,200 --> 00:15:00,480 Speaker 1: that have happened so far. We're companies that had enough 264 00:15:00,520 --> 00:15:04,960 Speaker 1: capital or raise enough capital, didn't need to get any 265 00:15:05,000 --> 00:15:07,480 Speaker 1: of that I p O cash. Now you said this, 266 00:15:07,680 --> 00:15:11,560 Speaker 1: you have staff level approval for combining the two. What 267 00:15:11,840 --> 00:15:14,880 Speaker 1: is the issue there? And once it's sort of fully 268 00:15:15,080 --> 00:15:18,280 Speaker 1: unlocked or once it's sort of fully allowed, how many 269 00:15:18,400 --> 00:15:21,960 Speaker 1: more companies just sort of uh, do you think that 270 00:15:22,040 --> 00:15:25,120 Speaker 1: opens up the interest if they can also raise cash 271 00:15:25,160 --> 00:15:28,480 Speaker 1: from a direct list. Yeah, we're we're excited about the 272 00:15:28,520 --> 00:15:31,360 Speaker 1: direct list in plus capital raise, and it just highlights that, 273 00:15:31,480 --> 00:15:33,040 Speaker 1: you know, we we've been leading a lot of this 274 00:15:33,080 --> 00:15:36,360 Speaker 1: innovation in the capital markets because of how we trade stocks, 275 00:15:36,360 --> 00:15:38,240 Speaker 1: our market model, the things we're able to do with 276 00:15:38,320 --> 00:15:41,400 Speaker 1: the New York Stock Exchange. Now, before I get to 277 00:15:41,440 --> 00:15:43,600 Speaker 1: that point, one thing I would say is that if 278 00:15:43,600 --> 00:15:46,960 Speaker 1: you look at and it helps in in in explaining 279 00:15:46,960 --> 00:15:49,200 Speaker 1: why the direct listing plus capital raise is so interesting. 280 00:15:49,720 --> 00:15:52,000 Speaker 1: If you look at some of these recent technology i 281 00:15:52,080 --> 00:15:55,560 Speaker 1: p o s, there has been a very small public flow, 282 00:15:55,960 --> 00:15:59,800 Speaker 1: so less than ten of the company being offered in 283 00:15:59,800 --> 00:16:02,000 Speaker 1: an i p O. Now, if it's an exciting company, 284 00:16:02,000 --> 00:16:06,440 Speaker 1: a consumer facing brand and enterprise tech company, or or 285 00:16:06,440 --> 00:16:08,640 Speaker 1: a company coming from a sector space where there's going 286 00:16:08,680 --> 00:16:11,280 Speaker 1: to be a lot of investor demand, when you're only 287 00:16:11,320 --> 00:16:14,040 Speaker 1: floating a very small percentage of the company, you you 288 00:16:14,240 --> 00:16:18,840 Speaker 1: encounter a supply demand uh dislocation, and so there's not 289 00:16:18,960 --> 00:16:21,760 Speaker 1: enough supply coming into the market. There's overwhelming demand. And 290 00:16:21,800 --> 00:16:24,560 Speaker 1: that's what's leading to this quote unquote pop. What we 291 00:16:24,600 --> 00:16:26,880 Speaker 1: saw at the direct listing is that you have a 292 00:16:27,000 --> 00:16:31,320 Speaker 1: much much, much bigger public float that's out there. Spotify 293 00:16:31,440 --> 00:16:34,400 Speaker 1: allowed of their shares to be trading in their in 294 00:16:34,480 --> 00:16:37,680 Speaker 1: their direct listing. What that that was you had more 295 00:16:37,760 --> 00:16:40,760 Speaker 1: robust price discovering, more buyers and sellers could come together, 296 00:16:41,040 --> 00:16:44,720 Speaker 1: and that ultimately lead to more liquidity and more efficient pricing. 297 00:16:45,120 --> 00:16:49,240 Speaker 1: So if you look at um, if you look at Spotify, 298 00:16:49,280 --> 00:16:52,240 Speaker 1: Slack and Talents, here three out of the four direct 299 00:16:52,280 --> 00:16:55,640 Speaker 1: listings that have come out, those three they're opening trade 300 00:16:55,680 --> 00:16:59,240 Speaker 1: stand among the top ten largest opening trades in the 301 00:16:59,400 --> 00:17:03,240 Speaker 1: history of US capital markets. That's because you had liquidity, 302 00:17:03,280 --> 00:17:06,199 Speaker 1: you had price discovery. You also had the ability for 303 00:17:06,320 --> 00:17:09,639 Speaker 1: investors that normally would have had to wait days to 304 00:17:09,840 --> 00:17:12,959 Speaker 1: institutional investors to start building a position without running up 305 00:17:12,960 --> 00:17:15,360 Speaker 1: the stock, to be able to build a bigger position 306 00:17:15,359 --> 00:17:18,440 Speaker 1: more quickly because you had that liquidity. So, after those 307 00:17:18,440 --> 00:17:21,800 Speaker 1: direct listings and the performance we saw from an exchange 308 00:17:21,840 --> 00:17:26,000 Speaker 1: standpoint in a and and by all meaningful metrics, less volatility, 309 00:17:26,200 --> 00:17:29,280 Speaker 1: more liquidity than you had in a traditional I p O, 310 00:17:30,200 --> 00:17:36,600 Speaker 1: we started talking to market participants so that companies, banks, investors, regulators, 311 00:17:36,600 --> 00:17:39,000 Speaker 1: others and said how can we improve this. We realized 312 00:17:39,040 --> 00:17:41,560 Speaker 1: there was strong demand. We're saying, hey, we would love 313 00:17:41,600 --> 00:17:45,240 Speaker 1: to incorporate the ability to raise primary capital or fresh 314 00:17:45,320 --> 00:17:48,280 Speaker 1: new capital for the company as part of the direct listing. 315 00:17:49,080 --> 00:17:51,800 Speaker 1: So this was not a solution in search of a problem. 316 00:17:51,840 --> 00:17:54,520 Speaker 1: There's demand in the marketplace for this, so we worked 317 00:17:54,520 --> 00:17:58,240 Speaker 1: with the SEC and others to to file rule changes 318 00:17:58,320 --> 00:18:01,359 Speaker 1: with the exchange. All our rules have to be all 319 00:18:01,400 --> 00:18:03,040 Speaker 1: of our rule changes have to be blessed by the 320 00:18:03,119 --> 00:18:06,480 Speaker 1: SEC and go through a very rigorous vetting process to 321 00:18:06,600 --> 00:18:09,520 Speaker 1: allow for that to happen. So what we have proposed 322 00:18:10,160 --> 00:18:12,760 Speaker 1: UH is for if a company wants to pursue a 323 00:18:12,800 --> 00:18:16,880 Speaker 1: direct listing and include a primary capital raise, they will 324 00:18:17,440 --> 00:18:19,800 Speaker 1: file their registration statement just like they will with an 325 00:18:19,800 --> 00:18:23,520 Speaker 1: I p O. They will disclose the number of shares 326 00:18:23,520 --> 00:18:26,040 Speaker 1: they're willing to sell, they will disclose a range at 327 00:18:26,040 --> 00:18:30,240 Speaker 1: which those shares will be sold, and then that they're 328 00:18:30,240 --> 00:18:33,119 Speaker 1: willing to sell those shares, and that whole block of 329 00:18:33,160 --> 00:18:36,440 Speaker 1: shares will need to trade at one price, one time, 330 00:18:36,520 --> 00:18:38,359 Speaker 1: and that's the opening auction of the n Y s C. 331 00:18:38,560 --> 00:18:41,720 Speaker 1: So it's a it's one moment in time that will 332 00:18:41,720 --> 00:18:43,560 Speaker 1: be the primary capital race, but it's going to be 333 00:18:43,640 --> 00:18:49,119 Speaker 1: raised at the market price. So it's again it's contrary 334 00:18:49,119 --> 00:18:51,160 Speaker 1: to an I p O, where you have again people 335 00:18:51,160 --> 00:18:54,680 Speaker 1: who are very good, uh at at at their jobs 336 00:18:54,720 --> 00:18:58,440 Speaker 1: setting the price, but oftentimes there's a huge dislocation between 337 00:18:58,880 --> 00:19:01,080 Speaker 1: the price they're setting in what markets actually value it. 338 00:19:01,119 --> 00:19:04,360 Speaker 1: You're going to open your stock and raise capital at 339 00:19:04,400 --> 00:19:09,239 Speaker 1: the market price. Mhm. Since we're on the topic of 340 00:19:09,640 --> 00:19:13,399 Speaker 1: the SEC or since you mentioned it, there are people 341 00:19:13,560 --> 00:19:16,280 Speaker 1: out there who make the argument that I p O S. 342 00:19:16,480 --> 00:19:19,760 Speaker 1: You know, it's not just about the pricing process and 343 00:19:19,840 --> 00:19:22,159 Speaker 1: the due diligence of the banks, but it's also about 344 00:19:22,520 --> 00:19:27,800 Speaker 1: certain protections for new investors. What happens to those in 345 00:19:27,880 --> 00:19:30,840 Speaker 1: the direct listing process, and what do you say to 346 00:19:31,040 --> 00:19:35,560 Speaker 1: critics who think that this is basically a regulation light 347 00:19:35,760 --> 00:19:40,199 Speaker 1: way for companies to go public. Look, there's there have 348 00:19:40,240 --> 00:19:43,080 Speaker 1: been some criticisms of the direct listing, but oftentimes those 349 00:19:43,119 --> 00:19:46,159 Speaker 1: come from the folks that are being disrupted along the 350 00:19:46,160 --> 00:19:49,600 Speaker 1: way and in the process. So these companies are filing 351 00:19:49,640 --> 00:19:53,000 Speaker 1: in a prospectus with the SEC so an S one 352 00:19:53,119 --> 00:19:56,040 Speaker 1: or an or an F one registration, there's still subject 353 00:19:56,080 --> 00:19:58,719 Speaker 1: to the rigorous requirements to be listed on the New 354 00:19:58,760 --> 00:20:03,160 Speaker 1: York Stock Exchange. They're still subject to the ongoing regulations 355 00:20:03,160 --> 00:20:05,280 Speaker 1: of the New York Stock Exchange. In the SEC so 356 00:20:05,359 --> 00:20:08,080 Speaker 1: it's a different pathway to the public markets. It disrupts 357 00:20:08,119 --> 00:20:10,399 Speaker 1: some folks that have been involved in the process and 358 00:20:10,440 --> 00:20:12,800 Speaker 1: getting resistance along the way as a sign that, from 359 00:20:12,800 --> 00:20:16,879 Speaker 1: my perspective, that we're doing something right. M You know, 360 00:20:16,960 --> 00:20:20,080 Speaker 1: you use the term market model a couple of times 361 00:20:20,080 --> 00:20:23,719 Speaker 1: in your description of how you operate. What does that 362 00:20:23,800 --> 00:20:26,840 Speaker 1: mean specifically when you talk about the power of the 363 00:20:26,920 --> 00:20:30,840 Speaker 1: NICECS market model? H can you describe that term a 364 00:20:30,840 --> 00:20:34,520 Speaker 1: bit more? Yeah? Absolutely, and and uh and happy to 365 00:20:34,520 --> 00:20:36,760 Speaker 1: get a little bit more into market micro structure. But 366 00:20:36,760 --> 00:20:39,600 Speaker 1: the New York we love, our our listeners love that stuff. 367 00:20:39,640 --> 00:20:42,400 Speaker 1: I know this is the right audience, so so I'm excited. 368 00:20:43,000 --> 00:20:45,440 Speaker 1: So the New York Stock Exchange operates a market model, 369 00:20:45,480 --> 00:20:48,480 Speaker 1: so how we trade your stocks, and it's differentiated for 370 00:20:48,560 --> 00:20:51,520 Speaker 1: not only any other domestic exchange, but any other global 371 00:20:51,560 --> 00:20:54,080 Speaker 1: exchange and well as well. So what does that mean. 372 00:20:54,280 --> 00:20:56,439 Speaker 1: It means that at the very base layer in the 373 00:20:56,520 --> 00:21:00,119 Speaker 1: United States, there's something that's uh any exchange in the 374 00:21:00,160 --> 00:21:03,359 Speaker 1: United States, there's something called a competitive market maker system. 375 00:21:03,520 --> 00:21:07,280 Speaker 1: So the exchanges incentivized market participants to quote in a 376 00:21:07,359 --> 00:21:10,719 Speaker 1: company security. There's no obligation to do that. But if 377 00:21:10,760 --> 00:21:15,720 Speaker 1: you show up, you are incentivized. Now, that's table stakes 378 00:21:15,760 --> 00:21:18,600 Speaker 1: in the US market. On top of that is what 379 00:21:18,680 --> 00:21:21,440 Speaker 1: we layer on and it's called a designated market maker. 380 00:21:21,520 --> 00:21:24,359 Speaker 1: So every company that's listed on the New York Stock 381 00:21:24,400 --> 00:21:27,560 Speaker 1: Exchange interviews the market making firms and selects the firm 382 00:21:27,640 --> 00:21:30,399 Speaker 1: that they want to represent them. That's in addition to 383 00:21:30,440 --> 00:21:33,159 Speaker 1: all those competitive market makers that are quoting in the stock. 384 00:21:33,720 --> 00:21:38,040 Speaker 1: But they're designated market maker has an obligation to be 385 00:21:38,160 --> 00:21:40,360 Speaker 1: on the bid and the offer of that stock at 386 00:21:40,400 --> 00:21:43,520 Speaker 1: all times. They cannot step away on election day or 387 00:21:43,520 --> 00:21:46,960 Speaker 1: when there's market wide volatility or some sort of single 388 00:21:47,000 --> 00:21:50,520 Speaker 1: stock event, so they have a regulatory obligation to be there. 389 00:21:50,840 --> 00:21:53,119 Speaker 1: They have an obligation to be setting the best quote 390 00:21:53,160 --> 00:21:56,440 Speaker 1: in the marketplace a relatively high percentage of the time. 391 00:21:57,000 --> 00:21:59,720 Speaker 1: And they have to layer interest so meaning put put 392 00:21:59,800 --> 00:22:02,440 Speaker 1: orders in the order book above and below the price 393 00:22:02,440 --> 00:22:07,000 Speaker 1: to help damp in volatility. Those those those are obligations, 394 00:22:07,080 --> 00:22:10,360 Speaker 1: they're not voluntary, and that results in no matter how 395 00:22:10,359 --> 00:22:12,440 Speaker 1: you look at the data, stocks to trade on our 396 00:22:12,440 --> 00:22:16,240 Speaker 1: market trade with narrower spreads, less volatility, more depth in 397 00:22:16,280 --> 00:22:18,960 Speaker 1: the order book, which can ultimately help lower company's cost 398 00:22:19,000 --> 00:22:22,360 Speaker 1: of capital. Now, how that helps in a direct listing 399 00:22:22,800 --> 00:22:25,720 Speaker 1: or in a complex transaction is you know, you have 400 00:22:26,240 --> 00:22:28,680 Speaker 1: you have the market model, you have best in class technology, 401 00:22:28,680 --> 00:22:31,359 Speaker 1: and you have human judgment all coming together at one place, 402 00:22:31,840 --> 00:22:35,240 Speaker 1: so you get that certainty of execution. You know, companies 403 00:22:35,240 --> 00:22:37,240 Speaker 1: want to de risk when they're coming to market, and 404 00:22:37,280 --> 00:22:39,040 Speaker 1: so that's one of the reasons why twenty four twenty 405 00:22:39,080 --> 00:22:41,200 Speaker 1: five largest ideas have put their trust in that model. 