IPO parade? 3 pressing questions on global markets with the NYSE

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0:45The leadership of AI is not only the technology companies that everybody knows the names of, like NVIDIA, but it's all these other companies that are really developing the infrastructure. Today's guest is Chris Taylor, Chief Development Officer at the New York Stock Exchange, where we're recording today. He's one of the top leaders on Wall Street, working with more than 2 ,400 listed companies with a combined market cap of more than$41 trillion. We are the last trading floor in existence of any stock market around the world where humans and technology meet at the point of sale. Today, he's helping advise CEOs and investors as they navigate global volatility, market highs and lows, and of course, advances in AI.

1:25Are we in an AI bubble? He's here now for our special news segment, Three Pressing Questions, where we get into three hot topics in each space. So what's really driving stock markets around the world today? Could this be a banner year for the U.S. IPO market? With a growing pipeline of what some are referring to as a trio of potential mega IPOs, including SpaceX, OpenAI and Anthropic, what are you expecting for the U.S. market this year? Those are very big, privately held companies. The question is whether the longer tail of companies that want to come to the market can IPO. What are the most common mistakes that companies make in the years leading up to an IPO?

2:05Truly listing ready is a couple of things.

2:10Chris, thanks so much for joining us. Michelle, pleasure to be here. So just to start off, I would love to hear about your path here to the New York Stock Exchange. Before this role, I understand you already had spent years working in investor relations and advising public companies. and markets. What did these experiences kind of teach you and what guiding principles really stayed with you? Yeah. So I am coming up on a decade at the New York Stock Exchange. Thank you very much. Time certainly flies. I came to New York right out of college in 1990, always had a goal to come to New York City and really started in a niche kind of industry called proxy solicitation.

2:50And that was working with companies who at the time were quite often being threatened by very aggressive investors, kind of the precursor to today's activist investors. And that experience really got me interested in the public markets and working directly with public companies. I won't retrace all 30 something years of my career, but leading up to the exchange, I ended up at the exchange. I ran a partnership with the exchange at another company. And that company also worked with public companies. And so when the exchange called me to become global head of listings, it was an opportunity to work for an amazing institution and really for me to essentially gain access to some of the greatest companies in the world.

3:35And I thought it was a great opportunity for me to use all the experience and expertise I had gained over 30 years and bring to an amazing platform. Was that an easy decision for you to make just to make that leap? Because I did see that you were also at some of your previous companies for quite a long time as well. I was. Yeah. I'm not someone who's always thinking the grass is greener on the other side. And it was an opportunity for me to leave a company that I really loved. We had a very close-knit company, but it allowed me to go to a partner. And so I kept the relationship with my former company.

4:08So that made the decision relatively easy. And just being able to work for the New York Stock Exchange, if you talk to the people that work here, there's a sense of pride in representing this institution. That is hard to explain unless you kind of get inside the walls here and start working here. You know, it's very funny because obviously I was just telling you off cam that I spent most of my career at CNN. I always say that I grew up in that newsroom. And I think I very much relate to that, right? We all felt like that allegiance to the three letters that were not on the back of our jersey but may as well have been.

4:37Yeah. I would love to just, you know, for our three pressing questions today, start off with getting your take on obviously the current state of markets. Perhaps the biggest ongoing question for everyone is what's actually driving stock markets right now, not just in the U.S., but around the world. And where do you think consensus might be wrong? Well, you know, at the New York Stock Exchange, you have to look back at history and the history of the markets. And when you look over time, the markets generally go from the lower left to the upper right in terms of graphs. But there is volatility in between.

5:12And I will say when you ask what's leading the market, certainly the U.S. is leading the market. You know, the U.S. is about, give or take, 25 percent of global GDP. But when you look at our markets and the market capitalization of the whole U.S. market, we're knocking on the door or really at 50 percent of global market cap being represented in the U.S. And so when you look to markets globally, you really need to look at U.S. market leadership. And, you know, it's pretty obvious that the technology boom has been leading the marketplace. And obviously, this is the first time we're going to say it.

5:47But AI is a very important part of that technology boom now. I think what's kind of missed in the AI boom are some of the companies that are really developing the infrastructure of AI that are doing very well. Some kind of companies that may be, quote unquote, traditional industries from industrials that are really the picks and shovels of the AI boom and are doing amazingly well. Companies like Wednesday of this week was Earth Day. We had GE Vernova in, which was created a little over a year ago, and they produce gas turbines that are helping power data centers around the world. There's a great company that we have here at the New York Stock Exchange called Amphenol.

