WEBVTT - This Is The NYSE's Plan To Win More Direct Listings 0:00:10.760 --> 0:00:14.520 Hello, and welcome to another episode of the Odd LODs podcast. 0:00:14.560 --> 0:00:19.680 I'm Joe Wisenthal and I'm Tracy Halloway. So, Tracy, you 0:00:19.680 --> 0:00:23.400 know how people talk a lot about how big financial 0:00:23.400 --> 0:00:27.800 institutions and financial and financial stocks in particular, just like, 0:00:28.160 --> 0:00:30.440 I haven't really done very well lately. It's been a 0:00:30.440 --> 0:00:35.920 long time sort of a seeming permanent state of slump. Yeah. 0:00:36.080 --> 0:00:39.680 I think it's easy to forget in when we have 0:00:39.760 --> 0:00:43.040 all these headwinds for the banks, like loan losses, um 0:00:43.360 --> 0:00:48.040 credit provisions, building up, things like that. That even before now, 0:00:48.159 --> 0:00:52.000 there was this big debate about whether we were in 0:00:52.040 --> 0:00:56.320 a secular or a cyclical downturn for banking and especially 0:00:56.360 --> 0:00:59.000 investment banking. Right, you had all these new rules that 0:00:59.120 --> 0:01:01.720 came in after the two thousand eight financial crisis, and 0:01:01.760 --> 0:01:03.520 there was a lot of talk about whether or not 0:01:03.600 --> 0:01:06.640 banks could ever get back to the days of making 0:01:07.000 --> 0:01:12.119 big money. Yeah, that's exactly right. Even prior to this year, 0:01:12.880 --> 0:01:15.760 if you just look at sort of the main financial 0:01:15.840 --> 0:01:19.880 sectors of the SMP, lots of questions about financial companies 0:01:19.920 --> 0:01:24.040 business model in an era of mediocre growth, very low 0:01:24.160 --> 0:01:27.119 interest rates, Like there's just this has been a sector 0:01:27.200 --> 0:01:29.839 that people haven't been into for a lot. Yeah, and 0:01:29.880 --> 0:01:33.000 of course ultra low interest rates don't really help on 0:01:33.040 --> 0:01:36.000 the lending side either. So yeah, it feels like there 0:01:36.000 --> 0:01:40.039 have been well, there has been a decade of challenges 0:01:40.120 --> 0:01:44.120 for banking. But okay, so, but also what I said before, 0:01:44.120 --> 0:01:47.000 it was kind of a lie because, uh, not all 0:01:47.120 --> 0:01:51.760 financial companies have struggled over the last decade, and some 0:01:51.920 --> 0:01:56.040 are doing phenomenally well. You're gonna have to narrow that 0:01:56.080 --> 0:01:58.320 down for me. So are you talking about non bank 0:01:58.440 --> 0:02:02.960 financial companies? Yeah, So basically there are other parts of 0:02:03.040 --> 0:02:06.160 Wall Street besides the big banks that are killing it. 0:02:06.240 --> 0:02:08.240 And so if you look at say the last decade 0:02:08.560 --> 0:02:12.560 company like Goldman sax uh stock you know, pre dividends 0:02:12.680 --> 0:02:16.120 is only up over the last decade. But some of 0:02:16.120 --> 0:02:20.919 the other sort of infrastructure parts of the business, UM 0:02:20.919 --> 0:02:24.600 exchanges doing phenomenally well, and ICE, the parent company of 0:02:24.600 --> 0:02:28.760 the New York Stock Exchange, they're up. Other big in 0:02:28.840 --> 0:02:34.520 the uh sort of exchanges platforms, index providers doing phenomenally well. 0:02:34.639 --> 0:02:38.120 So when we talk about financial is not doing well, 0:02:38.160 --> 0:02:41.320 we're talking about banks. But actually a lot of parts 0:02:41.320 --> 0:02:45.080 of Wall Street really are have been on a phenomenal run. Yeah, 0:02:45.120 --> 0:02:47.080 I think that's right. And of course you've had a 0:02:47.320 --> 0:02:49.640 you've had a pretty good year for trading revenue because 0:02:49.639 --> 0:02:52.040 you had a lot of market volatility, and now you've 0:02:52.040 --> 0:02:56.239 had a big boom in bond and debt underwriting as 0:02:56.280 --> 0:03:01.160 well because everyone's rushing to issue. So yeah, there are 0:03:01.280 --> 0:03:04.600 parts of the banking system that are doing well, and 0:03:04.639 --> 0:03:09.320 the non banks of course, up until I keep caveating this, Wait, 0:03:09.320 --> 0:03:12.000 what's your caveat so that it's not just