406 00:22:41,480 --> 00:22:45,399 Speaker 1: The direct listing, you don't have an underwritten offering, you 407 00:22:45,440 --> 00:22:50,280 Speaker 1: do not have a stabilization agent there helping support the stock. 408 00:22:50,640 --> 00:22:53,920 Speaker 1: So having that designated market maker when you're coming out 409 00:22:53,920 --> 00:22:57,240 Speaker 1: into the market with those quoting obligations helps provide superior 410 00:22:57,280 --> 00:22:59,919 Speaker 1: market quality, helps you come out of the block strong 411 00:23:00,440 --> 00:23:02,879 Speaker 1: and helps build investor confidence because the last thing you 412 00:23:02,920 --> 00:23:05,520 Speaker 1: want to do is open the stock at the wrong price, 413 00:23:05,840 --> 00:23:09,240 Speaker 1: have it start whip sawing and impact investor confidence and 414 00:23:09,240 --> 00:23:12,639 Speaker 1: and just have that that um that bad market quality 415 00:23:12,680 --> 00:23:15,840 Speaker 1: amplified even more. Sorry, can you talk a little bit 416 00:23:15,840 --> 00:23:20,680 Speaker 1: more about the allocation process in a direct listing. So 417 00:23:20,880 --> 00:23:22,840 Speaker 1: in a traditional I p O, the banks go out 418 00:23:22,960 --> 00:23:27,000 Speaker 1: and they sound out various types of investors and they 419 00:23:27,040 --> 00:23:29,399 Speaker 1: asked them how much of the stock they might be 420 00:23:29,440 --> 00:23:32,280 Speaker 1: interested in and at what price, and they helped to 421 00:23:32,320 --> 00:23:35,960 Speaker 1: build the book around that. But how does the actual 422 00:23:36,000 --> 00:23:39,719 Speaker 1: allocation work in the direct listing? Like who is able 423 00:23:39,760 --> 00:23:45,040 Speaker 1: to get the shares? Yeah, really good question and it's 424 00:23:45,119 --> 00:23:47,680 Speaker 1: also something that we're we're proud to see the SEC 425 00:23:47,880 --> 00:23:51,000 Speaker 1: wrote in our in the approval order for a direct listing. 426 00:23:51,000 --> 00:23:53,400 Speaker 1: Plus camplies that that what we're proposing with the direct 427 00:23:53,480 --> 00:23:55,720 Speaker 1: listing and ultimately direct list of the cawplories is a 428 00:23:55,760 --> 00:24:01,439 Speaker 1: more democratized process, more democratize access to the marketplace. And 429 00:24:01,480 --> 00:24:03,560 Speaker 1: so you nailed it with the With an I p O, 430 00:24:03,840 --> 00:24:06,119 Speaker 1: a company works with their bankers, They go out, they 431 00:24:06,119 --> 00:24:08,359 Speaker 1: do a road show, they talk to institutional investors, they 432 00:24:08,400 --> 00:24:11,119 Speaker 1: build an order book, they play shares with those investors, 433 00:24:11,359 --> 00:24:14,040 Speaker 1: and then secondary trading begins on the n Y s C. 434 00:24:14,920 --> 00:24:18,720 Speaker 1: In a direct listing, the company actually does much of 435 00:24:18,720 --> 00:24:22,520 Speaker 1: the investor education. So they'll do an investor day. Uh, 436 00:24:22,600 --> 00:24:26,439 Speaker 1: they'll talk with investors about how a direct listing works. 437 00:24:27,040 --> 00:24:29,240 Speaker 1: There's they're limited in in some of the things that 438 00:24:29,240 --> 00:24:31,479 Speaker 1: can talk about. They can't really build a book and 439 00:24:31,520 --> 00:24:35,280 Speaker 1: then on day one, you know, the stock is free 440 00:24:35,280 --> 00:24:39,400 Speaker 1: to trade for the current shareholders. For anybody out there 441 00:24:39,400 --> 00:24:44,000 Speaker 1: in the whether they be institutional investors or retail investors 442 00:24:44,040 --> 00:24:47,280 Speaker 1: that that uh, you know, aren't current investors, they're able 443 00:24:47,320 --> 00:24:50,520 Speaker 1: to buy into those shares, so that there there really 444 00:24:50,680 --> 00:24:55,040 Speaker 1: isn't an allocation process. The only difference I would say 445 00:24:55,080 --> 00:24:59,399 Speaker 1: is that for a direct listing, one of the requirements 446 00:24:59,880 --> 00:25:03,000 Speaker 1: is that a company has to have currently has to 447 00:25:03,040 --> 00:25:08,240 Speaker 1: have a fairly distributed private shareholder base. In an I 448 00:25:08,400 --> 00:25:11,399 Speaker 1: p O, you don't. And so the reason is the 449 00:25:11,640 --> 00:25:13,800 Speaker 1: n y s C and the SEC have rules saying 450 00:25:13,840 --> 00:25:17,040 Speaker 1: that prior to a company going public or two commencing 451 00:25:17,080 --> 00:25:19,800 Speaker 1: trading on the NYC, they have to have at least 452 00:25:19,800 --> 00:25:23,840 Speaker 1: four hundred round lot shareholders around loot shareholder meeting holds 453 00:25:23,880 --> 00:25:26,680 Speaker 1: more than one hundred shares and that helps ensure sufficient 454 00:25:26,680 --> 00:25:29,240 Speaker 1: liquidity on day one. So on an i p O, 455 00:25:29,760 --> 00:25:32,480 Speaker 1: the underwriting bank will talk to a bunch of investors 456 00:25:32,480 --> 00:25:35,080 Speaker 1: and they'll place the shares with more than four hundred 457 00:25:35,080 --> 00:25:38,840 Speaker 1: investors and meet that distribution requirement. In a direct listing, 458 00:25:38,880 --> 00:25:42,200 Speaker 1: because you're not allocating shares, you need to make sure 459 00:25:42,200 --> 00:25:45,879 Speaker 1: that you have at least four hundred shareholders prior to 460 00:25:45,960 --> 00:25:50,440 Speaker 1: your listing So for companies like Spotify, Slack, palat Here, Sonda, 461 00:25:50,520 --> 00:25:53,760 Speaker 1: they had fairly robust private market trading in their stock 462 00:25:54,320 --> 00:25:58,200 Speaker 1: and that coupled with employee ownership, met that four hundred 463 00:25:58,240 --> 00:26:03,120 Speaker 1: round lot threshold. But that's the currently the most meaningful 464 00:26:03,119 --> 00:26:07,480 Speaker 1: difference between the allocation process and distribution criteria between an 465 00:26:07,480 --> 00:26:11,920 Speaker 1: IP on a direct listing. Now, speaking of a palanteer, 466 00:26:11,960 --> 00:26:13,600 Speaker 1: that was the most recent one, or I think actually 467 00:26:13,640 --> 00:26:16,320 Speaker 1: they elicted on the same day as a sauna um. 468 00:26:16,320 --> 00:26:20,600 Speaker 1: But Morgan Stanley was involved in the Palanteer direct listing. 469 00:26:21,040 --> 00:26:24,040 Speaker 1: Explain to us the role of banks. So even though 470 00:26:24,080 --> 00:26:26,600 Speaker 1: it wasn't an I P O H, Morgan Stanley wanted 471 00:26:26,600 --> 00:26:29,440 Speaker 1: the big investment banks did have some role to play. 472 00:26:29,480 --> 00:26:34,240 Speaker 1: What is that role for a direct listing? Yeah, great questions. 