Speaker 1: Investors watching out for a range of headwinds. In twenty
Speaker 1: twenty four, Linn Martin, the president of the New York
Speaker 1: Stock Exchange, outlining three principal trends that may shape global
Speaker 1: markets this year, volatility remaining, a reinvigorated IPO market, and
Speaker 1: US capital markets continuing to lead the world. Lind Martin,
Speaker 1: a police are saying, joins us at the table, Morty, Lyn.
Speaker 2: Thanks for having me. It's great to be with you.
Speaker 1: It's good to see you again. Let's start with the geopolitics.
Speaker 1: Clearly the risk in the Middle East is front and
Speaker 1: center after the events at the weekend. How does that
Speaker 1: contribute to this theme of high volatility sticking around for
Speaker 1: longer in your view?
Speaker 3: Yeah, you know, the geopolitical environments are quite complicated environment.
Speaker 3: I think we can all agree with that. It clearly
Speaker 3: impacts the US equity markets and the global equity markets
Speaker 3: by contributing to volatility. The surprise factor, that's what's going
Speaker 3: to contribute to volatility, and this weekend's events were, you know,
Speaker 3: one of those surprises.
Speaker 1: Unfortunately, We've talked about this before, how capital markets might
Speaker 1: be increasingly polarized regionally, geographically, it might see a situation
Speaker 1: where it's US capital markets for US com companies Chinese
Speaker 1: companies capital markets for Chinese companies. Do you see it
Speaker 1: quite the same way?
Speaker 2: You know, I don't.
Speaker 3: I mean, the US capital markets are the envy of
Speaker 3: the world. They have withstood multiple pandemics, multiple wars, and
Speaker 3: they've really shown to be the best source of liquidity
Speaker 3: for a founder, for an entrepreneur to raise the capital
Speaker 3: that they need to change the world. If that's true,
Speaker 3: more than more than ever. In fact, you know, you
Speaker 3: see the ability.
Speaker 2: To tap the US capital markets as.
Speaker 3: Aspirational, but also when you look at the cost of capital,
Speaker 3: the most efficient way to raise capital to change the world.
Speaker 4: Let's put these two ideas together. So you think that
Speaker 4: because of the potential volatility, because of the unknown unknowns
Speaker 4: later this year, are people moving forward their plans for IPOs?
Speaker 2: Absolutely? You know, we have a tremendous amount of companies
Speaker 2: on the road.
Speaker 3: We're actually about to welcome one a large one this week.
Speaker 3: M or Sports, which is the holding company for Willis
Speaker 3: for Louisville Slugger, for a lot of the brands you know, our.
Speaker 2: Children and we use every day.
Speaker 3: And just later today we're about to welcome a UK
Speaker 3: based company, Flutter, who is transferring they're listing out of
Speaker 3: their regional market over to the New York Stock Exchange
Speaker 3: a little bit later this morning.
Speaker 4: One of the reasons why IPOs haven't been as active
Speaker 4: as people had expected was because of just a lot
Speaker 4: of private equity companies not wanting to take the valuation cuts.
Speaker 4: And we've seen that even with Reddit right they have
Speaker 4: five billion dollar market capitalization different lower than what some
Speaker 4: of the previous private market valuations had been. How much
Speaker 4: are people accepting a haircut, accepting not getting the price
Speaker 4: that they wanted in order to really cash out of
Speaker 4: those investments.
Speaker 3: You know, I think the main you had two reasons
Speaker 3: really impacting the IPO markets over the last two years.
Speaker 3: You had the volatility, the increased volatility when the VIX
Speaker 3: is trading a you know, a thirty handle as opposed
Speaker 3: to you know, below twenty. It's not that founders couldn't
Speaker 3: get deals done, it was what is my stock going
Speaker 3: to do the day after IPO, the month after IIPO?
Speaker 3: What macroeconomic factors are going to influence.
Speaker 2: The way my stock is trading? Now?
