ICYMI: A New Era for IPOs
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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Masser and Tim Stenevek on Bloomberg Radio.

Let's talk capital markets because that's what we do here at Bloomberg. I don't know if you have noticed this, Carol. Well, I know you've noticed it. But IPOs have kind of been on a tear, led by triple-digit percent increases for Circle and CoreWeave, two of the year's five largest IPOs on U.S. exchanges. This year's class of debutantes are trading up by a weighted average of about 53%. This is according to data compiled by Bloomberg, full disclosure, just a little earlier this week.

Kind of a market difference from what we've seen in recent years. It's still not what I think investors wanted to see. But what's great is there's momentum, but it's also performance, right? Investors are staying with these names. We've got a great voice on this. Michael Harris is back with us. He's got his finger on the pulse of everything happening in capital markets. He's vice chair and global head of markets at the New York Stock Exchange. He joins us on site here at the Uncharted Community Summit in beautiful Southampton, New York. Last time we spoke with you was at another event.

Equally as beautiful, by the way. Equally as beautiful downtown New York. Exactly. That was back in early March. A lot has happened since then. We've kind of had a round trip when it comes to equity markets. There were some concerns a few weeks after we spoke about companies pulling their IPOs as a result of what was happening with trade. Those IPOs, they ended up happening in May and June. How would you describe the environment right now? I mean, I think...

The round trip that you described is exactly the way to think about it. We've seen a complete 180-degree turn in terms of sentiment, in terms of where the market backdrop is, and it's playing out in the IPO market on a couple different factors. On one hand, we're seeing the subscription levels in terms of interest on IPOs are through the roof. So these deals that are coming to the marketplace are multiple times oversubscribed, interest from a wide range of investors.

The second part of it is when they do come to the market, the actual pricing outcomes are oftentimes very much in the favor of the issuers. And then the third part of it is the performance, which you mentioned just now. The performance on day one, the follow-through in the aftermarket all the way through the offer to today's performance has been absolutely phenomenal. So that really keeps the cycle in terms of investor interest continuing to go. Right. And so what we're seeing that play out is really in our backlog. Right.

So we see a very active summer. We see an active September. And we think it's going to be a very active 2025 going forward. What does that backlog look like? You say active. I mean, how backed up is it? And how eager are these that are backed up ready to go? Yeah, well, you know, for the first part, you're seeing on one hand a lot of companies that were delaying their IPOs because of some of the tensions that happened in the beginning part of the year. So some of them have taken a step back, and they were kind of waiting to see on one hand just what

What happened from a geopolitical standpoint, how things are playing out in terms of just the tensions that were in the air. And also they're waiting to see from the investor community what the reception was going to be for some of the more recent crop of IPOs. So we've gotten those results. Those results have been, in many cases, much better than they thought they would be. And so they're now ready to push forward.

The other part of it is what we're seeing now is a much more diverse array of companies that are going public. You know, when you and I talked, we were talking about who would be the most likely companies to go public, and they would be likely the more defensive names. Now we're seeing that start to broaden out. So our pipeline looks more diverse now.

than it was back in March. It looks also for larger companies that are also going to be coming. So really, in all respects, it tends to be a very healthy outcome. How has that pipeline diversity shifted in recent years? I remember when I spent three, four years working from the floor of the New York Stock Exchange as a reporter. And there was a period in 2017, 2018 where

No joke, no exaggeration. Almost every other day, there was a Chinese company going public in the United States. These were companies we had never heard of. There were companies that we haven't heard from since. I mean, it was really, really wild times. Then there was this crackdown on a lot of these companies that were listed from China in the U.S. Yeah. Has that business completely dried up for you? I mean, Xi'an has filed confidentially.

to IPO in Hong Kong. We saw that today. You know, it's interesting. There's still a class of companies that are, for the most part, micro-cap in nature. A lot of them domiciled in China that are still coming public. That's a class of companies that, quite frankly, we at the New York Stock Exchange really don't

really look to. Some of our competitors tend to focus on that market. And we've seen a number of articles, whether it's from the Wall Street Journal or Financial Times or others, that have really pointed to some of the problems that have become as a result of that. So that's not something we really focus on. But we are still seeing some of those companies come to the public markets. But I think there's some challenges with that. And there's going to probably continue to be challenges with that going forward. But still out of China? Yeah.

Some. Are they choosing to list in other areas of the world? Yeah, you know, it depends a little bit on market cap. It depends on the sector. I think what you are seeing is a bit of a preference for many companies just for liquidity. So the U.S. market still continues to be a place where they would like to list. But for larger names...