473 00:26:34,280 --> 00:26:38,159 Speaker 1: So since there aren't underwriters, the role of the banks 474 00:26:38,160 --> 00:26:39,679 Speaker 1: and the banks will always have a role in the 475 00:26:40,040 --> 00:26:43,000 Speaker 1: in all of these pathways to the public markets. But 476 00:26:43,080 --> 00:26:44,520 Speaker 1: the role of the banks was to serve as a 477 00:26:44,560 --> 00:26:48,560 Speaker 1: financial advisor, so capital f capital a official role. Morgan 478 00:26:48,640 --> 00:26:50,960 Speaker 1: Stanley and others served in that capacity. Morgan was the 479 00:26:51,040 --> 00:26:54,959 Speaker 1: lead on those transactions and they they did multiple things 480 00:26:55,000 --> 00:26:58,159 Speaker 1: when they helped advise the company I'm preparing for a 481 00:26:58,200 --> 00:27:01,879 Speaker 1: direct listing be when it came to the execution of 482 00:27:01,920 --> 00:27:04,879 Speaker 1: the transaction. Two things happen in an I p O. 483 00:27:05,400 --> 00:27:08,360 Speaker 1: You know, the bank works with the with the company 484 00:27:08,400 --> 00:27:10,800 Speaker 1: to establish an I p O price. Since there is 485 00:27:10,800 --> 00:27:13,320 Speaker 1: no I p O price in a direct listing, we 486 00:27:13,359 --> 00:27:16,359 Speaker 1: have to established what's called a reference price now prior 487 00:27:16,359 --> 00:27:18,040 Speaker 1: to trading commencing. There's always a reference price in the 488 00:27:18,080 --> 00:27:20,919 Speaker 1: IPO s I p O price on a typical day, 489 00:27:20,960 --> 00:27:23,040 Speaker 1: it's the price the stock closed the night before. But 490 00:27:23,080 --> 00:27:25,920 Speaker 1: in a direct listing, we need to establish this reference price. 491 00:27:26,280 --> 00:27:30,720 Speaker 1: No shares trade hands, uh, no transaction takes place. It's 492 00:27:30,840 --> 00:27:33,520 Speaker 1: just a price at which we can input into our 493 00:27:33,520 --> 00:27:37,159 Speaker 1: system so we can begin accepting orders and where market 494 00:27:37,200 --> 00:27:41,119 Speaker 1: participants can start thinking about building a book around. And 495 00:27:41,200 --> 00:27:43,920 Speaker 1: so the role of the New York stackaches. We consult 496 00:27:44,520 --> 00:27:47,800 Speaker 1: with the company's financial advisor to help establish that reference 497 00:27:47,840 --> 00:27:52,439 Speaker 1: price the night before, and then once trading begins, the 498 00:27:52,520 --> 00:27:55,080 Speaker 1: market maker who I spoke about the designated market maker, 499 00:27:55,560 --> 00:27:59,560 Speaker 1: That market maker will consult with the financial advisor before 500 00:27:59,600 --> 00:28:01,679 Speaker 1: opening the stock for the very first time. So the 501 00:28:01,800 --> 00:28:05,680 Speaker 1: underwriter plays a slightly different role and that's as a 502 00:28:05,680 --> 00:28:26,359 Speaker 1: as a financial advisor in a direct listing. I have 503 00:28:26,440 --> 00:28:30,760 Speaker 1: a different question about the Palenteer direct listing. So from 504 00:28:30,800 --> 00:28:35,120 Speaker 1: what I remember, well, you were talking about how one 505 00:28:35,119 --> 00:28:37,760 Speaker 1: of the benefits of doing a direct listing is that 506 00:28:37,840 --> 00:28:41,080 Speaker 1: you don't have to have the lock up period that 507 00:28:41,120 --> 00:28:43,520 Speaker 1: you would have in a traditional I P O process. 508 00:28:43,560 --> 00:28:48,000 Speaker 1: But I think Palenteer did away um with that, or 509 00:28:48,320 --> 00:28:51,520 Speaker 1: they opted to have a lock up period even though 510 00:28:51,520 --> 00:28:55,360 Speaker 1: they were doing a direct listing. Why did they do 511 00:28:55,440 --> 00:28:59,160 Speaker 1: that exactly? If you know that's supposed to be one 512 00:28:59,160 --> 00:29:03,600 Speaker 1: of the benefits of of going this route to public market, Well, 513 00:29:03,680 --> 00:29:06,800 Speaker 1: good question, Tracy, and and and you know, companies go 514 00:29:06,920 --> 00:29:09,640 Speaker 1: public for different reasons. They picked different pathways for different reasons, 515 00:29:09,680 --> 00:29:12,000 Speaker 1: and then within those pathways they can innovate how they choose. 516 00:29:12,080 --> 00:29:15,680 Speaker 1: Earlier direct listings did not necessarily have a lock up period, 517 00:29:15,880 --> 00:29:18,640 Speaker 1: some thought of that as a benefit. Now Palatier said 518 00:29:18,760 --> 00:29:20,480 Speaker 1: we want to have one, and so they had the 519 00:29:20,520 --> 00:29:22,160 Speaker 1: ability to put one in there and it did not 520 00:29:22,360 --> 00:29:26,320 Speaker 1: adversely impact their transaction whatsoever. So for then it was 521 00:29:26,360 --> 00:29:28,360 Speaker 1: important to have that lock up period. You know, I 522 00:29:28,520 --> 00:29:31,440 Speaker 1: don't want to speculate too much on specifically why they 523 00:29:31,480 --> 00:29:33,800 Speaker 1: did that, but they did have the option to do that, 524 00:29:34,080 --> 00:29:36,480 Speaker 1: just as how in an I p O you have 525 00:29:36,560 --> 00:29:39,840 Speaker 1: the ability to And companies are now working with banks 526 00:29:39,840 --> 00:29:42,840 Speaker 1: to modify that traditional eight day lock up period to 527 00:29:42,880 --> 00:29:46,280 Speaker 1: put in more kind of dynamic lockups where again, if 528 00:29:46,280 --> 00:29:50,760 Speaker 1: a company needs a certain share price or trigger UH, 529 00:29:51,000 --> 00:29:56,280 Speaker 1: it'll trigger the release of sharff for trading, so something 530 00:29:56,360 --> 00:30:01,000 Speaker 1: that tracys earlier. And that was about standards, and as 531 00:30:01,040 --> 00:30:05,360 Speaker 1: you pointed out that even a company that goes public 532 00:30:05,360 --> 00:30:08,240 Speaker 1: through direct listing, they still have did SEC standards and 533 00:30:08,520 --> 00:30:13,000 Speaker 1: S one and the n y c s own regulations. 534 00:30:13,720 --> 00:30:18,080 Speaker 1: Are there conflict of interest rules or anything set up 535 00:30:18,640 --> 00:30:22,440 Speaker 1: such that there is no incentive on the teams who 536 00:30:22,480 --> 00:30:26,520 Speaker 1: are doing your team doing direct listings versus the sort 537 00:30:26,520 --> 00:30:28,640 Speaker 1: of more regulatory side of the n y C, so 538 00:30:28,720 --> 00:30:34,280 Speaker 1: that there's no um, there's no getting around anything. Basically, Yeah, absolutely, 539 00:30:34,320 --> 00:30:36,440 Speaker 1: So the the n y s C and other exchanges 540 00:30:36,440 --> 00:30:39,120 Speaker 1: in the US are what are called self regulatory organizations, 541 00:30:39,480 --> 00:30:42,640 Speaker 1: and so we have an independent regulatory function that reports 542 00:30:42,680 --> 00:30:45,160 Speaker 1: to an independent committee of our board of directors, so 543 00:30:45,360 --> 00:30:48,240 Speaker 1: their work is completely independent from that of the business side. 544 00:30:48,600 --> 00:30:51,720 Speaker 1: That is meant to completely eliminate conflicts of interest, so 545 00:30:51,800 --> 00:30:54,920 Speaker 1: there's