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IPOs: Companies ‘not feeling rushed to enter the public markets,’ Nasdaq head of U.S. listings says

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Nasdaq Head of U.S. Listings & Revenue Karen Snow joins Yahoo Finance Live to discuss the IPO slowdown, which IPOs to watch for, and the outlook for public markets.

Video Transcript

- The IPO market has seen a slowdown in 2022, with companies raising a combined $4.9 billion in the first half of the year. That's less than 6% of the record amount raised in the first half of 2021. That's according to Bloomberg data. Joining us now to discuss the future of the IPO market is the NASDAQ head of US listings and revenue Karen snow.

Karen, thank you for being here. Not surprising that we've seen a slowdown. We've seen a slowdown in the market overall. Still, a lot of companies are privately held and are very big. We've got a record number of unicorns that are still in the private market. So what are you guys seeing at NASDAQ in terms of what kinds of activity is maybe percolating?

KAREN SNOW: Yeah. Well, I would say the first half, we've been really pleased with how well the IPO market has actually held together. We issued 108 IPOs at NASDAQ, which represented about 80% of the total capital raised. And that included 7 of the top 10 largest deals. In terms of deals percolating, lots of conversations with companies that are looking to tap the market when the window is right and opens for larger IPOs. We've got 240 S-1, F-1s on file.

So those are companies that are prepared and ready to go. And that compares to about 265 on file last year at the same time. So we're not really seeing companies decrease their interest in hitting the public markets. We have seen some SPAC withdrawals, which I'm sure we'll talk about a little bit. And we have seen some companies decide to go the M&A route.

So companies are evaluating all their alternatives. I would say that they're not feeling rushed to enter the public markets. There's plenty of private capital out there. So they're really just weighing all their alternatives. But we're excited about the breadth and depth that we're seeing from the general sectors that are really looking to tap the market. So you've got tech, consumer, health care, industrial companies, fintech. We've also got some commercial banks, of course, as well as energy now.

- Karen in terms of the revenue that the company NASDAQ, the exchange and stock market, usually sees from these listings that come through and the exchanges that take place prior to the actual listing, has the exchange trimmed some of the hard dollars that get offered in terms of getting these companies to list on the exchange? And then even additionally so, what extent to which are some of those existing listings coming knocking for some of what's offered in the partnership proposals?

KAREN SNOW: Yeah. We haven't pulled back at all. In fact, I would say that we're leaning in more than anything. We view our relationships as partnerships, and for the long term. So we're really interested in making sure that we're allocating our marketing dollars in a way that supports our listed companies. About 90% of our own marketing dollars actually go towards our listed companies. So we continue to lean in and look forward to partnering with companies as they go public.

- Karen, the companies that are teed up in the deal pipeline, what's the biggest thing they're looking for to ultimately pull the trigger on going public?

KAREN SNOW: Stability in the marketplace. So we're looking at the VIX is a key indicator for us. That's currently around 29. And we typically see about 90% of companies go public at 25 or below. And 95% go public when it's 20 or below. We're also looking at all the same key economic indicators that you have all been talking about for days around inflation, what the Fed is doing, the war of course.

So there's a lot of components that go into that VIX and the stability in the marketplace. But it's really hard to market a company, a new company especially, when the market's all over the place. And investors want to make sure that if they step into a transaction that it's not going to be down 20% the next day.

- We've certainly seen a precipitous drop in terms of the share prices for some of the SPAC companies, the DSPACs, if you will. And so with that in mind, are the single purpose acquisition companies-- are they recession-proof?

KAREN SNOW: Well, I would say that the IPO, or the SPAC themselves, are somewhat recession-proof. And they've actually not dropped. What you are seeing is the business combinations which you're referring to have. And I would say that when you compare that to the IPOs that also came to market, there's very similar performance. Companies need to evaluate what alternatives are available to them. We have seen some great companies go the business combination route.

And one I'll point out that just went was Polestar, which is a spin out of Volvo. EV company. And that transaction has been very successful. They had very few redemptions in comparison to what we've been seeing of late. So I would say that there's now 590 SPACs out there looking for business combinations. There's 119 that have announced. So there is a lot of paper out there chasing targets. And we've seen roughly 60 business combinations completed year to date. And as I mentioned, we've got another 120 in the pipeline looking to close.

- Karen Snow, head of US listings and revenue over at NASDAQ. Good to see you. We'll talk to you soon.

KAREN SNOW: Thank you