6:31I would say many people may not have heard the company, but they are providing a lot of the components that go into the AI boom. Companies like Eaton, Invertive, all these companies on the industrial side that are really playing a big part. So the leadership of AI is not only the technology companies that everybody knows the names of, like NVIDIA, but it's all these other companies that are really developing the infrastructure. Right. Realizing that there's an entire ecosystem there. I think that's such a good point because they frankly don't come across as the most sexy companies to know, right?

7:01People might glaze over when you talk about them, but they truly are winners of the AI boom and are probably underrated here. When you look at their income statements and their cash flow generation, they are sexy in a lot of different ways. Not at all. Not at all. That is so funny. So much of your job, Chris, is about working closely, obviously, with the nearly twenty five hundred companies listed here on the New York Stock Exchange. What are you hearing from CEOs and investors as they consider the overall landscape this year in terms of not just, you know, AI, which you just alluded to, but, you know, overall outlook?

7:33Yeah, it's interesting. We just completed our CEO agenda, which is our third annual CEO survey that we conduct with the Oliver Wyman Forum. And CEOs are generally positive about the outlook. They are certainly leaning into growth. That is their key category. And they see a lot of opportunity for growth. but they also see a lot of opportunity through disruption. So whether it's geopolitical disruption that is impacting their business, they actually see opportunity to take advantage of that. Cost savings, which is always a component of what companies do, while important, are less important than growth right now.

8:17And there's a separation in companies in terms of AI leadership and kind of AI laggards, if you will. companies are still trying to figure out how to deploy AI and what it means from a growth perspective. I think most companies look at AI right now as a productivity tool. But I think for AI to truly flourish, it needs to become a tool for growth for companies. And companies are still trying to figure out that latter part. So much to unpack there. Firstly, I guess I just want to follow up on something you mentioned that was so interesting. You're saying that some companies actually see the geopolitical volatility as an opportunity.

8:57What do you mean by that? Well, I mean, there are disruption to industries, whether it's supply chain or otherwise, that could give a company that is more nimble and faster to move an opportunity to pick up market share. And I think a lot of companies are better suited to handle some of the geopolitical disruption because of what they had to deal with six years ago during COVID when all their companies were disrupted. And they've become much more resilient, whether it's supply chain or their staffing. And so they're just better suited now to take advantage of serious disruption. And on the subject of AI, obviously, I mean, I'm sure you get asked about this multiple times a day.

9:36But I mean, we've been seeing some really interesting headlines, right? I think you must have seen that Allbirds recently, the sneakers company, said they're going to try to go all in on AI. We saw a huge stock rally there. And obviously, there's all these questions all the time of, are we in an AI bubble? What do you say to that? I think it's healthy that people ask if we're in a bubble. Usually bubbles are looked back upon in retrospect and people don't realize they're in it. So the fact that we're aware enough to be questioning whether we're in an AI bubble, I think is healthy for the market.

10:09And we've seen various periods of disruption in the AI space itself in terms of valuation and then for it to bounce back. I think it's a question that is difficult to answer currently. Valuations certainly are relatively high, but they're not at levels that I think cause a lot of concern across the marketplace. I think ultimately this question will be answered by the actual providers of AI if they find a path to profitability. It's not there yet. And a lot of the people in the ecosystem, folks that I mentioned earlier, are the ones that are really making the profit. But for AI to survive long term as a viable business, the companies that are actually providing the AI tools need to be profitable.

10:58And they're in huge investment modes now. It's are they going to get the return from that investment two years down the line, five years down the line, 10 years down the line? That really is the question. That makes a lot of sense. You know, between the current conflict in the Middle East, broader geopolitical and trade tensions, and then worries about private credit, it's no secret that volatility is top of mind for a lot of folks right now. How is the environment shaping the actual IPO timing right now? Are you seeing any kind of hesitation from companies? Because I know that shifts. Yeah. So the pipeline is very strong for IPOs.

11:31It's been like that for a while, though. You know, at the end of 25, in the fourth quarter of 25, we're very excited for what looked like a very strong IPO market to end the year. the government shutdown happened. That kind of delayed the timing of many IPOs. We get into this year, a lot of the geopolitical concerns have pushed IPO timing back. So the pipeline remains strong. The IPO market itself is a bit up and down. But I think generally speaking, we're in a healthy period for IPOs, notwithstanding everything that is happening in the world. And so, you know, yes, there's market volatility, but the VIX, which is a very popular volatility measurement, is pretty stable right now.

