We begin this hour with stocks slightly lower, following the biggest slide in three months as investors search for direction. Morgan Stanley chairman and CEO Ted Pick has seen it all and he joins us now for more. Ted, good to see you guys.
Thanks for having me. Electric moment. You must be feeling good.
Feeling pretty good. You're not going to be in the speech in about 28 minutes time. Going to avoid that?
Yeah, I'll be with you guys.
Let's talk about how things are set up for '26. We've drawn a big distinction between the energy that's coming from European officials and the emotion they have about a place like Greenland and the optimism that people have for the broader U.S. economy, particularly from bankers regarding the pipeline and the amount of debt issuance we've seen over the past few months, the debt underwriting that you've really benefited from, that's going to fund a lot of the transition. How amped up are you about the year ahead?
Well, thanks for having me, guys. Great to see you. I'm pretty amped up. You know, we had several years where the M&A activity was trying to get going and then COVID happened and then rates roofed. And it's taken a while for that to unglue. But this kind of, in this case, literal noise speaks to C-suite need to act whether it's to re-globalize or reorient where your operations are, who you want to do business with. And as long as there's activity, we're busy. So cross-border M&A, large-cap M&A are going to be important. AI acts as an accelerant to that, too. If you want to actually get after the productivity gains embedded in AI, you have to have the wherewithal to do it. And if your market cap is 30 or 40 billion, that's tough. You know, how do you take a couple points off your income statement to do that year after year? But if you're 200 or 300 billion, maybe you got a shot. So people are thinking bigger. And then the sponsors, you know, a couple of thousand companies that have been sitting there that are billion-dollar market caps, they need to come. And then very importantly, you have these great companies that have been private. And over the last 15 years, we've seen companies go public to diffuse options or effectively be secondaries. You may actually see great companies that are growth companies, some of them in the AI ecosystem, they want to go tap capital. So for the investment bank, a great period, and for a wealth manager leading wealth plans in the US and the world, you want to allocate your capital efficiently. So very exciting for some banks, some of those business lines.
So let's just pick up on the IPO pipeline, the activity we could see later this year. SpaceX, OpenAI, we're talking about some absolute monsters. Even the team have been historically quite dominant in the tech sector. What are you doing right now to prepare for that moment that might be in our future?
Well, these companies, you know, you bank them for a whole bunch of years and you get to know them. So there's a process, obviously the formal bake-off process and then the go or no-go decision. But typically, the company has a pretty good idea of what it wants to do ahead of time because it's selected its group. And the stakes are really high this round because, as you say, these implied market caps, these companies are enormous, but also they are paradoxically, they are very large, but also mega growers. They have, you know, some of them have a little bit of a change-the-world feel to them. So they could become must-own. I mean, one of the things that you guys have talked a lot about is so much of the equity base has become either beta or it's become kind of the seven or eight names. What if there are some additional companies that are three or four or $500 billion market caps, trillion, trillion and a half market cap? The active management community says, I want to own that. I want to own that from the time of the IPO. So I think it's not just Wall Street getting to know these companies. It's a whole bunch of investors who've either backed into early rounds or want to be there when the IPO comes.
When we were speaking with you a year ago in these seats, you were talking about how it was going to be a great year for IPOs and M&A. And it was for your bottom line. You had an incredible year. There was, though, a lot of IPOs and a lot of deals that got stymied by Liberation Day, policy uncertainty. What has to go right for some of these deals to come to fruition? OpenAI, Anthropic, SpaceX?
Well, I think part of the reason these companies are so interesting to investors is they are not rushed to go public. So there has to be an element of being patient. If you're in and around the ecosystem, they don't have to come in the first half of '26, come in the second half of '26, could even come in '27. But they are drawing a whole bunch of interest to names like them, derivative plays, and the ecosystem is, you sort of just aggregate the entire daisy chain. Where do you want to play? So the anticipation of the company going public almost is as important as the company itself coming. But whether they come in '26 or '27, they're going to come. They're going to come.
It's sort of a dissonance right now when you talk to business leaders about how much enthusiasm there is for deals and for energy in the US economy. And then when you hear the policymakers, you hear uncertainty and you hear 'Sell America.' How do you square those two narratives at a time where you do hear a growing number of investors say they are diversifying away from U.S. assets?