this's a 0:03:12.000 --> 0:03:16.400 brief period that we're talking about the Yeah, so today 0:03:16.480 --> 0:03:20.080 we're going to be talking about one aspect of I 0:03:20.120 --> 0:03:23.120 guess what you would call Wall Street that is doing 0:03:23.200 --> 0:03:27.600 phenomenally well, one interesting business, one other thing, Tracy before 0:03:27.600 --> 0:03:30.800 we before we get to our guests. Um, this has 0:03:30.840 --> 0:03:34.639 been a quite a year for public offering. Yes, even 0:03:34.680 --> 0:03:37.400 aside from traditional I p o s, we have seen 0:03:37.840 --> 0:03:41.280 a lot of SPACs, for instance, a new type of 0:03:41.400 --> 0:03:44.840 public listing or a new way of going public without 0:03:44.840 --> 0:03:47.480 actually going through the I p O process. So it's 0:03:47.480 --> 0:03:51.480 been an interesting time in equity capital markets. Yeah, it's 0:03:51.520 --> 0:03:53.480 super interesting because in addition to I p o s, 0:03:53.520 --> 0:03:56.640 we've had the spack boom, and we also have this 0:03:56.680 --> 0:04:00.200 sort of emergence of direct listings, which is companies saying, note, 0:04:00.200 --> 0:04:03.520 we're just gonna start trading our shares on the exchange 0:04:03.600 --> 0:04:06.240 and the market will set the price and we don't 0:04:06.320 --> 0:04:08.520 need to do the traditional I PO road show. And 0:04:08.840 --> 0:04:12.360 you know this is a also a growing area of yeah, 0:04:12.400 --> 0:04:15.400 area of new public listing. So today we're going to 0:04:15.520 --> 0:04:19.040 talk about the exchanges and that in particular. I'm very 0:04:19.040 --> 0:04:21.880 excited about our guest. We are going to be speaking 0:04:21.880 --> 0:04:25.279 with John Tuttle, Vice Chairman of the New York Stock Exchange, 0:04:25.320 --> 0:04:29.240 is a fourteen year veteran of the exchange. Uh he 0:04:29.360 --> 0:04:32.839 works on all areas of capital markets, I p o S, 0:04:32.839 --> 0:04:36.400 SPACs and direct listing, so sort of a fascinating person 0:04:36.520 --> 0:04:40.359 to discuss the nicetiest role and all this. So John, 0:04:40.440 --> 0:04:42.599 thank you very much for joining us. Great to be 0:04:42.640 --> 0:04:45.520 with you guys. So it has been I mean, is 0:04:45.560 --> 0:04:49.159 that fair like this to characterize like there's a lot 0:04:49.160 --> 0:04:52.359 of excitement these days about public markets. It feels like 0:04:52.360 --> 0:04:54.920 in a way that we haven't seen in a while. Yeah, 0:04:54.960 --> 0:04:58.000 I completely agree, and you know we are we're in 0:04:58.040 --> 0:05:01.159 the fourth quarter now, but I'll you know, I'll give 0:05:01.160 --> 0:05:05.240 you these two points. August was the busiest month we 0:05:05.320 --> 0:05:07.520 had in over a decade in August. You know, when 0:05:07.520 --> 0:05:09.680 it comes to new equity issuance I p o s 0:05:10.000 --> 0:05:13.000 and August is traditionally this one of the slowest months 0:05:13.400 --> 0:05:16.560 of the year, and September of this year was the 0:05:16.600 --> 0:05:19.080 busiest month for I p o s in the over 0:05:19.279 --> 0:05:21.839 two hundred year history of the New York Stock Exchange. 0:05:21.880 --> 0:05:25.000 So the market is open. It's open for new equity issuance, 0:05:25.000 --> 0:05:27.360 whether that come in the form of I p o s, 0:05:27.360 --> 0:05:30.880 SPACs or direct listings. So can you talk to us 0:05:30.880 --> 0:05:34.640 a little bit about that third option direct listings because 0:05:34.760 --> 0:05:36.840 my understanding is that even though there's a lot of 0:05:36.880 --> 0:05:41.840 talk about that, we haven't necessarily seen that many in 0:05:42.400 --> 0:05:45.400 recent years. In fact, I guess the most famous direct 0:05:45.440 --> 0:05:48.240 listing that I can think of is um Spotify, But 0:05:48.320 --> 0:05:51.000 that was a few years ago. So what's going on 0:05:51.240 --> 0:05:54.839 there and why the excitement over this particular route to 0:05:54.880 --> 0:05:58.720 public markets? Yeah, really, if you take a look back 0:05:58.760 --> 0:06:01.159 over the past four years, we created more pathways to 0:06:01.160 --> 0:06:04.280 the public markets than had been created in the previous 0:06:04.440 --> 0:06:07.560 two to three decades. The direct listing was one of them, 0:06:07.600 --> 0:06:10.039 So you're right, the first one was a few years 0:06:10.040 --> 0:06:13.479 ago in April of eighteen with Spotify. Barry McCarthy, the 0:06:13.480 --> 0:06:17.200 CFO Spotify, is really an independent thinker. He helped pioneer 0:06:17.240 --> 0:06:20.039 this process. Someone we are proud to work with uh 0:06:20.080 --> 0:06:22.440 in in creating a new pathway to the public market. 