no pressure the business side can exert over the 546 00:30:54,920 --> 00:31:00,600 Speaker 1: regulatory side. And is there any tension emerging or conflict 547 00:31:00,680 --> 00:31:03,600 Speaker 1: between you and the banks? I mean, as you mentioned, 548 00:31:03,640 --> 00:31:06,120 Speaker 1: Morgan Stanley did have a role in palant here. But 549 00:31:06,600 --> 00:31:11,400 Speaker 1: obviously this process does cut out what is a you know, 550 00:31:11,440 --> 00:31:16,160 Speaker 1: an important point of part of revenue for the investment banks. Uh. 551 00:31:16,360 --> 00:31:19,200 Speaker 1: Is there any pushback on them or any banks like, oh, well, 552 00:31:19,200 --> 00:31:21,680 Speaker 1: We're not gonna have our companies list on the n 553 00:31:21,800 --> 00:31:23,640 Speaker 1: y C anymore if the n y i C is 554 00:31:23,680 --> 00:31:26,920 Speaker 1: directly competing against us, Like, I'm just sort of curious 555 00:31:26,920 --> 00:31:31,720 Speaker 1: about that relationship and how the emergence of this business 556 00:31:31,760 --> 00:31:36,920 Speaker 1: for you changes those partnerships actually strengthened partnerships with the banks, 557 00:31:36,920 --> 00:31:38,560 Speaker 1: And I would say the banks will always find a 558 00:31:38,920 --> 00:31:40,960 Speaker 1: find a role in these type of transactions and helping 559 00:31:40,960 --> 00:31:44,840 Speaker 1: their clients. Now, early on, yes, when we started floating 560 00:31:44,840 --> 00:31:47,880 Speaker 1: this idea of the direct listing with Spotify, we did 561 00:31:48,280 --> 00:31:51,160 Speaker 1: receive some resistance from banks saying, what are you doing? Well, 562 00:31:51,280 --> 00:31:53,440 Speaker 1: you know, why are you you know this? This makes 563 00:31:53,480 --> 00:31:56,880 Speaker 1: no sense, this is risky, why would you do this? 564 00:31:57,360 --> 00:31:59,800 Speaker 1: And then what we saw though is a handful of 565 00:31:59,800 --> 00:32:02,640 Speaker 1: bank banks leaned in and said, well, wait a second, 566 00:32:02,840 --> 00:32:05,640 Speaker 1: this is what my client is hoping to achieve. This 567 00:32:05,680 --> 00:32:07,480 Speaker 1: is their goal. I want to help them achieve it. 568 00:32:07,560 --> 00:32:11,000 Speaker 1: And in helping them achieve their goal, well, my economics 569 00:32:11,040 --> 00:32:12,760 Speaker 1: may be slightly different than they would be in a 570 00:32:12,840 --> 00:32:16,280 Speaker 1: traditional I p O. I'm building a long term relationship, 571 00:32:16,320 --> 00:32:17,760 Speaker 1: and so I'm going to be the bank that come 572 00:32:17,760 --> 00:32:19,600 Speaker 1: back to when they do a following offering to the 573 00:32:19,640 --> 00:32:22,200 Speaker 1: market when they need when they need advice around M 574 00:32:22,240 --> 00:32:24,640 Speaker 1: and A or other important transactions. And so I want 575 00:32:24,640 --> 00:32:26,520 Speaker 1: to be a good partner. And so you saw a 576 00:32:26,560 --> 00:32:30,080 Speaker 1: number of banks lean in early on and UH and 577 00:32:30,120 --> 00:32:32,200 Speaker 1: realized that hey, this is this is gonna be a 578 00:32:32,200 --> 00:32:34,040 Speaker 1: new pathway to the public market. We see this as 579 00:32:34,080 --> 00:32:36,560 Speaker 1: an opportunity to help our clients in different and further 580 00:32:36,600 --> 00:32:41,239 Speaker 1: differentiate ourselves from other investment banks. So you saw them 581 00:32:41,320 --> 00:32:44,320 Speaker 1: lean in, and after the successful transactions that took place 582 00:32:44,360 --> 00:32:47,640 Speaker 1: with Spotify, slack now Palace here in Hassana. On top 583 00:32:47,680 --> 00:32:50,600 Speaker 1: of that, you seem pretty much every bank focus on 584 00:32:50,640 --> 00:32:53,160 Speaker 1: the direct listing. Their clients are asking them about it. 585 00:32:53,200 --> 00:32:54,840 Speaker 1: And if you're gonna be a good banker, you better 586 00:32:54,840 --> 00:32:57,000 Speaker 1: be able to provide good advice to your clients. So 587 00:32:57,040 --> 00:32:59,720 Speaker 1: we've seen the banks lean into this now. Where there 588 00:32:59,840 --> 00:33:02,720 Speaker 1: was some initial resistance at first, they've come around to it. 589 00:33:02,720 --> 00:33:04,640 Speaker 1: And again the economics are a little bit different from 590 00:33:04,680 --> 00:33:07,760 Speaker 1: an I p O. But for those that participated in 591 00:33:07,760 --> 00:33:10,320 Speaker 1: the early transactions, while you did not get a piece 592 00:33:10,400 --> 00:33:13,520 Speaker 1: of a gross spread or the underwritten offering, they were 593 00:33:13,520 --> 00:33:16,240 Speaker 1: paid an advisory fee. And so while there were fewer 594 00:33:16,240 --> 00:33:19,760 Speaker 1: banks on the cover for the Spotify UH perspectives than 595 00:33:20,120 --> 00:33:22,920 Speaker 1: they would have had should they take in a traditional 596 00:33:22,920 --> 00:33:25,440 Speaker 1: I PO, those banks received a bigger piece of a 597 00:33:25,480 --> 00:33:27,920 Speaker 1: smaller pie and were able to build a new business 598 00:33:27,960 --> 00:33:32,800 Speaker 1: for themselves. But you're talking mostly about the banks corporate clients. 599 00:33:33,280 --> 00:33:37,440 Speaker 1: What happens to their investor clients on the buy side, 600 00:33:37,480 --> 00:33:40,440 Speaker 1: because you know my understanding in the IPO processes that 601 00:33:40,480 --> 00:33:43,120 Speaker 1: banks were always trying to juggle the needs of those 602 00:33:43,160 --> 00:33:45,840 Speaker 1: two groups of people. On the one hand, you have 603 00:33:46,120 --> 00:33:49,640 Speaker 1: the company that's actually going public and they want to 604 00:33:49,800 --> 00:33:53,160 Speaker 1: maximize their proceeds, so they probably want to sell their 605 00:33:53,200 --> 00:33:57,200 Speaker 1: shares relatively high. And then you also have the investor 606 00:33:57,480 --> 00:34:01,240 Speaker 1: clients who probably want to buy into an I p 607 00:34:01,400 --> 00:34:04,800 Speaker 1: O at a low price and see that first day pop, 608 00:34:05,400 --> 00:34:10,160 Speaker 1: it feels like the banks might be uh, not necessarily 609 00:34:10,239 --> 00:34:13,760 Speaker 1: losing the investor clients, but like certainly the investors aren't 610 00:34:13,800 --> 00:34:16,080 Speaker 1: getting what they used to get from the banks, which 611 00:34:16,200 --> 00:34:20,800 Speaker 1: was allocation into an early I p O. Yeah. So 612 00:34:21,160 --> 00:34:22,759 Speaker 1: a couple of things on that there. And there's a 613 00:34:22,800 --> 00:34:24,600 Speaker 1: lot of different views on this, but I would say 614 00:34:24,640 --> 00:34:27,320 Speaker 1: if you are looking for high quality long term investors, 615 00:34:27,719 --> 00:34:29,200 Speaker 1: they're not going to shy away from you for a 616 00:34:29,239 --> 00:34:31,560 Speaker 1: direct listing. A couple of things there. One is, many 617 00:34:31,640 --> 00:34:35,279 Speaker 1: of these investors think your Fidelity t row Wellington, they've 618 00:34:35,320 --> 00:34:38,320 Speaker 1: already crossed over and we're private investors in the company. 