Why Nasdaq's CEO sees IPO market growth ahead: Opening Bid

It's great to be here, Brian. Thank you. Thanks for letting us in the building back in New York City.

Well, coming out of 2024, we were already feeling a better sense from investors that they were ready to put risk capital to work again and to underwrite more IPOs. So the IPO environment was getting better as we went through 2024, but as you know, it's been two or three years of a pretty challenging environment. So now with the new administration coming in, there's definitely more certainty that there could be a really interesting and exciting IPO environment for this year. We would expect though that it still will be kind of back-half-weighted, as companies are getting ready, putting their dates on the calendar. They're actually doing their non-deal roadshows to understand where investors are coming from. I think that as the administration kind of sets in, it'll give people confidence to come out to the market, so we're excited about what could happen this year.

Well, I think there are a few things. First, I would actually point to the cost of capital, meaning the interest rate environment. You have to have rates go from zero to 5% in such a short period of time – that just fundamentally changes an investment thesis. Investors have to predict the future, and then suddenly they're predicting a future that has a cost of capital that's vastly different than the future they thought there was going to be, so that makes them pull back, take a risk-off approach, really look at this, re-underwrite their investments, rethink – does this company have the fortitude to operate successfully in a different cost of capital environment? The companies that are coming out now are operating in that environment for going on three years, so you know that these companies are going to be persistent, able to answer this question successfully. And then investors are likely to say, "Look, the interest rates may not go down as fast as I want, but they're not likely to go up," so they can again predict the future with more certainty. So I personally think monetary policy is a huge driver that's held it back. And then I think regulation is another thing that just keeps companies from wanting to tap the public markets because they know that being a public company is a very different existence. Our hope is that in the new administration, they're going to focus on the challenges – what I'll call the tax of being a public company. We want investor protection, we want investors to feel like they have full transparency into the operating cadence of the company and its success, but we also think there's been a lot of additional regulation piled on being a public company that should be reexamined, and we're excited to engage on that.

Yeah, I think the first thing is reexamining the proxy process. I know that's very technical, but at the same time, it's a process that companies go through every single year, and the amount of obligation being placed on them – the question really is, are the proxy advisers regulators? Last time I checked, they weren't, but they're also not regulated, and that's a problem too. They don't really have the guardrails put on their operation. ISS and Glass Lewis – they don't engage with companies, so if they have something inaccurate in their proxy decisions, the way they're recommending a vote based on inaccurate facts, there's no way for a company to correct those facts in time for them to put out the recommendation. So there's some basic plumbing that could change. I think also the fact that there's even the PCAOB – very technical – but the accounting obligations put on firms. There were going to be some very significant changes proposed in the last administration that we're hoping do not continue because they would have had to make essentially every accountant a lawyer, and that's a very different way of evaluating risk within a company. My brother's an accountant – I don't think he can – I don't think he has lawyer skills. Sorry, bro, it's a different skill. So there are things like that that sound very technical but really make a difference in a company saying, "This is going to be exciting, I'm going to attract new investors, I'm going to be able to have acquisition capital, attract and retain my employees" – all the great things about being a public company – but you have to balance that against what the existence is and whether the tax associated with it is too high.

Well, I do think that we are very familiar with at least those officials that are likely to come into positions that have a role to play here, and we do think that there can be a constructive dialogue in that regard going forward.

Well, first you mentioned healthcare – I think that's a really important sector for the entire economy and for society, and they've really, starting in the second half of 2024, we started seeing more of them come out and be very successful. So we definitely are feeling a lot of momentum in the healthcare space, certainly in the technology space as well, as well as all elements of technology: consumer tech, B2B software, obviously the chip space, the data center space – every element of the technology ecosystem. There are companies that are looking to come out this year, so it could be very exciting. And then of course in the crypto space, I think that there are some really well-established, mainstay brands that are excited hopefully to come into the public market.

Well, we have two roles. One as a market operator, we list products like iBIT, which allows investors to be able to invest in Bitcoin. And then we also are a technology provider to the crypto space, so we provide trading, clearing, settlement technology, surveillance technology to make sure that you're thinking about the integrity of your markets. All of that technology we actually provide to exchanges all over the world in the crypto space, so we're quite engaged with them. And then at the same time, from a digital assets perspective – the broader blockchain – we have built out Puro.earth, which is a carbon removal marketplace and registry, and that registry is based on blockchain technology. So we're using the technology as well in our own market.

There were some changes that were probably necessary. I think that – get out, there's several – yes, there are several things that happened through the enforcement process that actually have really allowed the space to mature. And now in the new administration, if they actually create rules of the road – prescriptive, proactive rules of the road that govern the markets – I think it will unlock a huge amount of opportunity for more investors to participate in those markets with confidence.