0:06:22.880 --> 0:06:25.400 And as we expected, you know, would be a slow start, 0:06:25.480 --> 0:06:28.839 but now you're starting to see the uh the slope 0:06:28.839 --> 0:06:31.000 of the curve rise. So we had one in two 0:06:31.040 --> 0:06:34.440 thousand eighteen, one in two thousand nineteen with Slack, and 0:06:34.440 --> 0:06:36.920 then we had two on the same day in September 0:06:36.960 --> 0:06:39.839 with palat Here and Asana. And it might be helpful 0:06:39.839 --> 0:06:42.440 just to take a step back and describe the differences 0:06:42.480 --> 0:06:44.400 between a direct listing and an I p O, because 0:06:44.440 --> 0:06:47.839 sometimes parts of them get conflated. But an I p 0:06:47.960 --> 0:06:50.760 O is the most well worn path to the public markets. 0:06:50.800 --> 0:06:54.120 It's been around for a long time. A company hires 0:06:54.120 --> 0:06:57.960 an investment bank and other advisors to sell shares into 0:06:57.960 --> 0:07:00.280 the market, and they're going to raise capital that can 0:07:00.360 --> 0:07:03.800 use to grow and expand their business, launch new products, 0:07:03.839 --> 0:07:09.000 tap into new geographies, and they conduct you know, they 0:07:09.000 --> 0:07:11.480 file an S one if they're a US company, they 0:07:11.480 --> 0:07:14.080 file an F one perspectives if they're non us issuer, 0:07:14.680 --> 0:07:16.720 and then they go out and they talk to institutional 0:07:16.760 --> 0:07:20.360 investors market the transaction, and the night before they're listing 0:07:20.360 --> 0:07:22.320 on the New York Stock Exchanged, they get together and 0:07:22.320 --> 0:07:25.040 they say, okay, we agree to sell our shares for 0:07:25.080 --> 0:07:29.160 this price. Well, that's where they're sold to the institutional investors. 0:07:29.200 --> 0:07:31.080 That's not necessarily where the stock is going to open 0:07:31.120 --> 0:07:33.520 the next day. And so what happens after you see 0:07:33.520 --> 0:07:35.559 the bell ring and the price discovery on the trading 0:07:35.600 --> 0:07:39.320 floor take place is the beginning of secondary trading. And 0:07:39.400 --> 0:07:42.560 when that happens, that's really the market valuing this company, 0:07:42.840 --> 0:07:46.160 not necessarily a small group of bankers and other advisors, who, 0:07:46.360 --> 0:07:48.120 by the way, are the best in the world at 0:07:48.160 --> 0:07:52.280 what they do. But there's still a dislocation. It's not 0:07:52.320 --> 0:07:55.640 the most efficient pricing mechanism for an offering, and so 0:07:55.720 --> 0:07:59.360 you see a stock open at maybe percent and in 0:07:59.400 --> 0:08:02.560 some cases recently over two higher than that I p 0:08:02.680 --> 0:08:06.080 O price, which is referred to as quote unquote the 0:08:06.120 --> 0:08:09.280 pop um. Sometimes people want the pop most of the 0:08:09.280 --> 0:08:12.640 times they don't want that big of a pop. Now, 0:08:13.000 --> 0:08:16.680 a direct listing is a little bit different because every 0:08:16.680 --> 0:08:21.040 company goes public for different reasons. There's a variety of reasons, 0:08:21.040 --> 0:08:25.080 including that raising capital, liquidity for their shareholders, for their 0:08:25.160 --> 0:08:29.040 employees and other investors, having a share currency that they 0:08:29.080 --> 0:08:31.920 can use to conduct mergers and acquisitions down the road, 0:08:32.320 --> 0:08:35.840 to be branding as well, or even just things further 0:08:35.880 --> 0:08:38.520 down the list about credibility. If your software company