619 00:34:38,400 --> 00:34:40,760 Speaker 1: So they built a position there and are not banking 620 00:34:40,840 --> 00:34:44,680 Speaker 1: on getting a pop to meet their overall portfolio performance 621 00:34:44,760 --> 00:34:48,719 Speaker 1: targets for the year. Number two is when you look 622 00:34:48,760 --> 00:34:50,960 Speaker 1: at some of the more recent tech I p O 623 00:34:51,040 --> 00:34:53,520 Speaker 1: s over the past let's say two to three years, 624 00:34:54,160 --> 00:34:57,239 Speaker 1: Oftentimes these companies are floating a very very very small 625 00:34:57,320 --> 00:34:59,880 Speaker 1: piece of the company sub ten percent, So when you 626 00:35:00,000 --> 00:35:03,000 Speaker 1: actually allocate that out to institutional investors, they're not getting 627 00:35:03,040 --> 00:35:06,320 Speaker 1: that meaningful of a position, and so that pop, you know, 628 00:35:06,760 --> 00:35:09,040 Speaker 1: while yes it is a pop on that security and 629 00:35:09,080 --> 00:35:12,400 Speaker 1: a return on that single investment overall for that portfolio. 630 00:35:13,120 --> 00:35:15,160 Speaker 1: I don't know how many basis points it would be, 631 00:35:15,239 --> 00:35:18,759 Speaker 1: but probably diminimus. They're actually focused on building positions and 632 00:35:18,840 --> 00:35:21,600 Speaker 1: companies where they have convictions. And so why I think 633 00:35:21,680 --> 00:35:24,040 Speaker 1: the direct listing is fascinating is because when you have 634 00:35:24,280 --> 00:35:26,440 Speaker 1: more float out there from day one, when you have 635 00:35:27,280 --> 00:35:30,400 Speaker 1: true price discovery and not this kind of artificial supply 636 00:35:30,520 --> 00:35:33,000 Speaker 1: demand and balance that all of a sudden you had 637 00:35:33,480 --> 00:35:35,319 Speaker 1: eight days the lock up release, a bunch of new 638 00:35:35,320 --> 00:35:38,040 Speaker 1: shares come onto the market, and now you start finding 639 00:35:38,080 --> 00:35:40,279 Speaker 1: the actual market price for the shares. When you have 640 00:35:40,520 --> 00:35:42,719 Speaker 1: that that kind of pure price discovery, if you are 641 00:35:42,760 --> 00:35:45,520 Speaker 1: an institutional investor, you have conviction you want to build 642 00:35:45,560 --> 00:35:48,560 Speaker 1: a position, you can do it much more quickly and 643 00:35:48,680 --> 00:35:51,320 Speaker 1: with much less impact on the share price than you 644 00:35:51,320 --> 00:35:53,160 Speaker 1: would in a traditional I p O. Because if you 645 00:35:53,239 --> 00:35:55,880 Speaker 1: have sub ten percent of a company's offering out there 646 00:35:55,960 --> 00:35:57,840 Speaker 1: and you're a big institutional investor trying to build your 647 00:35:57,880 --> 00:36:00,960 Speaker 1: position because they're so little supply the market, you're gonna 648 00:36:00,960 --> 00:36:03,000 Speaker 1: be running up that stock as you build your position. 649 00:36:03,239 --> 00:36:05,200 Speaker 1: So with the with the direct listing, a lot of 650 00:36:05,239 --> 00:36:11,120 Speaker 1: those institutional investors are actually benefiting from having that increase 651 00:36:11,160 --> 00:36:13,560 Speaker 1: in liquidity. Now, sometimes in an I p O you 652 00:36:13,600 --> 00:36:15,279 Speaker 1: hear them talk about, oh, we have to allocate to 653 00:36:15,719 --> 00:36:17,439 Speaker 1: a certain percent of hedge funds because we know they're 654 00:36:17,440 --> 00:36:19,680 Speaker 1: going to flip it overnight and provide liquidity. Yeah, I'm 655 00:36:19,719 --> 00:36:22,319 Speaker 1: fine with getting rid of that. But when it comes 656 00:36:22,360 --> 00:36:26,160 Speaker 1: to institutional investors, a lot of them actually like this 657 00:36:26,320 --> 00:36:31,160 Speaker 1: process better than the traditional IPO. So let's some big 658 00:36:31,239 --> 00:36:34,160 Speaker 1: picture for a second. Uh, there's just been a handful 659 00:36:34,360 --> 00:36:37,879 Speaker 1: of direct listings, and of course there's been way more. 660 00:36:38,200 --> 00:36:40,840 Speaker 1: There's still way more traditional I p O s. This 661 00:36:41,000 --> 00:36:44,359 Speaker 1: year there's been an incredible spack boom, so they're way 662 00:36:44,440 --> 00:36:47,400 Speaker 1: more of those two in terms of sort of the 663 00:36:47,480 --> 00:36:51,480 Speaker 1: equity capital markets at the New York Stock Exchange. A 664 00:36:52,000 --> 00:36:54,600 Speaker 1: just sort of like how big is direct listing is? Now? 665 00:36:54,800 --> 00:36:57,239 Speaker 1: How big could you see it getting as part of 666 00:36:57,280 --> 00:36:59,480 Speaker 1: a share of the total business? And then what is 667 00:36:59,560 --> 00:37:01,920 Speaker 1: the business model for you? Like, what is you know, 668 00:37:02,680 --> 00:37:06,680 Speaker 1: investment banks take several percentage points in a traditional I 669 00:37:06,800 --> 00:37:09,840 Speaker 1: p O. What is the revenue model look like for you, 670 00:37:10,360 --> 00:37:12,560 Speaker 1: uh in a direct listing? And how big do you 671 00:37:12,600 --> 00:37:15,680 Speaker 1: see this business uh getting or just as getting as 672 00:37:15,680 --> 00:37:20,800 Speaker 1: a share of overall UM. Yeah. So the direct listing 673 00:37:20,880 --> 00:37:22,239 Speaker 1: is you're going to continue to see more of them 674 00:37:22,280 --> 00:37:26,200 Speaker 1: in the market, and whether that's four in one or 675 00:37:26,440 --> 00:37:29,879 Speaker 1: eight or more, you'll see that number increased from from 676 00:37:30,120 --> 00:37:33,279 Speaker 1: from where we are today. We think it's important because, look, 677 00:37:33,320 --> 00:37:35,800 Speaker 1: it's a differentiator for us. We mentioned the market model earlier. 678 00:37:35,840 --> 00:37:39,680 Speaker 1: We're uniquely positioned to execute these types of complex transactions, 679 00:37:39,760 --> 00:37:43,120 Speaker 1: so we we think they're very interesting. From an economic standpoint, 680 00:37:43,520 --> 00:37:45,480 Speaker 1: there's not much difference at all between this and I 681 00:37:45,600 --> 00:37:47,960 Speaker 1: p O or any other type of listing for US, 682 00:37:48,040 --> 00:37:51,880 Speaker 1: and that holds true for other exchanges as well. So 683 00:37:52,200 --> 00:37:54,440 Speaker 1: we UH, We're focused on this because it's a differentiator. 684 00:37:54,480 --> 00:37:56,760 Speaker 1: It's a new pathway to the public markets. We're providing 685 00:37:57,360 --> 00:38:00,560 Speaker 1: a product or service to our clients that is more 686 00:38:00,680 --> 00:38:03,560 Speaker 1: tailored to meet their objectives and help them be successful. 687 00:38:03,960 --> 00:38:05,840 Speaker 1: So we continue to see it being part of the market. 