The Compound and Friends - IPO Fever - a record breaking year for initial public offerings, with Kathleen Smith (Renaissance Capital) and Jay Heller (Nasdaq)

Episode Date: October 2, 2020

We're on pace to break the all-time record for IPOs set back in the year 2000. We could potentially see over $100 billion raised in initial public offerings and more than 200 newly listed companies by the end of 2020. If so, it would be one of the strangest, most unpredictable outcomes of the year - and that's really saying something this year! Today's new episode of my podcast, The Compound Show, takes a look at the IPO Fever we're experiencing now. I have two of the most knowledgeable people in the country as my special guests. First, we talk to Kathleen Smith, the founding director of Renaissance Capital, the premiere research firm in IPOs and the sponsor of the IPO ETF. Then, we speak with Jay Heller, the head of US capital markets at Nasdaq, who has overseen the launch of approximately one hundred new issues so far this year - most of which he conducted from his kitchen table in suburban New Jersey! Kathleen and Jay have so much knowledge to share about initial public offerings and the watershed year that 2020 has become. You're really in for a treat this week :) Thanks for listening and please leave a rating and review! Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

I am so excited about today's show. It's your boy, JB. Listen, the biggest story for investors this year, other than the pandemic, of course, the number one trend in the markets this year is initial public offerings. And when we look back on this period of time, three years from now, five years, 10 years from now, we say, what was going on with investors in 2020? This is it. This is the mega trend of this period of time. It is unbelievable what's happening with IPOs, to paraphrase a Donald Trumpism. But really, the hyperbole is warranted. We are on pace to break $100 billion worth of money raised by initial public offerings this year.

It's really extraordinary to consider what went on in the first half of this year and what's happening now. The fact that this many companies can go public and raise this much money, I really think makes this a watershed year for capital formation. really think makes this a watershed year for capital formation. And $100 billion we did in the year 2000, and we got close in 2014. But we look like we're on pace to break both of those records by the end of 2020. And it's not just in sheer dollar amount that's notable. It's the number of companies, the volume of deals coming to market is immense. The pipeline is robust and we're seeing companies in every segment of the economy.

There was an avocado company went public today, of all things. I don't think the avocados are connected to the cloud, okay? It's like literally, it's a guacamole IPO, all right? So it's healthcare and it's biotech and it's obviously software and computing. It's electric vehicles. So gambling, there's a whole spectrum of businesses in all segments of the economy represented by these deals. I think we're probably going to finish the year with something like 200 IPOs. And it seems to be the NASDAQ's doing more deals than New York Stock Exchange, but the New York Stock Exchange listed deals are a little bit bigger.

And what's interesting is we've got a whole cornucopia of types of initial public offerings. Obviously, we've got the traditional ones like Snowflake being a very notable example, but then we've got direct listings. And we've also obviously got special purpose acquisition corporations, which just came out of nowhere and floored us that this is like a huge trend happening this year. And we're going to get into all of that stuff with two very special guests. My guests today are, I would say, two of the most knowledgeable people in the entire world when it comes to initial public offerings. So we're going to talk with Kathleen Smith, a founding director at Renaissance Capital. Renaissance Capital

is the premier research firm following the IPO market. They are the name when it comes to IPOs, whether it's data, insights, you name it. And Kathleen has been following this stuff for a very long time, more closely than anyone I could think of, quite frankly. And she's going to talk to us about what she's seeing and her perspective and the 1999 and 2000 comparisons and the international IPO scene, which is a thing. And by the way, Renaissance has the only ETF that tracks the IPO market. And we're going to get into how she manages that. And it's an index and a fund and the portfolio construction there and the rules. But Kathleen's got really, really great information to share. I think you guys are

going to get a lot out of that. You're going to walk away from this podcast knowing way more about IPOs than you've ever known before. And then most people you talk to know. And Kathleen's just terrific. We're also going to talk with Jay Heller. Jay Heller is the head of capital markets for the NASDAQ. And Jay, this is an amazing story. Jay is working out of his house in suburban New Jersey. I think they brought 100 companies public and he's doing that from his kitchen. He is talking with the bankers, the syndicates, the corporation itself, traders, market makers. He is coordinating dozens and dozens of IPOs every month and getting these things out the door in public and allowing for

this process to take place in an orderly way, despite the fact that nobody is at the NASDAQ. So all of this is happening remotely, which is just mind blowing. None of this would have been possible even five years ago or 10 years ago. And it's all happening now. So we're going to talk with Kathleen. We're going to talk with Jay Heller about what it's like to bring companies public in a lockdown and a pandemic economy. And again, I think you guys are going to walk away from this just really having a great understanding of what's taking place. And then we're going to talk about some of the hot deals still to come and some of the stuff we want to look for between now and the end of the year. So stick around. Duncan's going to hit the intro and we'll get right into it with Kathleen Smith. Welcome to the Compound Show with downtown Josh Brown. Josh is the CEO of Ritholtz Wealth