and 0:08:38.520 --> 0:08:40.840 you're listed on the public markets, your clients, no, you're 0:08:40.840 --> 0:08:43.120 not going to go out of business overnight and leave 0:08:43.160 --> 0:08:46.640 them high and drive. So in a direct listing, the 0:08:46.720 --> 0:08:49.360 priorities are a little bit different for these companies. These 0:08:49.400 --> 0:08:52.319 are companies that want the benefits of being a publicly 0:08:52.320 --> 0:08:55.200 traded company, most of which I just enumerated, but they 0:08:55.240 --> 0:08:58.320 don't necessarily need to raise capital at the time of 0:08:58.320 --> 0:09:00.920 their listing. So if you think about Spotify, they had 0:09:00.960 --> 0:09:03.880 cash on their balance sheets. Slack had raised I believe 0:09:03.920 --> 0:09:07.000 close to a billion dollars in the private markets prior 0:09:07.040 --> 0:09:10.440 to their listing. Same with palant Here and Asana, and 0:09:10.520 --> 0:09:13.120 so they didn't want to come to the market raised 0:09:13.160 --> 0:09:17.120 capital at a arguably higher than necessary cost of capital 0:09:17.760 --> 0:09:21.720 being exemplified by that pop, and they said, is there 0:09:21.760 --> 0:09:24.160 a new pathway to the market. So so we worked 0:09:24.200 --> 0:09:27.199 with Spotify. We worked with the SEC and other stakeholders 0:09:27.240 --> 0:09:31.960 to create this direct listing pathway and so now now 0:09:32.480 --> 0:09:34.920 you know this is an option for companies. Like I said, 0:09:34.920 --> 0:09:38.280 we started slow, we're seeing more companies planned for them. 0:09:38.800 --> 0:09:41.960 You know, in every conversation I'd have with CFOs and 0:09:42.040 --> 0:09:46.080 company founders, this is always a topic and we're going 0:09:46.120 --> 0:09:48.480 to see more of them as we go into one. Now, 0:09:48.600 --> 0:09:52.559 it's also an important distinction to make between the IPO. 0:09:52.679 --> 0:09:54.920 That bank also helps you set up your road show. 0:09:55.360 --> 0:09:59.360 They provide stabilization activities, so they helped support the stock 0:09:59.800 --> 0:10:03.480 and it's early days. That doesn't happen in a direct listing. 0:10:03.559 --> 0:10:06.240 There's no underwritten offering, no no shares are being sold 0:10:06.280 --> 0:10:08.760 to the public. So really you're relying on the NYC 0:10:08.880 --> 0:10:11.959 S market model. You're relying on the company to meet 0:10:12.000 --> 0:10:14.640 with investors as well as part of this public debut. 0:10:15.040 --> 0:10:18.120 In planning for the public debut, you know, before I 0:10:18.160 --> 0:10:19.719 was gonna ask you a sort of question about the 0:10:19.720 --> 0:10:22.120 mechanics of the direct listening, but before I do it, 0:10:22.160 --> 0:10:26.400 before I forget, do you think that like in the 0:10:26.520 --> 0:10:31.080 road show, the sort of informational services that the banks 0:10:31.360 --> 0:10:35.800 offer where they introduce a new company to perspective investors 0:10:36.440 --> 0:10:39.760 has become less necessary. I'm just thinking about, like with 0:10:39.840 --> 0:10:42.640 the Internet and all different ways of sort of doing 0:10:42.679 --> 0:10:48.240 research and getting information out there, is that particular aspect 0:10:48.240 --> 0:10:51.120 of the going public, the sort of the introduction aspect, 0:10:51.760 --> 0:10:57.199 is that declining in terms of its necessariness for companies 0:10:57.200 --> 0:10:59.520 when they go public. It is changing and that is 0:10:59.559 --> 0:11:01.800 a fact. There's no way we're going back to the 0:11:01.840 --> 0:11:05.440 two thousand nineteen style road show where a company's management 0:11:05.440 --> 0:11:08.000 team gets on an airplane, flies around the world or 0:11:08.040 --> 0:11:11.840 across the country, and back to back meetings with institutional investors. 