688 00:38:05,920 --> 00:38:08,440 Speaker 1: We continue it will be an increasing part of the market. 689 00:38:08,880 --> 00:38:10,680 Speaker 1: Do I think it will go on the same trajectory 690 00:38:10,760 --> 00:38:13,840 Speaker 1: that SPACs have gone on this year? No? Uh, and 691 00:38:13,920 --> 00:38:17,280 Speaker 1: SPACs accounting for roughly or so of the the overall 692 00:38:17,320 --> 00:38:20,000 Speaker 1: I p O proceeds raised this year, UH, no, I 693 00:38:20,040 --> 00:38:22,920 Speaker 1: don't see that happening, but we we will continue to 694 00:38:23,000 --> 00:38:26,200 Speaker 1: see this be a product that a lot of companies 695 00:38:26,239 --> 00:38:29,360 Speaker 1: consider and ultimately select going forward. Just just to be 696 00:38:29,480 --> 00:38:33,480 Speaker 1: clear on something you said, Um, are there more fees 697 00:38:33,600 --> 00:38:35,920 Speaker 1: for you? Is there more revenue when a company does 698 00:38:36,000 --> 00:38:38,840 Speaker 1: a direct listing versus a normal I P O or 699 00:38:38,960 --> 00:38:41,920 Speaker 1: is that not a Is it not a major difference? 700 00:38:42,360 --> 00:38:45,360 Speaker 1: It's not a major difference. So we still receive revenue 701 00:38:45,400 --> 00:38:48,320 Speaker 1: the same way from these from these companies. How confident 702 00:38:48,400 --> 00:38:51,880 Speaker 1: are you that the SEC is going to approve the 703 00:38:52,200 --> 00:38:57,919 Speaker 1: direct listing with capital raising proposal? Reasonably confident? Because look, 704 00:38:58,200 --> 00:39:01,160 Speaker 1: the team that's down there has done a very good 705 00:39:01,200 --> 00:39:04,480 Speaker 1: job at the SEC. This is my personal perspective. Uh. 706 00:39:04,560 --> 00:39:07,120 Speaker 1: You know, Jay Clayton as chairman has made capital formation 707 00:39:07,200 --> 00:39:09,400 Speaker 1: and innovation in the capital markets a pillar of his 708 00:39:09,480 --> 00:39:12,879 Speaker 1: agenda down there. You've seen it come in different forms, 709 00:39:12,920 --> 00:39:15,200 Speaker 1: whether it be with direct listing one point oh, which 710 00:39:15,239 --> 00:39:18,200 Speaker 1: we saw a Spotify and Slack which was under the 711 00:39:18,280 --> 00:39:21,560 Speaker 1: current leadership's tenure at the at the SEC, or with 712 00:39:21,680 --> 00:39:24,279 Speaker 1: this new process the directlessing plus the capital raise. Now 713 00:39:24,800 --> 00:39:27,200 Speaker 1: you know, not to get too far into the kind 714 00:39:27,200 --> 00:39:30,239 Speaker 1: of regulatory procedures that go along with rule changes at 715 00:39:30,280 --> 00:39:32,400 Speaker 1: the SEC. But you know, we went through a very 716 00:39:32,520 --> 00:39:35,720 Speaker 1: rigorous process for two forty days with the SEC walking 717 00:39:35,800 --> 00:39:38,480 Speaker 1: through the direct listing with Capital Raise, talking with the 718 00:39:38,520 --> 00:39:42,320 Speaker 1: staff from Trading and Markets, Corporate thin the different departments 719 00:39:42,360 --> 00:39:46,000 Speaker 1: within the SEC, and ultimately in the staff's approval order, 720 00:39:46,040 --> 00:39:48,640 Speaker 1: which was done through something called delegated authority. And that's 721 00:39:48,640 --> 00:39:51,160 Speaker 1: just a way of saying that the commissioners have delegated 722 00:39:51,200 --> 00:39:54,920 Speaker 1: the decision to the professional staff or the expert staff, 723 00:39:55,400 --> 00:39:57,839 Speaker 1: that they approved the direct listing, and they said they 724 00:39:57,880 --> 00:40:00,239 Speaker 1: went other way to say two very important things. One, 725 00:40:00,360 --> 00:40:03,839 Speaker 1: it's a more democratized process so allows more people, more 726 00:40:03,920 --> 00:40:07,080 Speaker 1: access to more opportunities. And be it's more efficient pricing 727 00:40:07,480 --> 00:40:11,359 Speaker 1: than the traditional IPO. So a industry trade group called 728 00:40:11,360 --> 00:40:15,480 Speaker 1: the Council of Institutional Investors petition for our approval to 729 00:40:15,560 --> 00:40:19,400 Speaker 1: be reviewed and approved by the by the five commissioners 730 00:40:19,440 --> 00:40:21,239 Speaker 1: at the SEC. We're just awaiting that right now, and 731 00:40:21,280 --> 00:40:24,000 Speaker 1: then we'll be ready to go. No matter what pathway, 732 00:40:24,120 --> 00:40:27,400 Speaker 1: companies have to the public markets, having access to capital 733 00:40:27,719 --> 00:40:31,279 Speaker 1: that you can use to fuel growth, so offensively or 734 00:40:31,400 --> 00:40:33,839 Speaker 1: defensively in periods of time, like we saw in late 735 00:40:33,920 --> 00:40:36,800 Speaker 1: Q one and Q two where companies were starving for 736 00:40:36,920 --> 00:40:38,880 Speaker 1: capital and they were able to come to the public 737 00:40:38,960 --> 00:40:42,000 Speaker 1: markets raise it at market rates. It's nice to hear 738 00:40:42,440 --> 00:40:46,680 Speaker 1: uh many folks in the marketplace, many participants again talking 739 00:40:46,719 --> 00:40:48,920 Speaker 1: about the benefits of the U S public markets, both 740 00:40:48,960 --> 00:40:54,799 Speaker 1: for companies and for investors. John, that was a great conversation. 741 00:40:54,880 --> 00:40:57,680 Speaker 1: I learned a lot and really appreciate you joining us. Yeah. 742 00:40:57,719 --> 00:40:59,239 Speaker 1: I hope once the world gets back to normally you 743 00:40:59,280 --> 00:41:00,960 Speaker 1: can come down here for the next direct listing and 744 00:41:01,000 --> 00:41:02,840 Speaker 1: see it live. Yeah, that'd be fun. I'd love to 745 00:41:02,880 --> 00:41:06,479 Speaker 1: do that, all right, Thanks very Thanks John. That was great. 746 00:41:28,600 --> 00:41:31,120 Speaker 1: I really like that conversation. You know, it's funny. I know, 747 00:41:31,320 --> 00:41:35,160 Speaker 1: like I feel like John was being diplomatic or maybe 748 00:41:35,239 --> 00:41:39,160 Speaker 1: completely uh straightforward. But it's hard for me to imagine 749 00:41:39,640 --> 00:41:42,360 Speaker 1: that this isn't going to be a source of increased 750 00:41:42,560 --> 00:41:45,600 Speaker 1: angst the fact that some of this traditional imp O 751 00:41:45,719 --> 00:41:49,439 Speaker 1: money might be going away in direct listings, especially also 752 00:41:49,480 --> 00:41:51,440 Speaker 1: when you compare like I said at the beginning of 753 00:41:51,480 --> 00:41:54,680 Speaker 1: the stock prices, like the exchanges are still doing very 754 00:41:54,760 --> 00:41:56,799 Speaker 1: well at a time when the major banks are kind 755 00:41:56,800 --> 00:42:01,080 Speaker 1: of stagged it. Yeah, although I don't know, I say, 756 00:42:01,239 --> 00:42:05,239 Speaker 1: never underestimate the bank's ability to find new ways of 757 00:42:05,400 --> 00:42:07,719 Speaker 1: making money. Um, the only thing sort of standing in 758 00:42:07,719 --> 00:42:10,600 Speaker 1: their way, I guess is regulation on that point. But 759 00:42:10,800 --> 00:42:15,040 Speaker 1: I do wonder if you could get a more interesting 760 00:42:15,400 --> 00:42:19,400 Speaker 1: response from some of the banks, like maybe altering the 761 00:42:19,520 --> 00:42:23,640 Speaker 1: I p O process itself so that you don't abandon 762 00:42:23,719 --> 00:42:27,360 Speaker 1: it completely, but maybe you do something that's more similar 763 00:42:27,480 --> 00:42:31,320 Speaker 1: to an auction process, where you know, you you blast 764 00:42:31,400 --> 00:42:34,240 Speaker 1: out prices to a bunch of investors at one time 765 00:42:34,440 --> 00:42:36,760 Speaker 1: and then put it through some sort of automated system. 