Management. All opinions expressed by Josh or any podcast guest are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. I am here with Kathleen Smith, who is a founding principal of Renaissance Capital. Renaissance Capital is probably the best research firm on the street in terms of IPOs. They follow this market, I would imagine, almost exclusively. They are also the sponsor of both the most popular index as well as the most popular ETF or the only ETF that tracks the IPO market. And I've asked Kathleen on today to talk a little bit about

what she's seeing, what the big themes of this year in IPOs have been, and where things seem to be headed. So Kathleen, thank you so much for joining us. Really appreciate it. Thank you, Josh. I'm delighted to be here and to say that there are two ETFs. One is IPO, which tracks the US IPO market. The other is IPOS, which tracks non-US IPOs. Okay. I know that the index itself, you've probably done a back test, but how long do we have data for on the index that the ETF is meant to track? 10 years. Okay. All right. But you've been in the market a long time and you've been following IPOs for a long time. So, the Wall Street Journal's article this week, IPO market parties like it's 1999. And of course, they do that for the clicks, which is okay. There's nothing wrong with that. But give us a little bit of a sense of what this year has been like from the perspective of someone that knows this market really well. You don't feel this is very 1999-ish, do you? Well, there is some feeling about 1999, 2000 in the current market.

And even though our indexes only go back 10 years, we've been tracking the IPO market since the mid-90s. So we have a lot of data and knowledge that goes back that far. So we have a lot of data and knowledge that goes back that far. And the one thing is we had a really robust IPO market in the 90s think every venture capitalist wishes we could repeat again. So I think that's the venture capitalist's dream. But some rhyming today for what that was, if you add SPACs into the dollars raised, we're getting close to $100 billion of fresh capital raised between IPOs, which are a little over half of that, and SPACs. So that kind of reminds me of the $100 billion a year we saw back in 1999-2000. Many companies, too, weren't earning

money, but more importantly, a lot did not have revenue. So we're a little bit better on that score. But valuations are high now, and there's a lot of activity. So we're not there, but there's a lot of things to be cautious about when we see the activity that we're seeing now. Sure. So for me, the $100 billion is notable. And I think we did $100 billion in 2014, but a very large amount of that is from Alibaba. So it's almost like an asterisk on that year.

But for me, it's the sheer number of deals that I find to be dizzying. And I think as recently as a year or two ago, there were a lot of articles talking about how there weren't enough stocks. And I think we're headed towards solving that problem. Are you surprised by the volume of deals? Even if you took SPACs out, which I think are a pretty big chunk of what we're seeing, there still seem to be many, many companies every week coming to market. Right. We're seeing a record number. If you look at just the full year data

sort of clouds the fact that earlier in the year, the market was really shut down around COVID. But if you look at the third quarter of this year, we've had more issuance than we ever had. You have to go back to the third quarter of 2000 to see such active levels. Although still in total, there've only been 150 maybe regular way IPOs so far. So I don't think we're getting to the point of maybe issuing of too many, the number, getting to the point of maybe issuing too many, the number, a specific number, I think what we have to worry about is when we see certain sectors get very crowded, notably cloud computing, notably biotech, all of a sudden you get to an environment where, hey, how big is the market really for cloud? And are we slicing it down too much that they're going to eat each

other alive? And we have to figure out who the winner is. Right now, the market's pretty wide open, but there's crowding happening when it comes to capital raising in those areas. Right. So when cloud computing companies come public or cloud software providers come public, one of the big things they talk about in, I guess, their virtual roadshows is the TAM, One of the big things they talk about in, I guess, their virtual roadshows is the TAM, the total addressable market. And the problem with that is that there are now 50 of them and they all are trying to address the same total addressable market. And I think most corporations that would work with a cloud computing software company aren't

looking to work with 10 of them. So they can't all win. And then you see something like Snowflake come along, which has an incredible pedigree as far as pre-IPO investors. They seem to have checked all the right boxes, but it's a $65 billion stock out of the gates. And that's roughly the size of Goldman Sachs and several other well-known corporations. How many snowflake size new issues can the market bear before it rolls over? Is that the right way to think about it? It certainly is. And because when you're a portfolio manager, you have only so much you can allocate to tech and then slice it down a little bit. It's going to have to be like,