0:11:12.240 --> 0:11:15.960 We saw during that there are new tools, so whether 0:11:16.040 --> 0:11:20.480 it be video conferencing, teleconferencing, etcetera, where you can have 0:11:20.559 --> 0:11:24.120 meaningful interactions with investors and not have to get on 0:11:24.160 --> 0:11:26.800 an airplane to do it. So that is a when 0:11:26.800 --> 0:11:29.600 we talk to the companies that have gone public, you know, look, 0:11:29.720 --> 0:11:31.760 they'll they'll be the first ones to tell you there's 0:11:31.800 --> 0:11:34.000 nothing like a face to face interaction, whether that's with 0:11:34.040 --> 0:11:37.520 a customer, with an employee, or with an investor. But 0:11:37.760 --> 0:11:40.959 when it comes to coming to market, the efficiency uh 0:11:41.160 --> 0:11:44.520 that they're able to have by conducting the quote unquote 0:11:44.559 --> 0:11:48.360 road show virtually is well received, and I don't think 0:11:48.400 --> 0:11:50.880 we're going back to the ways of twenty nineteen and prior. 0:11:51.840 --> 0:11:54.960 I have a related question before we go into the 0:11:54.960 --> 0:11:58.080 details on direct listings. But all of the criticisms of 0:11:58.080 --> 0:12:00.800 the I p O process, the idea of the bank's 0:12:00.880 --> 0:12:03.959 charge big fees, and the idea that maybe the stock 0:12:04.040 --> 0:12:06.920 gets miss priced in some way or the company is 0:12:07.000 --> 0:12:10.520 effectively leaving money on the table when they get the 0:12:10.559 --> 0:12:13.439 big pop on the first day of trading. You could 0:12:13.480 --> 0:12:18.360 have made any of those criticisms over the past um decades, certainly, 0:12:18.400 --> 0:12:23.120 and maybe even beyond that. What's changed recently so that 0:12:23.400 --> 0:12:27.520 you know people are talking more about the direct listing 0:12:27.600 --> 0:12:30.840 or this back process. What was the catalyst for this 0:12:30.960 --> 0:12:34.800 current conversation. Well, I think there's been a pent up 0:12:34.880 --> 0:12:37.480 demand for new pathways to the public markets that are 0:12:37.600 --> 0:12:40.600 arguably more tailored to meet the companies objectives. So again, 0:12:40.640 --> 0:12:43.160 the I p O is a well worn route. A 0:12:43.240 --> 0:12:46.520 lot of companies will take that route and and and 0:12:46.640 --> 0:12:50.240 like the process, even though it may result in arguably 0:12:50.480 --> 0:12:52.800 less efficient price and than you would have through other routes. 0:12:53.280 --> 0:12:55.760 But for companies that again didn't need to raise capital 0:12:55.800 --> 0:12:58.000 at the time that they're listing, either because they had 0:12:58.080 --> 0:13:00.679 cash on their balance sheet from operation or they were 0:13:00.679 --> 0:13:03.520 able to get investment in the private markets. They have 0:13:03.559 --> 0:13:05.839 a new pathway that's more tailored to meet their objectives. 0:13:06.200 --> 0:13:10.960 Companies that want certainty of execution and want their public 0:13:11.080 --> 0:13:13.600 entrance to be more akin to an M and a 0:13:13.720 --> 0:13:16.960 transaction than the traditional I PO now have this spack 0:13:17.559 --> 0:13:20.000 And now we're even working to combine the best of 0:13:20.080 --> 0:13:23.800 some of these where we filed with the SEC last year, 0:13:23.920 --> 0:13:26.120 received approval from the staff and are just waiting on 0:13:26.160 --> 0:13:28.880 final sign off from the commissioners to bring together the 0:13:28.880 --> 0:13:32.160 direct listing with a capital raising component as well. So 0:13:32.480 --> 0:13:34.800 there are more pathways to the public markets now, that's 0:13:34.800 --> 0:13:39.120 why you see companies more actively pursuing different routes. Now, 0:13:39.160 --> 0:13:41.200 I should also make a point but that there's been 0:13:41.320 --> 0:13:44.400 innovation within each one of those pathways. So some of 0:13:44.400 --> 0:13:48.800 the frustrations companies had or institutional investors had around things 0:13:48.840 --> 0:13:52.840 like the lock up or the allocation process are all changing. 