766 00:42:37,120 --> 00:42:39,920 Speaker 1: We've talked about that process is similar to that in 767 00:42:40,040 --> 00:42:42,319 Speaker 1: the bond market. So I don't know, I think it's 768 00:42:42,360 --> 00:42:46,040 Speaker 1: going to be interesting to see this fight or the 769 00:42:46,120 --> 00:42:49,400 Speaker 1: scrum over public markets and developed between the banks and 770 00:42:49,520 --> 00:42:53,080 Speaker 1: the exchanges. Yeah. No, I mean it's it's definitely true. 771 00:42:53,120 --> 00:42:55,800 Speaker 1: I think, you know, there's now there's so many different models. 772 00:42:56,200 --> 00:42:58,719 Speaker 1: The IPO model obviously with just still a huge the 773 00:42:58,880 --> 00:43:03,479 Speaker 1: back model, this model, this model, plus the capital raise. 774 00:43:03,680 --> 00:43:06,000 Speaker 1: You know, I remember like a two thousand, like twenty 775 00:43:06,080 --> 00:43:09,719 Speaker 1: years ago, you had the first sort of experiments with 776 00:43:09,880 --> 00:43:13,160 Speaker 1: things like auctions and no pops and stuff, And I remember, 777 00:43:13,920 --> 00:43:16,839 Speaker 1: I think Google tried to go or they did try 778 00:43:16,880 --> 00:43:20,200 Speaker 1: to go public in an unusual way. Yeah. But but 779 00:43:20,400 --> 00:43:23,160 Speaker 1: now it feels like perhaps some of these early ideas 780 00:43:23,320 --> 00:43:25,920 Speaker 1: that never quite got off the ground seemed to be 781 00:43:26,080 --> 00:43:28,879 Speaker 1: maturing and ready to go, and we can actually start 782 00:43:28,920 --> 00:43:32,600 Speaker 1: to compare and contrast the different uh the most efficient 783 00:43:32,640 --> 00:43:35,359 Speaker 1: ways and the best ways for companies to go public. Yeah, 784 00:43:35,560 --> 00:43:39,960 Speaker 1: for sure. I also found John's points about getting more 785 00:43:40,040 --> 00:43:43,880 Speaker 1: of a float more liquidity out of a direct listing. 786 00:43:43,960 --> 00:43:45,960 Speaker 1: I thought that was interesting. But I have to confess 787 00:43:46,480 --> 00:43:50,320 Speaker 1: that as a former fintech reporter, part of me is 788 00:43:50,400 --> 00:43:52,799 Speaker 1: just really jaded, and every time I hear someone say 789 00:43:53,120 --> 00:43:57,280 Speaker 1: the word disrupt a particular process or disrupt the banks, 790 00:43:57,400 --> 00:44:00,840 Speaker 1: I immediately just think regulatory argage, trage. So much of 791 00:44:00,920 --> 00:44:03,879 Speaker 1: disruption is basically regulatory arbitrage, And I think that gets 792 00:44:04,000 --> 00:44:07,520 Speaker 1: back to the questions we're asking John about whether or 793 00:44:07,640 --> 00:44:11,120 Speaker 1: not this is basically a way to avoid some of 794 00:44:11,160 --> 00:44:13,880 Speaker 1: the red tape around the traditional I P O process. 795 00:44:14,080 --> 00:44:16,480 Speaker 1: I think those are valid points, and I don't think 796 00:44:16,520 --> 00:44:20,000 Speaker 1: we've seen the end of that conversation. Yeah, I'm sure 797 00:44:20,080 --> 00:44:23,960 Speaker 1: regulatory arbitrage or just sort of the patchwork of regulation 798 00:44:24,040 --> 00:44:25,880 Speaker 1: is an important part of it. But the other thing 799 00:44:26,040 --> 00:44:28,680 Speaker 1: to me is that you know one of the huge 800 00:44:28,920 --> 00:44:32,399 Speaker 1: themes for a long time and you think about tech 801 00:44:32,440 --> 00:44:34,399 Speaker 1: when you said fintech is over my mind, when it's 802 00:44:34,480 --> 00:44:37,239 Speaker 1: just like network effects and the sort of the big 803 00:44:37,320 --> 00:44:42,040 Speaker 1: index providers, the big exchanges, our networks, and so there 804 00:44:42,200 --> 00:44:47,520 Speaker 1: is a sense that regulation aside that these companies continue 805 00:44:47,560 --> 00:44:50,640 Speaker 1: to sort of extract value from the ecosystem overall or 806 00:44:50,680 --> 00:44:53,680 Speaker 1: find ways that they can build up their business or 807 00:44:53,680 --> 00:44:57,680 Speaker 1: build them vertically or horizontal horizontally. I don't know which, 808 00:44:57,760 --> 00:44:59,880 Speaker 1: just the exact one I'm looking for right now, one 809 00:45:00,000 --> 00:45:02,680 Speaker 1: of those two, but that the sort of whether it's 810 00:45:02,680 --> 00:45:08,560 Speaker 1: in tech, Facebook, Amazon, Nicey, Nas Deck, etcetera, there all 811 00:45:08,640 --> 00:45:13,200 Speaker 1: like sort of these very central infrastructure players in any 812 00:45:13,280 --> 00:45:16,600 Speaker 1: industry finding the way to sort of make more money 813 00:45:17,160 --> 00:45:22,239 Speaker 1: while the peripheral players finding it harder. Yeah, you don't. 814 00:45:22,320 --> 00:45:24,839 Speaker 1: You don't seem very compelled about it. You're like whatever, 815 00:45:25,320 --> 00:45:28,520 Speaker 1: I'm trying to chack fully. It's fine. No, it's just 816 00:45:28,640 --> 00:45:32,879 Speaker 1: like what I probably changed the subject. That's fine, we'll 817 00:45:32,920 --> 00:45:35,200 Speaker 1: have to talk about it. So okay, Yeah, let's just 818 00:45:35,280 --> 00:45:37,400 Speaker 1: leave it there. I don't wanna because after you leave 819 00:45:37,480 --> 00:45:39,600 Speaker 1: me hanging like that. Let's let's just write this up 820 00:45:40,400 --> 00:45:43,000 Speaker 1: really bad. Okay, I promised we will talk more about 821 00:45:43,040 --> 00:45:46,640 Speaker 1: it later. Okay. This has been another episode of the 822 00:45:46,719 --> 00:45:49,400 Speaker 1: All Thoughts podcast. I'm Tracy Alloway. You can follow me 823 00:45:49,520 --> 00:45:52,759 Speaker 1: on Twitter at Tracy Alloway and I'm Joe Wisn't Thought. 824 00:45:52,760 --> 00:45:55,800 Speaker 1: You can follow me on Twitter at the Stalwart. Follow 825 00:45:55,880 --> 00:45:59,360 Speaker 1: our guest on Twitter, John Tuttle, He's at j R Tuttle. 826 00:45:59,719 --> 00:46:03,600 Speaker 1: Follow our producer Laura Carlson. She's at Laura M. Carlson. 827 00:46:03,840 --> 00:46:07,840 Speaker 1: Follow the Bloomberg head of podcast, Francesca Levie at Francesca Today, 828 00:46:08,280 --> 00:46:10,920 Speaker 1: and check out all of our podcasts under the handle 829 00:46:11,400 --> 00:46:13,160 Speaker 1: AD Podcasts. Thanks for listening.