I guess, pigs at the trough where the better ones are going to muscle their way through and it'll be harder then for the slower growing ones to run for market share. And then don't forget, when a company goes public, they have a lot of resources now. So if you're a private company and you're trying to battle a public company

that has so much capital, can raise more capital, it makes it much harder. So you're saying like once a few of them get public, now they have this currency that they can use to strengthen their competitive position. So the companies in their same space that aren't yet public, you almost have to tamp down your expectations for how large those companies can become because now they're behind the eight ball. Is that what you're saying? That is what I'm saying. Okay. When you think about the SPAC side of the equation, so special purpose acquisition corporations, I guess these are companies with no earnings or revenue, but it's very un-1999-ish because

we don't know who they will end up buying, thus bringing public. And so you almost can't judge them until they consummate a deal. Are you surprised that of all periods of time in this particular year, this type of investment has caught fire and captured the imagination of pretty much everyone. Was that shocking to you or not really? Well, I have to say we were surprised and continue to be, but there's some things to recognize about SPAC. You're able to part an asset manager. Now, we're not talking about individuals here, but an asset manager, we get a management fee for making

investment decisions. If you're a hedge fund, you get a two and 20, you get upside and you get, but you have to do absolute return. This is a perfect product for a hedge fund to put money in what looks like a stock, but basically it's parking money in treasuries where you can limit your downside for a while. Then there's the option to turn around and decide whether you want to own the company. Now, we've been studying the SPACs that have been done once they have made acquisitions and the results don't look too good. Talk about those results because the results for IPOs, I think two-thirds of them are higher than their opening price or than their IPO price, which is really great.

I don't know historically where that fits in, but the special purpose acquisition corp track record over long periods of time beyond just 2020 is terrible. Yes. is terrible. Yes. It's because most of the companies that are targeted by SPACs, and I do think this tells you it's a little bit like 99-2000, they're companies that really can't go public or there's some reason they're not going public the regular way. Now, maybe that's starting to change a little bit. There've been some really smart sponsors, but still smart people make investment mistakes too. And they are pretty much, they have a sponsor's share of these, which kind of limits a lot of their downside. So our study showed that all the SPACs, if you

looked at all the ones, of the ones that completed mergers since 2015, the average loss was 19% of those compared to an average aftermarket return of 37% for regular way IPOs. Now, when you do this data, you obviously have to keep updating it and looking at making sure we're comparing apples to apples, but there have been very poor returning, they're poor returning IPOs, but on average, you can't just think I'm going to be on a SPAC and think you're going to have a tailwind there. You got to be smart with the structure because you have to make a decision. Do you want to continue to own it while it goes through this acquisition? For example, today, Oak Tree, a very smart manager, has a SPAC, and they just merged. They're announcing a merger with HIMSS.

Well, if you bought that SPAC when it came out, you're up maybe 6% or 7% for all this time. Even at today's announcement, the stock dropped. And then we have to see what HIMSS does. I think it's an interesting company, maybe one of the better ones you could target, and maybe they could have gone public. But it takes time to figure out whether these are worthwhile. And the more we get Nikolas that are disasters, I think the more cautious investors are going to be with this structure, which has been so popular because you can park money or hedge fund. You can park money there and reduce volatility in your portfolio.

Let's say you're not a hedge fund and you're a high net worth individual, or even you're a kid learning how to invest, whatever. The motivation for buying a SPAC pre-announcement of a deal seems to be you think you have no downside from the initial offering price because it's a bag of cash essentially sitting in escrow. But you also think there's going to be this dramatic opening day pop when they do announce a deal. And of course, there have been. DraftKings comes to mind, Nikola. I'm sure there are plenty of others this year. But now, if everyone's playing that game, Kathleen, isn't the danger that you might not be the first one to sell that opening day pop? People might be front running the opening day pop or they have their finger on the trigger

and they sit there all day waiting to do it while you're at the dentist or doing your real job. Is that really a great game for individual investors to be playing now that everyone is wise to it? Well, I'll point, not all of them rise when they announce an acquisition. The oak tree is down almost back to its $10 original price on the main security that it's traded on after that announcement. I think for an individual investor, if you want to hang out somewhere, just buy treasuries. And then you can buy one of these after the deal is announced. Then you can say, okay, I want to research this company. And now that I know what it is that they're trying to buy, let me invest based on that. And if I missed an opening pop, so what? If it's a great opportunity, it's not the last time the