12:16And we're seeing companies that are really strong businesses, profitable businesses, have very successful IPOs. Last week, we had a company called Madison Air. For lack of a better description, it's an HVAC company, but they work on air filtration. Really important. There is a story along the line of data center buildout that's happening. But it was our largest industrial IPO in like 30 years, like really, really big IPO, very successful business, very profitable, growing. There are stories for businesses that can come out and do very well with an IPO right now. Yeah. Don't sleep on the industrial ones.

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13:35Eligible students get a year of Microsoft 365 Premium and a year of Xbox Game Pass Ultimate with a custom color Xbox wireless controller. Learn more at windows.com slash student offer. While supplies last, ends June 30th. Terms at aka.ms slash college PC. Okay, some analysts are calling this a potential blockbuster year for IPOs. Which I'm sure is music to your ears with a growing pipeline of what some are referring to as a trio of potential mega IPOs, including, as I'm sure you asked about, SpaceX, OpenAI and Anthropic. What are you expecting for the U.S. market this year? I mean, you kind of talked about the fact that it's still very healthy and robust.

14:15But do you think we should be expecting that IPO parade, as some people are hoping? Well, we'll see. Those are, you know, three very big privately held companies that would be IPO size like we've never seen before, which is really, really exciting. I think the bigger question is those three companies kind of stand on their own. The question is whether the longer tail of companies that want to come to the market can IPO. And I'm not sure whether it's one of those companies you mentioned, if that's going to open the floodgates for others. I'm hopeful that the other companies that really want to come that are more normal size have the ability to access capital so they can grow.

15:01You know, there's about a thousand unicorns in the U.S. I think it's about 1 ,500 globally. Companies that are worth more than a billion dollars or more that are privately held. We need those companies to come to the IPO market to really make it a lasting IPO market. So everybody's excited about those three companies. How could you not be? But for real to be a sustainable IPO market, we need companies earlier in their life cycle at slightly lower valuations from a market cap perspective to access the public market. Yeah. Just, you know, a shoddy billion dollars. No big deal. No, I know. It's an amazing figure to start a company that's worth a billion dollars.

15:42No, exactly. And it's so funny you say that because I've been taping with other folks here in the city, as I told you. We just taped with Away CEO just now before coming here, Peloton CEO, Canva co-founder. And, you know, it's something I definitely press them on. But of course, they're only going to tell me so much right now. So I think definitely one to watch in the unicorn space. Yes. You know, I'd love to turn to roadmap in the near to midterm. What do you see as a New York Stock Exchange's next phase of growth? You know, what are the top strategic priorities for the exchange over the next, let's say, one to three years?

16:15So a couple of things. One is I'm I'm going to stick to our core business, and that is listing companies. I just mentioned about the number of billion dollar companies that are still private. So I really feel like there's a secular reversal coming on. If you look at the last 30 years, the number of listed companies in the U.S. has declined dramatically. It's basically been cut in half. That's shocking. So given the number of companies in the private market, I'm hopeful that they're ready to come public sooner. And right now we have an SEC that is really looking to right size disclosure regulation that we think is going to make the public markets a little bit easier to navigate for smaller companies.

17:00And that's really, really important. Our biggest companies, they may not like some of disclosure regulations, but they can handle it. They have the resources. They have the scale. It's smaller companies that are coming to market that may need some relief. So things like executive compensation disclosure, a regulation called SK that really dictates the qualitative narrative around financials. And importantly, we expect that the SEC will have regulatory proposals around the option to have semiannual financial disclosure versus quarterly. And that may open up the eyes of some private companies and say, hey, that's not too bad.

17:40I could deal with semiannual. I don't need to do it every three months. So we'll see. I was going to ask what you thought of that, because obviously one of the biggest things we consistently hear from public company leaders is balancing that pressure to deliver on short term expectations with the freedom to carry out a longer term vision. It sounds like also you're talking a little bit as well about the more practical implications of literally just getting your act together every three months and having the staff to do that. Right. So it sounds like you're on board and very much in support of that.