The home markets continue to be also very attractive. You know, cattle being a great example of that early in the year. Xi'an looking to Hong Kong relative to London. So depending on the name, depending on the sector, depending on the specifics of those companies, home markets can also be a very viable alternative too. Michael, in some of the cases with the IPOs, we've really seen quite a pop in that first day of trading, right? That's a good sign. You know, we want to see that as certainly...

a company that's going public wants to see that. But it always begs the question, were they too conservative in the numbers that they put out there? I am curious, what are the conversations that you're hearing from those folks in those companies that are looking to go public? Would they rather be a little conservative going in and making sure that that's a good first day of trading? Yeah. You know, I think when you...

talk to people in the world of IPOs, whether they're bankers or lawyers, you know, it's often talked about being more of an art than a science. And I think there is a little bit of truth to that. Yeah. There's a balancing act that always has to happen between getting the right investors, those being the ones that are going to be supportive of your company.

not just on day one, but making sure that there's adequate follow through as you think about companies that are going through their cycles of maturity as a public company. Right. And also companies that are investors, rather, they're going to be supporting the company from a liquidity perspective. And there's a balance of the two in the aftermarket. And the reality is until you actually get to that stage where you're in the pricing room and you're actually confronting with management in terms of what the dynamics look like, it's sometimes tough to tell.

And so I think the underwriters do a great job of being able to offer what those trade-offs are going to be to management teams. Ultimately, the management teams are the ones that have to make those really tough decisions. But I always think about it in terms of the IPO process. Ultimately, it's,

a day one event. And really what management teams, what their stakeholders need to focus on is really trying to set up a company for success over the long term and not focus on necessarily the day one performance. Obviously you want a great pricing outcome, but really you're managing this company for the long haul. It's not really just for the day one IPO event. Can you give us an update on the New York Stock Exchange Texas?

Launched this year. We talked about it back in March. Yeah, yeah. We have multiple companies that are now listed there. We have a fairly healthy pipeline of companies that are going to be listing on the exchange over the next several months. We are very close to signing a lease in Dallas. We're getting very close to actually naming a person that's going to be running that business. So it's really continuing to take on momentum. And so we really are excited about it. Do you think it's perhaps a hedge?

in New York City losing its place when it comes to capital markets. And I ask this kind of came into sharp relief this week with I think a lot of people would argue with what happened in the Democratic primary for the mayoral

And we don't know who's going to win, but we certainly have a lot of outspoken billionaires who've talked about concerns when it comes to capital markets here in New York and the position of New York City as being the epicenter of Wall Street.

Yeah, I mean, for Texas, the way that we've thought about it is when we look at our own listed community and we look at the number of companies in terms of where they're domiciled, Texas really stands out. It tends to be the area where we have the most number of companies from a really diverse range of sectors that are represented.

And so when we kind of really thought about it from the perspective of what Governor Abbott's doing to try to make sure that the ecosystem of companies within Texas is vibrant and, you know, intersects with a lot of what we're trying to do in terms of

getting a great environment for our own listed community, it really made sense. So we think about this more from the long-term perspective of offering the best environment for our listed community, less in terms of like a short-term strategy in terms of what might be happening in the New York ecosystem. We still are big believers that New York continues to be a great place for capital raising and also for companies to be domiciled. But longer term then, does that mean, you know, and I'm sure you've had questions about this and I'm sure we've talked about it,

Does it expand the model? Like, do you anticipate that there's going to be other major cities that you guys will also have an exchange?

It's hard to know. You know, looking at the crystal ball, it's really hard to know. Like we're really just focused on kind of where we see the greatest opportunity for our community right now. But we're always forward thinking in terms of really trying to see where the greatest opportunity results for our community. Another great example that I'd point to is extended hours trading. You know, we were the first exchange to look at 22-5 trading as an opportunity. We're really happy to see the SEC kind of move towards that.

And so we think that there's going to be other opportunities where we can try to take a leadership position to try to extend our lead. We need less because that means days off for us.

Because we need a break. We work. That's the bad news for you guys. You're going to be on 22 hours a day. That's the downside. There used to be times, except for M&A deals, weekends were quiet. The summer was quiet. Not anymore, right? Not since the great financial crisis has happened. It's just been kind of nonstop. It's been exciting. Yeah. White House, though, in terms of volatility? Yeah.

That really is the thing that impacts the markets. And that's what ultimately will impact, right, in terms of new listings and stuff. Everybody's watching. I think it's a combination of what you're seeing in Washington. It's a combination of what you're seeing with the Fed. And it's a combination of what you're going to see on the company level in terms of earnings. Yeah. Right? But in many respects, that's not that different from what it's always been. Right? And so I think the way that we've always tried to approach it is,

We always want companies to try to look at the tradeoff of all those three things. What's the right tradeoff for themselves as they think about being able to build great companies? But ultimately, investors are going to want to invest in great companies that can weather those cycles regardless. All right. I'm going to leave it there. Michael, thank you so much. Hey, thank you. It was great seeing you both. Fun to check in with you again. Michael Harris, Vice Chairman and Global Head of Capital Markets at the New York Stock Exchange, right here on site at the Uncharted Community Summit. Thank you.

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