stock will pop. And that's the issue we have with it, is they tend not to be the highest quality group of companies. Right. So I've been on the street 20 years and we used to do SPAC IPOs with retail clients. And a lot of them ended up buying Chinese corporations. And a lot of them, they would take companies public that had no prayer of getting through a roadshow with how shaky their business model was. But then it seems something changed in the last three or four years where all of a sudden, this is way before the pandemic, all of a sudden there was like a sheen of respectability on the space. The New York Stock Exchange

had its first SPAC in probably 15 or 20 years in 17. Goldman Sachs sponsored one, a couple of hedge funds, and then of course, Chamath's deal to buy Virgin Galactic. So all of the seeds for this SPAC boom were planted prior to the pandemic. What is it about the pandemic era that you think sped that up and accelerated it? Well, I don't know if it's the pandemic because this was building up even though we're at a crazy level. I think a lot has to do with the fact that the stock market has been so strong. It's hard to short stocks. Yeah. Right.

And interest rates have been so low. It could make sense to hang out maybe for a couple of years in treasuries and then move into a security like this. So I think it's that, I think if we had higher interest rates and a more volatile market, we might see investors being more cautious about these and also maybe get some of the fluff that's out of all the markets right now. We have a lot of high multiple stocks out there, not just recent IPOs, but also many technology stocks have very generous valuations. So we've seen about 150 special purpose acquisition corps of which 50 or 60 have announced or consummated a deal. So that's – so you've got 100 recently public SPACs out on the market looking to buy things.

And some of them are very big like Bill Ackman's SPAC, for example, with billions of – multiple billions of dollars. with billions of dollars, multiple billions of dollars, what is the likelihood that they'll be able to find suitable targets to acquire with so many of them out there on the hunt? Doesn't it seem like a low probability that they'll all find decent acquisition targets? Well, if they don't find them, they have to return the money. But I think the fear is when too much money chases too few opportunities, you don't want to be on that side return the money. But I think the fear is when too much money chases too few opportunities, you don't want to be on that side of the trade. That means you can't find a good price. That's what's been happening in the private markets in general. I mean, I think if you look at historically what's happening, we have never seen so much money staying in the private markets. It's been bigger than for every $10 of private

capital, only a dollar's coming out in liquidity. So there's been this pressure. It's been way too long. And we've built up these numerous unicorns that are private and have these valuations that are really hard to justify when they try to go public, which is why they wait because they don't want to take, you know, the investors don't want to take a mark down. We've never seen anything like that. And I believe that is the reason we're seeing the many attempts to figure out how to get around this regular way of going public, because there is some like parsing that goes on in the IPO market. And, and it may be that you don't know what you're going to end up with when you take, go public a lot, you get a

lot of rotten apples thrown at you. And a lot of these companies aren't used to it, aren't used to the scrutiny that investors are putting because investor, public investors, they get pretty testy when they lose money. So I want to pivot to direct listings. The two most high profile direct listings that kind of seem to have kicked off a new trend, Spotify was one of them. And was Slack the other one? Yes, it was. Okay. And now this week, we just had two of them on the New York Stock Exchange, Palantir, And now this week, we just had two of them on the New York Stock Exchange, Palantir, which is Peter Thiel's data company, and Asana, which I guess fits in the same bucket as Slack. And full disclosure, I own a very, very small amount of venture shares in Asana. But they were able to place these direct listings.

They didn't really need to pay a lot of fees to investment banks. They didn't need to market the security because they're not raising money. The private markets have been so flush that you now have companies listing simply to give their employees the ability to buy and sell and just get that currency out there. They don't need to raise money from Wall Street because they've raised it from Silicon Valley. Is this like a big wave of the future, or will we just see a few each year and they'll kind of stay in the single-digit percentage territory? What do you think? Well, I think that the way to judge these is to look at the results. I mean, I think it's really important. If investors don't make money in an area, they leave that area. It's the same with IPOs, which is why you can at least look at our ETFs and say, it's a good time to be

going public because investors have made good returns. So returns are everything. The issue with SPACs, we looked at it and say, okay, what's the result here? With direct listings, the issue there is not the companies themselves. And it's great to want what they do, but it's what are we giving investors? With a direct listing, the whole idea is how do we get to market at the highest price and how do we enable insiders to sell freely without any lockup for many shares? Because I know Palantir had a small lockup. Remembering that lockups were always put on these to wait for insiders to sell till the public got to see a couple quarters of what they're performing as they kind of said on the roadshow. I mean, management knows a lot more about their company than public investors, and we want to see them perform and show the results. Okay. So the direct

listing does not have these two things that kind of have been helpful to investors. So as a result, what's happened with the two, the Spotify and Slack, if you study them like one year after, if you just take the end of the first day close, because the reference prices mean nothing. But after the first day of trading for Slack and Spotify, and one year later, both of those direct listings are negative in terms of returns. In fact, Spotify has never traded above its first day of trading. Is that right? Right. You can pull up a chart.