18:07Well, I'm on board of the option for companies to do that. I don't think every company will make that choice. There are certain industries. Take biotechnology. You're a biotechnology company. You have a drug in development. A quarterly call is not really going to provide a lot of information to investors. And so allowing companies like that to have the option to report semiannual financials, they may be pre-revenue. They don't have a lot of financials. And then provide just updates on the progress of their drug development will free those companies up with more time to do the R &D that they need to do to bring drugs to market.

18:44So there are certain sectors that I think this will be very beneficial to. Other companies, they're pretty ambivalent about it. They are worried about investor reaction. They may have bond covenants that don't allow them to report financial semiannual. They need to report quarterly. So there are a lot of different factors, but providing companies of different sizes and different sectors, the option to do that, I think, is really great and really important for the markets. Such a good point. You know, some companies have different horizons that they can look at. What are some of the biggest operational challenges that exchanges face today that most people don't see?

19:18You know, what's the hard part of your job? I will say I'm on the business side. My job is really to work with our listed companies, which I love doing. And it's a great job. The hard part of running the exchange is actually running the market and the technology behind the marketplace. And really, you know, over the last six years, really since COVID, the markets, both the equity markets and the equity options markets have hit record volumes year after year. And so our markets, we have our trading system is called Pillar based on the six pillars of our building. And thank goodness we have invested a lot of money into that technology because we haven't seen volumes like this in our history of the exchange.

19:59The ability for our trading systems not only handle the volumes, but the amount of what we call messaging, the indications for orders that come over our systems, they number in the trillions per day. And so the U.S. markets writ large, I give credit to all of the exchanges, has really handled the increased volume of trading really, really well. And so we keep our fingers crossed that we continue to make the right decisions and our technology continues to hold up. We do more than keeping our fingers crossed. We actually work at it. But, you know, then there's, of course, other, you know, threats to the business that come with an electronic business that we have along with the trading floor.

20:40So that's the really hard part of the business. And we do a great job. And so those are a challenge. I will say originally your question is kind of what's next. We're looking to a couple of things. One is trading 23.5. So a lot of people don't realize that our electronic markets actually open up at 4 a.m. now. They close at 8 p.m. The core market hours are 9.30 to 4. We'll be expanding them along with the industry from 9 p.m. start all the way up until 9.30 a.m. So there will be a hour break from 8 p.m. to 9 p.m. to take care of all of the different things that we need to take care of. and investors overseas now will have more access to the U.S.

21:27markets off hours, which is pretty exciting. Yeah, I think my mom would be happy to hear that one. I'm actually from Hong Kong, so my mom's always talking about U.S. stocks. It is incredible the amount of interest in U.S. equities from the likes of Hong Kong, from Korea. It really is very interesting. And if you look at after hours trading, it's now about 10 % of overall volume. And a lot of that comes, most of that after hours trading is pre-market hours leading up to 930 with orders coming from Asia. So there's so much interested in the global companies that are in the US. What do you think is feeding that voracious appetite and the higher volume that you're seeing?

22:06Because I can imagine it's quite different from over the years that you've been here. It is. I really do think it's about the notoriety of the companies in the U.S., how big they've gotten. I noted that the U.S. is almost 50 % of global market cap. And the performance of the market over time has led people to look at the U.S. as just a place to invest. as information and technology makes it easier to access our markets, the interest has grown. And, you know, we have a lot of CEOs in the U.S. that are very big personalities, experts in their field, very charismatic people, and that attracts investment from all.

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24:06Yeah. Well, what's interesting is the U.S. from an exchange perspective is highly competitive. New York Stock Exchange, NASDAQ and several other exchanges. And then there are some regional exchanges that are starting to start are starting up. And I always kind of take a step back. I said, what makes our business so attractive? It's a good business, don't get me wrong. But my statistic before talked about the decline in U.S. public companies. So I'm like, okay, we're not in a secular growth mode yet. We hope to be with IPOs. And then even trading in the U.S. is hyper competitive. And yet there are a lot of people that want to be in the exchange business.

24:44Everybody's got that dream of coming to Wall Street. It really is true. It really is true. So the competitive structure of the markets in the U.S. is really interesting. And so we compete very hard for every single IPO. It is a zero-sum game. So one exchange wins, one exchange loses, which makes it very, very high stakes. The exchange has an amazing history, but we don't want to rely only on our history to win companies. Our technology is first in class and really our market model, the way we trade stocks is not only different than any exchange in the U.S., it's different than any other exchange in the world.