0:13:53.040 --> 0:13:56.320 So if you look at some recent IPOs, instead of 0:13:56.320 --> 0:14:00.200 the traditional one day lock up period, you've seen some 0:14:00.360 --> 0:14:03.520 companies incorporate more dynamic lock up periods so if there 0:14:03.559 --> 0:14:06.960 are certain thresholds or trigger points that are met, certain 0:14:07.000 --> 0:14:10.000 events happen. When it comes to uh, the ability to 0:14:10.040 --> 0:14:12.120 sell more shares to the public or employees, a will 0:14:12.120 --> 0:14:15.760 sell more shares. One of the criticisms by some investors 0:14:16.280 --> 0:14:18.200 about the direct listing was that there was no lock 0:14:18.320 --> 0:14:21.040 up period, and they thought there was not enough control 0:14:21.400 --> 0:14:24.760 over the float and who had who had access to 0:14:24.800 --> 0:14:27.360 selling shares. So so with Palace here they incorporated a 0:14:27.440 --> 0:14:29.640 lock up period. So not only there are more pathways, 0:14:29.920 --> 0:14:32.280 but there's more innovation within each one each of those 0:14:32.280 --> 0:14:53.000 pathways as well. Tok to us about that the combining 0:14:53.000 --> 0:14:55.280 of the direct listing of the capital rays. So as 0:14:55.320 --> 0:14:58.200 you set it up, most of are the direct listings 0:14:58.200 --> 0:15:00.480 that have happened so far. We're companies that had enough 0:15:00.520 --> 0:15:04.960 capital or raise enough capital, didn't need to get any 0:15:05.000 --> 0:15:07.480 of that I p O cash. Now you said this, 0:15:07.680 --> 0:15:11.560 you have staff level approval for combining the two. What 0:15:11.840 --> 0:15:14.880 is the issue there? And once it's sort of fully 0:15:15.080 --> 0:15:18.280 unlocked or once it's sort of fully allowed, how many 0:15:18.400 --> 0:15:21.960 more companies just sort of uh, do you think that 0:15:22.040 --> 0:15:25.120 opens up the interest if they can also raise cash 0:15:25.160 --> 0:15:28.480 from a direct list. Yeah, we're we're excited about the 0:15:28.520 --> 0:15:31.360 direct list in plus capital raise, and it just highlights that, 0:15:31.480 --> 0:15:33.040 you know, we we've been leading a lot of this 0:15:33.080 --> 0:15:36.360 innovation in the capital markets because of how we trade stocks, 0:15:36.360 --> 0:15:38.240 our market model, the things we're able to do with 0:15:38.320 --> 0:15:41.400 the New York Stock Exchange. Now, before I get to 0:15:41.440 --> 0:15:43.600 that point, one thing I would say is that if 0:15:43.600 --> 0:15:46.960 you look at and it helps in in in explaining 0:15:46.960 --> 0:15:49.200 why the direct listing plus capital raise is so interesting. 0:15:49.720 --> 0:15:52.000 If you look at some of these recent technology i 0:15:52.080 --> 0:15:55.560 p o s, there has been a very small public flow, 0:15:55.960 --> 0:15:59.800 so less than ten of the company being offered in 0:15:59.800 --> 0:16:02.000 an i p O. Now, if it's an exciting company, 0:16:02.000 --> 0:16:06.440 a consumer facing brand and enterprise tech company, or or 0:16:06.440 --> 0:16:08.640 a company coming from a sector space where there's going 0:16:08.680 --> 0:16:11.280 to be a lot of investor demand, when you're only 0:16:11.320 --> 0:16:14.040 floating a very small percentage of the company, you you 0:16:14.240 --> 0:16:18.840 encounter a supply demand uh dislocation, and so there's not 0:16:18.960 --> 0:16:21.760 enough supply coming into the market. There's overwhelming demand. And 0:16:21.800 --> 0:16:24.560 that's what's leading to this quote unquote pop. What we 0:16:24.600 --> 0:16:26.880 saw at the direct listing is that you have a 0:16:27.000 --> 0:16:31.320 much much, much bigger public float that's out there. Spotify 0:16:31.440 --> 0:16:34.400 allowed of their shares to be trading in their in 0:16:34.480 --> 0:16:37.680 their direct listing. What that that was you had more 0:16:37.760 --> 0:16:40.760 robust price discovering, more buyers and sellers could come together, 0:16:41.040 --> 0:16:44.720 and that ultimately lead to more liquidity and more efficient pricing. 