Well, that's where having some proactive regulation is going to be really important, and having investor protection at the center of that regulation is going to be critical. That's similar to the securities markets, the futures markets – they were regulated in a way that is geared towards investor protection, and it's a matter of making sure that you stay true to that mission as you're evaluating and establishing the rules. But the rules need to be there. In fact, the crypto ecosystem today, they want the rules because it allows them to know that they can operate over the next decade in a consistent way, that they won't have some big surprise come at them. So I think everyone's welcoming that process, and keeping investor protection at the center of it is going to be important.

I am a believer that the new administration is very focused on growth, and I think growth solves a lot of problems. If you can have an economy that is innovative and has consistent and persistent growth, it allows more people to participate in that economy, it creates jobs, it creates opportunity, and then it actually fuels new businesses and other things that can make it so that even more people have opportunities. So I'm a huge believer in the virtuous cycle of growth. I also do think the administration is focused on taking a deep look at regulation and saying, "Is a regulation achieving its outcomes? Are we focused on the regulations that are actually going to drive the economy forward? Are we too backwards-looking or are we forward-looking?" I think there's a huge opportunity in the financial industry to unlock an enormous amount of capital. As you know, we have a new Complexity Report that we've just launched today, and when you read it, you realize that complexity in the financial system has gone up six times in the last 50 years, but complicatedness has gone up 35 times. If you think about it, it's a much more complex world, but when you're trying to solve complexity with regulation, you create a lot of complicated processes and systems that are hard to unravel but create a huge tax on society. If the banks could actually take all that capital they're spending on regulation – some of which is very important, some of which probably does not achieve its purpose – they could redeploy that into the markets or into investments or into small businesses, and it would drive growth. I think that's something where there's a real opportunity to really take down the complicatedness in a complex world.

Well, I don't know what happens to the platform, but I can say this: I think it's a pretty unique situation. In general, though, technology companies are gearing up for public markets this year. And I also think that AI and new technologies that are coming out are going to continue to lift the economy and lift the sector and lift the markets. So we're very excited about the development of AI technology, how it can boost productivity and efficiency, and at the same time how it can create entirely new industries. If you really think about this technology and what it can unleash, it creates a whole new way of working. You may be just talking to a bot, but there's nothing like you – I appreciate that, it's our humanity that keeps us very relevant. So actually, this is funny – on the topic of AI, I think it was Goldman Sachs CEO David Solomon, on his earnings call, mentioned that AI can write 95% of a prospectus in a couple of minutes. Well, if you think about it, you've got all the facts, all the people who are there to make sure that all that data is accurate. Once you put the data in a system, it can write the text, it can write all the right – because it's actually a perfect use case for AI, and it makes you so much more productive. So I think there are a thousand of those use cases, even within the financial industry.

Yeah, I think it's going to be hugely impactful on defense and offense. The first use cases are going to be more obvious on the defense side, meaning I've got a huge obligation to report to regulators and I've got to write up all these reports. Well, as you just talked about, AI can write those reports. So you give them the facts, and AI can write the report – that's a massive time savings. We do that in our anti-financial crime suite with Verafin: it writes reports, the SARs reports, based on actually gathering data on your behalf and making sure that it surfaces the information you need, and then writes the report for you. It's great. Same with other regulatory reporting. So there's a lot of defense where the technology can be used to take out a lot of very boring, rote work. And at the same time, on the offense side, I also think that you're going to see more of it in terms of driving investment recommendations, or making it so that you can have more accurate answers to your client questions. Algorithmic AI continuing to drive interesting ways to engage with investors, using algorithmic AI to make predictive decisions.

Well, this is the way I look at it. I actually embrace the earnings call because it's like a report card. I was something grades-oriented when I was a kid, so every quarter you have to work hard at it, you have to test – an exam at the end of every quarter. And that gives you a sense of where you are in your journey and how your milestones are working and all those great things. So to me, it's actually a great way to engage with your owners because your shareholders are your owners, to make sure that they feel like they understand where you stand in terms of your report card.

Well, I know in the UK they have two earnings that are more comprehensive and then two what I would call updates in the other two quarters. As much as I actually like that because I think it drives a little bit more of a long-term orientation towards strategy implementation, I think it's very difficult to see a world where the US does not embrace the quarterly process. The one thing I would say – and I'm a big believer in this – I am not a believer in quarterly guidance. Quarterly guidance really drives short-term orientation from the investment community and as a result from the corporate community. So I think it was done in order to make sure that people didn't get overly enthusiastic, but I actually think that in general we don't provide – we provide a medium to long-term outlook on our revenue growth and then our annual cost guidance, and I like that balance in terms of being focused on the longer-term future as to where our growth drivers are and how we can achieve that, but then being very specific in how we're managing our business.