Wow. So basically, I believe what's happened is that they've come public perhaps at a price a little too high, and it's taken a while for them to earn their way out of that. In the meantime, all this time, insiders are just hitting the market because they're free to sell. You're saying that they don't have lockups because the company's saying, You're saying that they don't have lockups because the company's saying, well, listen, we're not asking you for any capital. So we're not obliged to volunteer to be locked up from selling any stock.

Well, Asana, a half of Asana's shares outstanding are freely tradable right now. Wow. Okay. Half. So that's a very big difference. I don't think a lot of people are fully aware of that. Sure. And with Palantir, it was, it's a third, they have a, it's about a third or 25% of their shares are now freely tradable. So what's happening is there isn't a, there's no control over the distribution of shares. And yeah, I, I don't mind that, but what I mind as an, being on the other side of this, I don't mind that. But what I mind as being on the other

side of this, I don't like to see a company that is only now public, public audited financials. We get to see management. We get to see the company that had, you know, a private company looks different inside under the covers. When they're public, they have a lot more transparency. under the covers. When they're public, they have a lot more transparency. Meanwhile, there's a distribution of shares happening all the time. And the public hasn't seen them even report any results yet. I mean, the tables are a little bit not quite level for investors here. And now they may end up working and they can fix some of these things possibly. I think it's a good, I don't wish any of these companies poorly, but I think the idea of the structure has to account for the investor, the public investor who isn't working in the company.

We don't know the sales. We don't know as much as anyone inside that company is going to know about their business. We're looking at audited financials. We're looking at an idea of what they're going to do. Think of what happened with Snap. It had promised so much to investors. And the first earnings report out of the box, they disappointed. Yeah. It was a disaster. A disaster. And so that's why there's a lockup. And I think that somehow they'll fix the structure. I'm looking at the trading in Palantir and Asana so far. I don't see anything real great about it. The stocks are both down today.

Anyone who looks at a first day pop is mistaken to look at the reference price. The reference price is not a price at which anyone bought it. Right, because it didn't trade yet. So it seems then, based on what you're saying, that you take in a direct listing, an investor on the market that has nothing to do with the company that just comes in and buys the shares is taking a bigger leap of faith than an investor buying a straight regular IPO that's got a bigger or more extensive lockup? Yes. I think that an investor should wait because let the stock trade a little bit, let all the insiders dump their shares on the market, see the company perform, and I hope they do, and then you'll have something there. So it really is just about that. It's not like these are bad companies, but I will point out that for Palantir and Asana, Palantir is trading at 21 times trailing sales.

Asana is trading at about 27 times trailing sales. Right. They're getting the benefit of the doubt and valuation right out of the gates. Certainly are. Both of these companies are growing about 40% coming, this growth rate. To be trading a 20 times sales, you need to have a pretty high, the ones that do trade at high growth rates. Snowflake was a traditional IPO. I mentioned earlier the pedigree. You had firms like Altimeter Capital.

You had Berkshire Hathaway, which is very rare to see them in the docs for a technology IPO. But maybe that's the wave of the future for Berkshire. And you had the top shelf underwriters. You had top shelf venture capitalists. It seems like all of the stars were aligned for this to be a sought after deal. But its sheer size, I think, is notable. And that's not a comment on how well the company is doing. I think everyone agrees the company is doing very well.

What was it about that deal that you think caught everyone on Wall Street's attention and gave it that opening valuation? It has a very high growth rate. And if it weren't for that, it should never, even with that growth rate, it has a very high multiple. And I think the street looked at it and said, it's going to grow faster than anyone thought. Like they're putting out conservative numbers. So they're going to have to really beat their numbers.

They are, the growth rate suggests and what we know of the business suggests it's a great recurring revenue business. And there's a lot of interest in its approach to putting SQL in the cloud and being able to have all the benefits of the cloud with databases. So it's kind of early as a leader in this space, but I will say it has a very high valuation. There's no doubt. And it is going to have to really knock the cover off the ball when it reports its results. I think the CEO was interviewed on CNBC the day of the deal. And I think I have this right.