Speaker 3: You also see that there is a recalibration of valuations
Speaker 3: in the market. I would make the argument though, that
Speaker 3: twenty twenty one had inflated valuations in the market, so
Speaker 3: you know twenty twenty one was one side of tail risk.
Speaker 3: This is the last two years or the other side
Speaker 3: of tail risks on the Bell curve.
Speaker 1: There is this structure story as well, and we've talked
Speaker 1: a lot about it around this table and in Dallas
Speaker 1: as well at the World Economic Forum, that we're seeing
Speaker 1: regulation shift that will push more financing activity into private markets.
Speaker 1: When you start to think about those themes, do you
Speaker 1: think the lifespan, the arc of a company's lifespan, the
Speaker 1: timeline of it is going to change just in terms
Speaker 1: of how long they stay private for versus how long
Speaker 1: they started private previously.
Speaker 3: I think companies are going to be more disciple about
Speaker 3: when they tap the public markets. Obviously, they're going to
Speaker 3: want to be able to articulate a path to profitability
Speaker 3: or profitability. So I think what you're going to see
Speaker 3: is when companies come to market the public markets, they're
Speaker 3: going to be public market ready. They're going to be
Speaker 3: able to articulate a very clear message to investors, to
Speaker 3: their shareholders that will enable them to thrive I don't
Speaker 3: think there's any substitute though, for the public markets, and
Speaker 3: that's been proven time and time again.
Speaker 1: Have you seen that change already? That change you just
Speaker 1: described absolutely.
Speaker 3: With the amount companies we have on the road, we
Speaker 3: have a tremendous mount companies on the road. We have
Speaker 3: a tremendous amount of companies that we're working with at
Speaker 3: the moment to tap the public market. So we're really
Speaker 3: excited about the prospects for twenty twenty four.
Speaker 1: I want to talk about one threat for twenty twenty
Speaker 1: four and beyond AI. I've asked you about this before,
Speaker 1: Let's go through it again. Confronting an era of misinformation
Speaker 1: for someone in your position, how are we going to
Speaker 1: go back to doing this?
Speaker 3: You know, I'm really glad you made the point about misinformation,
Speaker 3: because AI is just a continuation of data driven trends
Speaker 3: that have really existed for more than a decade. If
Speaker 3: you've got good data that is going to enable models
Speaker 3: to add efficiencies to markets. It's something that we've seen
Speaker 3: in production for more than a decade now with the
Speaker 3: AI or large language models that we employ to add
Speaker 3: transparency to the energy markets. And as a result of
Speaker 3: the large language models that we have had in production
Speaker 3: for a decade. We've seen the more opaque parts of
Speaker 3: the energy market have tremendous amount of transparency, a tremendous
Speaker 3: amount of liquidity added to them, particularly over the last
Speaker 3: couple of years.
Speaker 4: Did you guys see what happened with Taylor Swift and
Speaker 4: X the AI sort of renditions of her and that
Speaker 4: basically it was preventing you from googling Taylor Swift search
Speaker 4: and search on X because there are pornographic, artificially intelligence
Speaker 4: generated images. But it sort of shows you some of
Speaker 4: the challenges in misinformation or just a false videos. I
Speaker 4: am curious how many companies that are planning to IPO
Speaker 4: our tech companies are building themselves as such. I mean,
Speaker 4: is it like one hundred percent their tech company, even
Speaker 4: if they sell furniture.
Speaker 3: You know, in this digital age, everyone uses technology. Everyone's
Speaker 3: a technology company. You sort of missed the boat. If
Speaker 3: you're not employing technology in some way, shape or form
Speaker 3: to drive your business forward, who do you.
Speaker 4: Think right now is your biggest competitor? Though, I mean,
Speaker 4: to John's point, the private markets. We've been talking about
Speaker 4: that for a long time, and there was a discussion.
Speaker 2: About some sort of transfer.
Speaker 4: Is it just, you know, another stock exchange, or is
Speaker 4: it another avenue of financing?