Well, if you think about it from the investor's perspective – I'll take their side for a minute – many of the analysts and investors are following like 100 companies, so they have to do an enormous amount of work to model out the future of these businesses that they have no experience in. So in a way, guidance can help frame what their expectations are over a multi-year period as they're trying to decide whether to invest in one company or another because they're always comparing you to something else. It allows you to have more comparative data. But personally, I'm not a huge guidance fan. I can actually say that a world without guidance – I think in general, I could get behind that.

Well, first of all, the rule – just to make sure – the rule that we had was a rule that we implemented that really was meant to simplify disclosures on the board composition from a diversity perspective, and then to provide an encouragement – I would say not a mandate, but encouragement – to have at least one woman and one underrepresented minority on the board or explain to your shareholders why not. That was the rule, and it was very straightforward. But the whole idea of it was actually to simplify, and as I said, you want to have data that's comparative, and this allowed them to have a very simple table that investors could evaluate across thousands of companies. So it was pretty straightforward. The courts have decided that it's not consistent with the law of the land, and that's fine – we accept that decision. But we are very proud of the fact that companies were easily able to provide that disclosure, and I think it elevated the conversation of what is a modern board, what does a modern board composition look like in today's world, and how you want to think about all aspects of diversity – diversity of experience and expertise and background. So I do think it's done a good job of elevating the conversation. As we go forward, I can't speak for all of corporate America, but I can say for Nasdaq, we've been very consistent and persistent in making sure that we're focused on creating an inclusive environment, a culture that naturally attracts great talent.

We feel great about the initiatives that we have. And I know – one, even call them initiatives; they're actually quite integrated into the culture of NASDAQ. We've been very mindful and thoughtful about how to implement them so that they are culture-driven. And then we work very hard to make sure we go out and attract more talent from different diverse backgrounds as a way to bring great people into the organization. It makes us a better company – it makes it so that we have richer conversations, we are representing our clients in a more holistic way with our own people. And I also believe that it is actually a better way to do business and it gives us better outcomes, so we're very comfortable with that.

I personally do not think so. I think in general – I can say for Nasdaq, we're very proud of what we do, we're very comfortable and confident in what we do, we feel very good about the results that we've been able to achieve in terms of creating that culture of inclusivity and belonging. And I think a lot of companies feel the same way I do, and it's just going to be a little bit quieter in how they implement.

In general, I think governance – you need to look at diversity in a lot of different contexts. Definitely experience and expertise, geography and background – I think all of those things matter because you want your board to represent your team and your clients. And as I think about the world today, it's a diverse world. So as we think about how do you bring in people who can represent your employees, who can represent your clients, and have a richer conversation, I think it is a component of it.

I can say this: it is a competitive world, and being a CEO is a competitive existence. I am a very competitive person. But being competitive and being quietly confident – they're not antithetical to each other. Having quiet confidence, being humble, being a learner, being willing to listen to other people – that's a core part of being a successful CEO as well. Being competitive, being quietly confident – we call it quiet confidence at Nasdaq – and making sure that you're always engaging with and building trust with your clients and your team – that's what creates greatness in a modern CEO. And I think that, frankly, it's going to be like that forever. I've not heard those comments, so I can't really speak to a specific comment.

Well, I think first of all, it's a matter of how the board thinks about what's needed to make the company successful. They should be seeking a CEO that can lead a modern organization and can drive what's needed for that company at that time. For Nasdaq, we operate in a hyper-competitive world – we compete for every order, for every listing, for every software sale – and at the same time, we have to build trust everywhere. Our entire business is founded on a basis of trust, and trust means it's much more holistic in terms of the relationship, the partnership approach, the equal way that we want to engage our clients. That's different than being raw and still doing all of that. But I also think that in general, that's the modern world that we exist in, and that's the best way to lead.

It is a very intense competition. And I can say this: I genuinely like the leadership of ICE and the New York Stock Exchange – that rolls up to ICE. I like them very much, but I will compete every single second of every single day to win every single listing. And our team is very focused not only on winning but on keeping and attracting companies. So I have to do this: this year and last year, we were able to reach our 500th switch from the New York Stock Exchange to NASDAQ – 500 companies have come to NASDAQ since we started being able to switch companies, which is about 15 years ago. And we're just thrilled with that, in addition to the fact that we win about 75 to 80% of all IPOs today.

Definitely. In fact, this was just great. I think we're going to have to do this more.

Thank you.