0:16:45.120 --> 0:16:49.240 So if you look at um, if you look at Spotify, 0:16:49.280 --> 0:16:52.240 Slack and Talents, here three out of the four direct 0:16:52.280 --> 0:16:55.640 listings that have come out, those three they're opening trade 0:16:55.680 --> 0:16:59.240 stand among the top ten largest opening trades in the 0:16:59.400 --> 0:17:03.240 history of US capital markets. That's because you had liquidity, 0:17:03.280 --> 0:17:06.199 you had price discovery. You also had the ability for 0:17:06.320 --> 0:17:09.639 investors that normally would have had to wait days to 0:17:09.840 --> 0:17:12.959 institutional investors to start building a position without running up 0:17:12.960 --> 0:17:15.360 the stock, to be able to build a bigger position 0:17:15.359 --> 0:17:18.440 more quickly because you had that liquidity. So, after those 0:17:18.440 --> 0:17:21.800 direct listings and the performance we saw from an exchange 0:17:21.840 --> 0:17:26.000 standpoint in a and and by all meaningful metrics, less volatility, 0:17:26.200 --> 0:17:29.280 more liquidity than you had in a traditional I p O, 0:17:30.200 --> 0:17:36.600 we started talking to market participants so that companies, banks, investors, regulators, 0:17:36.600 --> 0:17:39.000 others and said how can we improve this. We realized 0:17:39.040 --> 0:17:41.560 there was strong demand. We're saying, hey, we would love 0:17:41.600 --> 0:17:45.240 to incorporate the ability to raise primary capital or fresh 0:17:45.320 --> 0:17:48.280 new capital for the company as part of the direct listing. 0:17:49.080 --> 0:17:51.800 So this was not a solution in search of a problem. 0:17:51.840 --> 0:17:54.520 There's demand in the marketplace for this, so we worked 0:17:54.520 --> 0:17:58.240 with the SEC and others to to file rule changes 0:17:58.320 --> 0:18:01.359 with the exchange. All our rules have to be all 0:18:01.400 --> 0:18:03.040 of our rule changes have to be blessed by the 0:18:03.119 --> 0:18:06.480 SEC and go through a very rigorous vetting process to 0:18:06.600 --> 0:18:09.520 allow for that to happen. So what we have proposed 0:18:10.160 --> 0:18:12.760 UH is for if a company wants to pursue a 0:18:12.800 --> 0:18:16.880 direct listing and include a primary capital raise, they will 0:18:17.440 --> 0:18:19.800 file their registration statement just like they will with an 0:18:19.800 --> 0:18:23.520 I p O. They will disclose the number of shares 0:18:23.520 --> 0:18:26.040 they're willing to sell, they will disclose a range at 0:18:26.040 --> 0:18:30.240 which those shares will be sold, and then that they're 0:18:30.240 --> 0:18:33.119 willing to sell those shares, and that whole block of 0:18:33.160 --> 0:18:36.440 shares will need to trade at one price, one time, 0:18:36.520 --> 0:18:38.359 and that's the opening auction of the n Y s C. 0:18:38.560 --> 0:18:41.720 So it's a it's one moment in time that will 0:18:41.720 --> 0:18:43.560 be the primary capital race, but it's going to be 0:18:43.640 --> 0:18:49.119 raised at the market price. So it's again it's contrary 0:18:49.119 --> 0:18:51.160 to an I p O, where you have again people 0:18:51.160 --> 0:18:54.680 who are very good, uh at at at their jobs 0:18:54.720 --> 0:18:58.440 setting the price, but oftentimes there's a huge dislocation between 0:18:58.880 --> 0:19:01.080 the price they're setting in what markets actually value it. 0:19:01.119 --> 0:19:04.360 You're going to open your stock and raise capital at 0:19:04.400 --> 0:19:09.239 the market price. Mhm. Since we're on the topic of 0:19:09.640 --> 0:19:13.399 the SEC or since you mentioned it, there are people 0:19:13.560 --> 0:19:16.280 out there who make the argument that I p O S. 0:19:16.480 --> 0:19:19.760 You know, it's not just about the pricing process and 0:19:19.840 --> 0:19:22.159 the due diligence of the banks, but it's also about 0:19:22.520 --> 0:19:27.800 certain protections for new investors. What happens to those in 0:19:27.880 --> 0:19:30.840 the direct listing process, and what do you say to 0:19:31.040 --> 0:19:35.560 critics who think that this is basically a regulation light 0:19:35.760 --> 0:19:40.199 way for companies to go public. Look, there's there have 0:19:40.240 --> 0:19:43.080 been some criticisms of the direct listing, but oftentimes those 0:19:43.119 --> 0:19:46.159 come from the folks that are being disrupted along the 0:19:46.160 --> 0:19:49.600 way and in the process. So these companies are filing 0:19:49.640 --> 0:19:53.000 in a prospectus with the