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Nasdaq Stock Exchange president on IPO outlook amid COVID-19

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Nasdaq Stock Exchange President Nelson Griggs joins Yahoo Finance’s Seana Smith to discuss market operations amid the coronavirus and the outlook on IPOs.

Video Transcript

SEANA SMITH: Welcome back to Yahoo Finance's live market coverage. Now, the coronavirus outbreak has upended US equities trading. The New York Stock Exchange has closed its trading floor, and the NASDAQ has closed its option floor in Philadelphia. Now, all of this happening, of course, as we've seen market volatility spikes.

So let's get more on this. And for that, we have Nelson Griggs, president of the NASDAQ stock exchange. And Nelson, thanks so much for taking the time to join the show this afternoon. We're excited to have you on. I guess let's start with-- give us a sense of what the last two months have been like with your entire operations working remotely.

NELSON GRIGGS: Sure, well thanks for having me. So historically, we are about a 4% work from home and very quickly went to a 98% work from home. If you think about the exchange's responsibility, though, we have been through shutdowns before over Sandy, et cetera. But most of the BCP planning, the backup planning, is thought about in terms of days and weeks, not globally for months. So we did very quickly put plans in place. We were pretty early on this because of what we saw happening with our operations in Hong Kong.

So we have been incredibly resilient, I think not just NASDAQ but the entire Street. I think we all feared the worst, in terms of what it would be like to work from home. And it has been really-- from a market operations, obviously there's a lot of volatility, but it's been really seamless.

SEANA SMITH: Nelson, can you talk about-- I mean, at a time when there's so much uncertainty and there's so much volatility in the markets, it's spooking a lot of investors out there. What kind of relief measures are you providing to listed companies at this point?

NELSON GRIGGS: Yeah, I think the one thing that comes up in times like this, and we saw this as well in the financial crisis, is companies that are on what we call more of the smaller cap end of the range, concerned about rules around having that minimum dollar bid price, minimum market values. And the SEC has been great to work with. Both ourselves as well as the competing exchanges have come up with plans that have been very-- the SEC has been very receptive to give temporary relief for those companies with the idea is that this is probably more of a temporary downturn and then we'll come back. And we saw that in the financial crisis.

SEANA SMITH: Yeah, Nelson, you talk about the fact that it could be a temporary downturn. We have shifted our focus almost, or I guess the direction of our conversation recently, talking about people getting back to work, the return to work here, and the potential return to-- I don't know if we want to put it in quotes, but what normalcy will look like going forward. What do you think that could look like?

NELSON GRIGGS: Yeah, I think what's interesting to us is-- so we do operate in over 30 countries. So it is a very country by country, even-- and then you get to the US, it's state by state. There's a lot of local regulations and rules to figure out about what we actually can do with our employee base. So it's going to be gradual.

We are fortunate. Our business is very resilient, so we're not forced to go back early, by any means. But our hope is that we see gradual returning to work with a lot of precautionary measures around temperature testing, social distancing. The biggest thing to figure out early are transportation-- public transportation and how do you get a workforce to work?

So it's a daily call we have with our executive leadership team to talk about how that could look, but I think we all have to be understanding that it's going to take some time and it's going to be gradual and we should expect it to be-- you know, have a bit of a lumpy effect.

SEANA SMITH: Hey Nelson, so when we talk about returning to work, some of the questions I guess that have been raised I've been reading about is whether or not US exchange trading floors are still going to be relevant post-coronavirus. I know the NASDAQ in particular, it's mostly remote trading. You mostly do it all online. But what are your thoughts on that, just in terms of what we could expect going forward and what will be necessary going forward?

NELSON GRIGGS: Yeah, I think we'd separate the equities market from the options market. There's unique components of the options market. We still see value in a floor. But it's pretty clear during this time with the equities market, most of the volume today is happening away from a floor environment, as is we measure the quality of trading. And we do feel that NASDAQ does electronic trading the best in the world. But electronic trading better serves investors because there's not really that conflict of interests that we see in the floor-based models for equities.

So you know, we'll see how the floor-based markets-- there's really only one left, how it comes back. But I think at this time, investors are actually being served very well with tight spreads, liquidity, and we're seeing the markets operate very, very efficiently.

SEANA SMITH: Nelson, I want to hear your thoughts on the IPO market because it's come to nearly a standstill over the last several weeks. So how do you think-- or how has coronavirus reshaped the 2020 IPO timeline?

NELSON GRIGGS: Yeah, well, it certainly has reshaped it. It hasn't come to a complete stop. We have had six health care companies, biotechs go public, and we do believe we'll have more. And there actually is a small pipeline developing of companies that were on the cusp of going public in February and March that still have an active dialogue going about a June, July timeframe.

But clearly, the biggest challenge for a companies when you do go public is you need to forecast your-- you know, your financials for the remainder of the year, the coming year, and that's gotten very hard for many businesses. So we still think there can be an IPO market.

That's part of the reason why you see health care being successful is because the lack of need for forecasting. They're talking about, you know, two years, four years, five years down the road for developing drugs. But we do think we'll start seeing the IPO market open up a bit in June, July, August, but be fairly slow. And then we do think it'll pick up more robustly as the year progresses. There's a lot of companies would like to go.

SEANA SMITH: Yeah, Nelson, you mentioned the fact that you've had six companies go public. How are you facilitating those virtual IPOs. What exactly does that process look like at this point?

NELSON GRIGGS: Yeah, that's a great question. So as mentioned, we've been incredibly impressed with our partners, the trading firms, the banks that do trade through NASDAQ. So they can really operate as they do today. NASDAQ operates, as we always have-- we provide a very robust tools-- toolkit to companies, investors to go public-- or sorry, the trading desks. And we have our team that does that. So that that's been very, very fluid.

The challenge for companies is if you think about what a roadshow used to be, it used to be going for eight days to all these different cities on planes. And now it's usually been four days on video. But I would say the deals that have come out have all been received very, very well. They've traded well. And I think that companies were able to get their message across, you know, clearly enough to drive that investor demand, so different but also surprisingly successful.

SEANA SMITH: Nelson, real quick, in your line of work as the president of the NASDAQ stock exchange, you talk to a lot of executives because it's in your line of business. What are you hearing from these CEOs? What are you hearing from these executives, just about their outlook over the next couple of months?

NELSON GRIGGS: Yeah, and I think we look-see a little bit that's developing actually in the market in performance. It clearly has been a market where technology, health care have done very well. The averages there-- the NASDAQ 100, the NASDAQ composite, the biotech-- are actually positive now for the year. Clearly, value stocks in certain sectors have been hit very hard.

So I think you do need to look at the market, look at companies on a very individualist basis. What does their sector look like? But clearly, everyone says a lot of consistent themes. They think about their employees, their health, their safety and well-being.

And then depending on which side of the market they're on, it's either how do I accelerate through this and find new opportunities? For some, they're thinking about, OK, I need to really conserve cash, find cash, and prepare myself for, you know, a handful more quarters or even a year or so, what's going to be a slower market for their businesses.

SEANA SMITH: All right, Nelson Griggs, president of the NASDAQ stock exchange, thanks so much for joining me today.

NELSON GRIGGS: Thanks again. Thanks for having me.