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NYSE expects ‘robust pipeline’ of companies for back half of 2021: Tuttle

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NYSE Vice Chairman John Tuttle joins Yahoo Finance to discuss the boom in the IPO market, the different strategies companies are taking to go public on the NYSE, and Chinese companies future in the market.

Video Transcript

BRIAN SOZZI: The IPO train appears to be kicking back into high gear. This morning, sneaker maker On Holding debuted over at the New York Stock Exchange. Again, we're still waiting for that first trade for that company. Rival Allbirds is expected to IPO soon, the same for electric truck maker Rivian. John Tuttle is vice chairman at the New York Stock Exchange, and joins us now.

And John, I'm sure you're wearing the On sneakers. This morning here, that company is about to debut over by you guys. What do you think is driving this pickup in IPO activity right now?

JOHN TUTTLE: It's a good question. And I am wearing some On sneakers. I'm drinking some Dutch Bros coffee, who is also going public today. But it is an exciting time for the equity markets. I mean, 2020 was a record year for the New York Stock Exchange. We've already surpassed that record in 2021.

And it's a group of companies from across geographies and sectors that are coming to market. What we're seeing right now in the market, and what we expect through the end of the year and probably into 2022, is-- is a lot of technology companies, a lot of health care companies, but also a lot of consumer facing names like you see behind me with On sneakers and Dutch pros coffee.

So investors are attracted by what they're seeing in the marketplace. A lot of these companies have been performing well as we make our way through what I hope are those final stages of the pandemic. And the market's been giving them a very warm reception when they go public.

JULIE HYMAN: You know what's also interesting, John-- hey, it's Julie here-- is that we have seen a shift in the way that they're going public, right? The first half of the year was all about SPACs, and then completing those mergers and going public.

Now, it seems like-- at least, anecdotally-- that we're shifting more back towards traditional IPOs and also direct listings. What do you think is going on there? Is that what you're-- I mean, I say it's anecdotal, you guys have the numbers-- is that what you're seeing? And why do you think we're seeing that?

JOHN TUTTLE: Well, first of all, I'm excited that there are options for companies in how they go public. Now there are more pathways to go public that are more tailored to meet a company's objectives as they become a public company. So now, companies can take different paths. So SPAC is obviously one of them that you mentioned, direct listings, IPOs, and we're seeing a healthy mix of all of them.

Historically, and what we're continuing to see, is that most companies will come to Market via the traditional IPO route. But what we're also seeing is that more and more companies are going through the direct listing. So if you remember, we had one in 2018 with Spotify, one in 2019 with Slack.

And since that time, the number of companies that have chosen that route has increased significantly, and will continue to. So what I think is most exciting-- and we've been leading a lot of this innovation here-- is that companies have more options and investors have more options.

BRIAN SOZZI: John, why do you think they are choosing direct listings?

JOHN TUTTLE: Well, companies go public for different reasons. Historically, it had been to access capital that they could use to grow and expand their business, launch new products, and tap into new geographies. Companies don't necessarily need to raise capital at the time of their listings. It depends on every company's business model and fundamentals.

But they may be looking for some of the other benefits of being a publicly traded company, and prioritizing those when they come to the market. And that can be liquidity for their investors and shareholders, is what we oftentimes see with direct listings, having a share currency that they can use for M&A activity to grow and expand the business, or even just branding and visibility as they look to establish themselves as a great global well governed public company. So companies-- in short, companies are going public for different reasons now.

JULIE HYMAN: And John, talk to us about momentum. I assume-- I mean, is it safe to say 2021 is going to surpass 2020 in terms, you know, that we're going to continue the momentum and it's going to be a record year? And then, what happens in-- in 2022, which is definitely going to be something of a transition year, it seems, for the economy?

JOHN TUTTLE: Well, we expect a robust pipeline of companies for the back half this year. We're already setting all time records at the New York Stock Exchange when it comes to new equity issuance or IPOs, and there's a whole host of reasons for that. Some companies are performing quite well, and view this as the right time for them to come to market for the reasons we identified before-- to raise capital for liquidity, for M&A, or even just for branding as well.

But also as investors look at different asset classes and where to allocate their capital, one of the ones that has been giving them a meaningful return over the past few years-- and in the past 12 months in particular-- are equities and IPOs. So as long as those conditions continue where interest rates are low and relatively stable, volatility is low and relatively stable, and companies-- public comps, or the companies they're comparing themselves to in the public markets-- are flirting with their record highs reflected by our indexes, the IPO window will remain open.

BRIAN SOZZI: John, within that pipeline of IPOs, what component, or is there a percentage of Chinese companies in the mix? I mean, the regulatory outlook for China has continued to worsen this year. Have you just seen Chinese companies just-- they're just frozen out, they're unlikely to go public anytime soon.

JOHN TUTTLE: Yeah, there was-- it's a really good question. And we saw a lot of activity in the first half of the year with companies from China coming to the US markets to access capital to grow their businesses, and investors were participating in that.

Two factors have come into play. First, is that Congress passed legislation that increases scrutiny on auditors of Chinese-- of many of these Chinese companies, and requires inspection. The second part of that is, the SEC has indicated that they want to see increased disclosures around some of these companies that are going public in the United States and some of the structures that they may be using to access the public markets.

So what's going to happen is, it's going to require a diplomatic solution with regard to the audit inspection and some of these other components of it. We encourage our governments to get together and talk, and we hope that happens sooner rather than later.

BRIAN SOZZI: And John, just to follow up on that, do you think-- what would happen to the overall market in what you guys do over there if Chinese companies are delisted?

JOHN TUTTLE: And, look, we-- we hope Chinese companies are not delisted, but we also want to make sure that the US capital markets continue to be the most well governed, the broadest pool of liquidity, the deepest investor base of any marketplace in the world. If we look at our profile of companies here in the New York Stock Exchange, we have 2,400 companies, they're from 46 countries around the world, they represent over $40 trillion worth of market capitalization. So we're well represented across geographies, sectors, and sizes

BRIAN SOZZI: All right, we'll leave it there. John Tuttle, vice chairman over at the New York Stock Exchange. Enjoy those On sneakers, I heard they're very comfortable. Good luck for the rest of the week.

JOHN TUTTLE: Thanks so much. Indeed, they are. Take care, guys.

BRIAN SOZZI: [CHUCKLES] Take care.