And even he was like, yeah, this is a lot of pressure. Well, he's a smart CEO. He came from service now and he knows that you have to be what the expectations. So hopefully the smart, somebody who's been through the IPO process before knows very well that it better have been conservative about what it thinks the business is going to do. At least it told investors, a conservative outlook. Okay. So when will Snowflake be added to your IPO index that the ETF is based on? Has that happened already? What's that process like?

It's happened. It's already in. Okay. The ETF owns it. What we do is we'll wait for at least five days of trading. We'll put it in as long as it's big enough. So the way we structured this, see, I think the thing is with IPOs, forget the first day pop. We all know that that's kind of a great thing if you can get it. But Wall Street only gives that to

investors who are going to buy in the aftermarket. Okay. Right. Of course. But we always maintain that there are returns for companies that are already public and they're not included in indices. Right. And the issue is how do you construct a portfolio to capture the alpha from these companies? Because there's no reason. And, you know, everyone thinks, well, the IPO is overpriced. Well, yeah, there are times it is.

But remember, during the life of a new company, there's the research initiations that has a trading angle. There's the lockup releases. There are times when these stocks kind of have big bumps down and bumps up. And so by constructing an index, especially market weighted, and then you add as they release float after they release shares, so not ahead. So when a lockup release happens, like we could add Uber after the lockup release, after the stock really traded down. And so it's not just early because you're only getting, we only get in the index only includes them based on their free float. So we structure a set of companies that aren't yet in the major indices. Facebook took two years to get in the S&P 500. So we could own it for two years and you didn't have to buy Facebook on the offering and we don't. There was plenty of times to buy Facebook. That was a-

Facebook got cut in half. Yeah. It had been. And who's going to know? So you get a portfolio of 50 names. They're the largest, most liquid ones. You rebalance them every quarter. If the company has more liquidity in the market, then you can weight it more because there's more tradable float. Then if there's a very big IPO- So you're saying the way you construct the index is you're going by the amount of market capitalization that's free trading.

That'll determine how big or small each IPO company will be in the index? The weight, right. First, we take the market caps of them all and say, if you're down in the bottom part, we cut off the bottom part. So we only have like top 80%. Then we take the companies and look at their tradable float. Okay. At which, where they are.

And every quarter we will adjust the portfolio. New names come in and those over two years roll out. So we have a portfolio that, that's why Zoom is the number one holding in the portfolio. Because it's gone up the most. It has the biggest market cap free float. Okay. It's about twice the size. So you still have Lyft in your index and I guess Uber? Yes. Okay. It's about twice the size. So you still have Lyft in your index and I guess Uber?

Yes. Okay. You've got CrowdStrike, Datadog. So these are, you know, people wouldn't look at these and say these are IPOs because there are people who've been trading them every day for what feels like years, but they really have only come public in the last one year to 18 months, these names. Yeah. They're really, they're less than two years old. They're babies. They are. Some of them are all grown up babies.

And since we research them, we have an institutional research business. When we sell, for example, when we sell Zoom and Unity is another one that I think is a very attractive company that recently came out, profitable. My point is the profitability. When you look at the ones, it's not just growth. I'm impressed by the ones that can grow and be profitable too. I mean, JFrog recently came out and is really a software developer. Unity is a game platform.

They're profitable. We saw Zoom. We're like, how can a company grow this fast and make money and be in video conferencing? What's that market cap now? It's like 130 billion or something. It's incredible. And most of the users aren't paying them a dollar. Well, some are. Some are. We are. I insist on using Zoom now. It's our number one holding. But at the time it came out, people said, you know, I know it's a video conferencing company. But the profile looked really good. And there was a lot to Zoom, even at the time, because we realized they had a lot of traction in the enterprise because they're so much better than anyone else that's been at this.

They really focus on it. Well, the genius of Zoom is that unlike Skype, where you've got to place a call to somebody, Zoom is a link. Here's the link. Email a link to 20 people, one person. It's literally you click on a link and you're in a conference. And I can't believe they were the first to figure that out and do that. Right. They have a very good algorithm, too.

So the video looks good. And they have this checkbox that says, uh, improve my look on this. Well, I'm, I'm a fan because I always have that checkbox check. So it sort of like, it's like using a makeup person. They have it, they have you all fixed up. Kathleen, let me tell you that, that, that ain't going to work for me. I could, uh, I could hit, I could check that box as, as many times as I want. I don't think it'll help. I think the interesting thing about Zoom, because a lot of people use it for corporate, is they have a very nice chat channel.