SEC so an S one 0:19:53.119 --> 0:19:56.040 or an or an F one registration, there's still subject 0:19:56.080 --> 0:19:58.719 to the rigorous requirements to be listed on the New 0:19:58.760 --> 0:20:03.160 York Stock Exchange. They're still subject to the ongoing regulations 0:20:03.160 --> 0:20:05.280 of the New York Stock Exchange. In the SEC so 0:20:05.359 --> 0:20:08.080 it's a different pathway to the public markets. It disrupts 0:20:08.119 --> 0:20:10.399 some folks that have been involved in the process and 0:20:10.440 --> 0:20:12.800 getting resistance along the way as a sign that, from 0:20:12.800 --> 0:20:16.879 my perspective, that we're doing something right. M You know, 0:20:16.960 --> 0:20:20.080 you use the term market model a couple of times 0:20:20.080 --> 0:20:23.719 in your description of how you operate. What does that 0:20:23.800 --> 0:20:26.840 mean specifically when you talk about the power of the 0:20:26.920 --> 0:20:30.840 NICECS market model? H can you describe that term a 0:20:30.840 --> 0:20:34.520 bit more? Yeah? Absolutely, and and uh and happy to 0:20:34.520 --> 0:20:36.760 get a little bit more into market micro structure. But 0:20:36.760 --> 0:20:39.600 the New York we love, our our listeners love that stuff. 0:20:39.640 --> 0:20:42.400 I know this is the right audience, so so I'm excited. 0:20:43.000 --> 0:20:45.440 So the New York Stock Exchange operates a market model, 0:20:45.480 --> 0:20:48.480 so how we trade your stocks, and it's differentiated for 0:20:48.560 --> 0:20:51.520 not only any other domestic exchange, but any other global 0:20:51.560 --> 0:20:54.080 exchange and well as well. So what does that mean. 0:20:54.280 --> 0:20:56.439 It means that at the very base layer in the 0:20:56.520 --> 0:21:00.119 United States, there's something that's uh any exchange in the 0:21:00.160 --> 0:21:03.359 United States, there's something called a competitive market maker system. 0:21:03.520 --> 0:21:07.280 So the exchanges incentivized market participants to quote in a 0:21:07.359 --> 0:21:10.719 company security. There's no obligation to do that. But if 0:21:10.760 --> 0:21:15.720 you show up, you are incentivized. Now, that's table stakes 0:21:15.760 --> 0:21:18.600 in the US market. On top of that is what 0:21:18.680 --> 0:21:21.440 we layer on and it's called a designated market maker. 0:21:21.520 --> 0:21:24.359 So every company that's listed on the New York Stock 0:21:24.400 --> 0:21:27.560 Exchange interviews the market making firms and selects the firm 0:21:27.640 --> 0:21:30.399 that they want to represent them. That's in addition to 0:21:30.440 --> 0:21:33.159 all those competitive market makers that are quoting in the stock. 0:21:33.720 --> 0:21:38.040 But they're designated market maker has an obligation to be 0:21:38.160 --> 0:21:40.360 on the bid and the offer of that stock at 0:21:40.400 --> 0:21:43.520 all times. They cannot step away on election day or 0:21:43.520 --> 0:21:46.960 when there's market wide volatility or some sort of single 0:21:47.000 --> 0:21:50.520 stock event, so they have a regulatory obligation to be there. 0:21:50.840 --> 0:21:53.119 They have an obligation to be setting the best quote 0:21:53.160 --> 0:21:56.440 in the marketplace a relatively high percentage of the time. 0:21:57.000 --> 0:21:59.720 And they have to layer interest so meaning put put 0:21:59.800 --> 0:22:02.440 orders in the order book above and below the price 0:22:02.440 --> 0:22:07.000 to help damp in volatility. Those those those are obligations, 0:22:07.080 --> 0:22:10.360 they're not voluntary, and that results in no matter how 0:22:10.359 --> 0:22:12.440 you look at the data, stocks to trade on our 0:22:12.440 --> 0:22:16.240 market trade with narrower spreads, less volatility, more depth in 0:22:16.280 --> 0:22:18.960 the order book, which can ultimately help lower company's cost 0:22:19.000 --> 0:22:22.360 of capital. Now, how that helps in a direct listing 0:22:22.800 --> 0:22:25.720 or in a complex transaction is you know, you have 0:22:26.240 --> 0:22:28.680 you have the market model, you have best in class technology, 0:22:28.680 --> 0:22:31.359