Speaker 3: You know, I don't really think we have a competitor
Speaker 3: because the role of the New York Stock Exchange is
Speaker 3: just very different than a traditional stock exchange or a
Speaker 3: listing's venue.
Speaker 2: Our job is to be the stewards.
Speaker 3: Of the US capital markets, and since the US is
Speaker 3: such an important part of the global capital markets, we
Speaker 3: really are the stewards of the global capital markets, allowing
Speaker 3: entrepreneurs and innovators to tap the markets to raise the
Speaker 3: capital they need in a cost efficient fashion and to
Speaker 3: democratize investing.
Speaker 4: You expect there to be a much more active year
Speaker 4: in the IPO world. We have seen this with a
Speaker 4: lot of banks predicting much more active capital markets activity
Speaker 4: this year. How much is that predicated on significant rate
Speaker 4: cuts by the Federal Reserve It.
Speaker 3: I think the market's already pricing in the rate cuts
Speaker 3: to a certain extent.
Speaker 2: The one thing that I'm watching.
Speaker 3: Is the discrepancy between the US equity markets and how
Speaker 3: it's pricing in call it two or three rate cuts,
Speaker 3: and then you look at the Fed fund futures markets.
Speaker 3: If you go further out in the curve. Towards the
Speaker 3: end of the year, it's pricing in probably five or
Speaker 3: six rate cuts, so there's a bit.
Speaker 2: Of discrepancy there.
Speaker 3: The reason why I'm watching this is because that's what's
Speaker 3: going to impact volatility. Really, volatility is what's going to
Speaker 3: I would say impact the IPO markets. But for the
Speaker 3: short to medium term, I think we're going to see
Speaker 3: some good IPOs.
Speaker 4: You wrote last year that seventy percent of IPOs executed
Speaker 4: actually couldn't meet the provisions on the New York section.
Speaker 4: What is the biggest provision that's holding some of these
Speaker 4: companies back from going to the NICY.
Speaker 3: Yeah, So we've got a variety of quantitative standards. A
Speaker 3: lot of those are focused on the minimum amount of shareholders,
Speaker 3: the size of a company's float that they actually put
Speaker 3: into the public markets, as well as the minimum.
Speaker 2: Market cap of a company. And you're right, more.
Speaker 3: Than seventy percent didn't qualify for US last year, and
Speaker 3: that number was even higher in twenty twenty two.
Speaker 1: New York Stock Exchange President Limartin alongside maybe we talked
Speaker 1: about politics, remember and Davos, and the whole room just
Speaker 1: went quiet. No one wanted to discuss does this changed
Speaker 1: your world, this race this year.
Speaker 3: You know, the only way it changes our world is
Speaker 3: it's impacting volatility and the IPO window.
Speaker 2: So our job is to.
Speaker 3: Make sure that, particularly in years like twenty twenty four,
Speaker 3: our systems are are reliable, resilient and open so that
Speaker 3: people can efficiently manage risk.
Speaker 1: That's how you diplomatically sort of dodge that question without
Speaker 1: addressing it.
Speaker 4: Basically, they're going to look at the markets and not
Speaker 4: address the politics of it. I will just say Saturday
Speaker 4: Night Live will get funnier because they seem to really
Speaker 4: enjoy this Lynn. When you talk about volatility, how much
Speaker 4: is really driven by an unexpected weakening in the economy.
Speaker 4: Is that what you're really referring to that is potentially
Speaker 4: the greatest supplier of volatility or is it a lot
Speaker 4: of different things?
Speaker 2: You know, it's a lot of different things.
Speaker 3: And the important thing to look at when you think
Speaker 3: about volatility. So there's the VIX, which is clearly the
Speaker 3: measure of equity vall. But then there's also the MOVE,
Speaker 3: which is our index, which is the Treasury market ball,
Speaker 3: and those levels are still elevated. It's still above one hundred.
Speaker 3: If I look at the move Index, which I do
Speaker 3: every day.
Speaker 1: Said thank you to be brilliant. Lynn Martin, the NYSC President,
Speaker 1: joining us around the table.