And we pointed out earlier that it's easy to see a lot of crossover between similar companies. Zoom is attacking the business that Slack is in with chat channels, with corporate chat, because video is such an important thing. And the workplace, there's nothing better than to be able to do video calls with colleagues. I mean, we don't, in our company, use the phone. We don't have anything but video calls. We have video interaction all day. Are you including SPACs into your index or not? You consider them non-IPOs. There's something different.

Well, our index is designed to hold operating companies. So we are going to include Palantir and Asana. And I'm rooting for the fact that we can include them at a reasonable price. So they're not going to come in just yet because they're not big enough, but we'll be looking at them at the next rebalance, which is in December. In the case of SPACs, they're not operating companies. Would you add them once they consummate a deal or that's not really an initial public offering? Yeah. We don't have the index structured to do that. And we do know that there's a SPAC index out there. I mean, we track SPACs. We could create our own index, but it's not clear to us. There's an ETF as of today.

Yeah. It's not clear to us. We wanted to structure in the IPO world something that would work and have a rules-based process. It's not clear to us you can have a good rules-based process with SPACs. So we're studying them. And if we think you can find positive returns based on certain factors, we'll take a look at it, but we don't see the factors yet. But we could construct that because we have all the data for it. Well, you're going to have plenty of sample size. I'll tell you that. Last thing I wanted to ask you. So we're recording this on the first day of the fourth quarter. I can't believe it. But here we are in early October. What are the big IPOs that we think are still to come this year?

What should we be watching for? What do you think will make a big splash on the market? I know Airbnb is the one that most people talk about, but what else is out there? And is Airbnb interesting to you? Yeah. I had to say at the start, Airbnb and everyone's interested in Airbnb. I think that the beauty of that is it really is a leader in its segment. It's going to be about the valuation. Creator of its segment. Right. Although there are some others that have been out there, but nothing, right? They're just such a leader. But it's going to be about valuation because at one point they had a $30 billion private valuation. And it's hard to see that. We don't know all the numbers yet.

Okay. But I think the valuation is going to have to be reasonable because you have to find peers in what the travel industry is doing. So, but it'll be- Is that a direct listing? industry is doing. So, but it'll be. Is that a direct list? Is that a direct listing? No, there, well, we heard at first they'll do a direct listing. Then we heard at first that Bill Ackman's SPAC might buy it. And then I, those rumors have gone away. I think they will end up doing a regular IPO, but I don't have any, any insights just to get. You imagine that conversation, I think his name is Brian Chesky. Is that right? You imagine him taking a call from Bill Ackman and saying, okay, but what do you do? What do I need you guys for?

Yeah. And I think we'll see DoorDash. I think maybe Robinhood. Really? Robinhood. I think there's a chance we see Robinhood. Really? Robinhood. I think there's a chance we see Robinhood. That would be very meta to trade the Robinhood IPO for free on Robinhood. That would be extremely meta. Yes, it would. Yes, it would. That Poshmark, I really want to highlight, you know, in the international, the IPOS, our product, the international ETF.

Yeah. That has the same strategy. So a fast entry for the international will be Ant Group. So Ant Group is going to be the largest ever globally. 200 billion dollar valuation expected. Yeah. And maybe a 30 billion dollar deal. It's going to be just huge. And it's one of those really profitable companies with good growth. By the way, both of our indexes cap holdings at 10%. So we're-

All right. I was going to say, you would end up having an ant ETF. My friend Brendan at Crane Shares thinks he's going to get that added to his index and his ETF first in the world. Are you telling me that you guys might be before him? He might. Our rules say it has to trade for five days. Okay. I don't know what his rules are. I mean, we want a little price discovery in these. We want a little bit of price. You can't short some of these, at least definitely in the US market. Well, you'll be able to short a really big one. But typically, it's hard to short an IPO for a week. So you want to have some price discovery in there if you can, people on the short side. So Ant Financial is going to duly list in Hong Kong and Shanghai, completely bypass New York, bypass London. They're not doing

tracking shares here or any of those things. Is that remarkable to you that a deal of that size can get done without the West? No. I think that there's enough happening in those local markets. And it's connected some... First of all, we know Alibaba came here and we do have deep markets. There's no doubt about that. They're deeper than any other one. But Hong Kong is really gaining share. By the way, we would not own it in China. We'd own it in Hong Kong, in Shanghai. That's just the rules. But you should be aware that the Chinese companies have had, and other foreign companies have had a carve out when it comes to accounting oversight

in the US IPO market. And that's going away by the end of next year. And so we will not be seeing big Chinese companies come public here because they are, unless they want to allow audits the way we allow audits. I think that my belief is that every company should, we should have a level playing field. But they don't want the TikTok treatment. They don't want to become a political football and have to- Well, it's the PCOA. It's the public accounting. political football and have to- Well, it's the PCOA, it's the public accounting.

They don't want to have the books opened by our accountants, which we require for a foreign company here. So there's rationale for what's happening. But I do think also the Chinese, they want their companies to go public in their markets. Ant Group is a very important company to China. So I think that we will,

you know, most asset managers these days have accounts all over the world, including Hong Kong and many in Shanghai. So this is going to be owned by all the top asset managers. Yeah. What's interesting is it'll be owned by active managers and specialty index ETF providers like yourself, but it won't be in the SPY. And if it's a huge winner, that's going to be alpha that had to have been captured by active management. And that might be, I don't want to say wake up call, but that might be the kind of thing that people who are just strict, you know, S&P 500 or Vanguard total US market, they might look at that and say, you know what? I need to look internationally and I need to look beyond the SPY. Well, also, SPY is US. I know a lot of the US companies are international.

But owning through an ETF, owning an international portfolio, it's a real advantage to own that through an ETF because we know from managing our IPOS product, there's a lot of currency transactions. Sure. Just opening accounts in all these markets and then accessing these shares. It's real hard to do that directly for a U.S. individual. No, they shouldn't even try. Right. It's not feasible. Managers.

Yeah, institutions are also challenged to be able to do that. So it's very convenient through the ETF structure. All right, well, Kathleen, I really appreciate all of your insights on the IPO market and some of the names to come. And your perspective is very valuable because I think you follow this market more closely than anyone I can think of. And how do you want people to

look for your research? They go to renaissancecapital.com? You can go to renaissancecapital.com. If they want to follow the IPO market, they should follow our ETFs, IPO, IPOS. We also have a weekly email that people really love about what's happening in the market. It's called Winners and Losers. They can sign up for that. And we have an institutional research platform, which most institutions know of. But for investors or those following it, we have a product called IPO Pro that's really cloud-based. It tracks the market and it's very popular, very inexpensive, and it's a way to follow what's happening in the IPO market. So we're all things IPO. So we will link to that in the show notes

for sure. And we'll send everyone who wants to become more educated about initial public offerings should absolutely be reading and following Renaissance Capital and Kathleen Smith. Kathleen, thanks again. Hey, guys, I'm here with Jay Heller. Jay is the head of U.S. capital markets at NASDAQ. And Jay is pulling something off right now during the course of this pandemic that I find just to be absolutely miraculous. Jay is in charge of the process by which companies go public. And these days, he's taking companies public on the NASDAQ from his kitchen in New Jersey. So it's really like if you think you're adapting to the pandemic, imagine billions of dollars worth of capital being put into new

businesses that launch their initial public offerings and having a guy be responsible for that, be the point man for that. I know it's a whole team at NASDAQ. So Jay, thanks so much for being on the compound show. I really appreciate it. No, listen, I appreciate you having me on, looking forward to the conversation without question. I think, you know, we're in a times that are different, and we're truly unique. But I would say from the standpoint, the mannerism in which we take public, you know, companies public, that has not changed. So let's cut right to the chase. How are you not like a walking ball of stress all the time? I am. I mean, let's make no mistake about it. Yeah. I'm not going to sit here and be disingenuous. I'm out of my mind. I'm crazy, but we always look at the clients first,

but every company matters, big, small. We give everybody great service across the board. Okay. So you've been doing this for 20 years. So it's not that this process has been thrown at you. What's happened is you've had to adapt. And even though NASDAQ is on the cutting edge of technology, you've had to take it a step further because now you're not in your facility, neither are most of your coworkers. But the show must go on. And this is one of the biggest years for IPOs in the United States of all time. And certainly one of the biggest years you've ever seen. I think we're on pace to see $100 billion worth of initial public offerings this year, which would put us over the top for 2014. And maybe tie with 2000. Do I have that right? for 2014 and maybe tie with 2000. Do I have that right? Yeah, I think you're pretty much spot on there. It's been an active year. I mean, look, today in itself was active again for NASDAQ. We had three more companies go public. Tomorrow we'll have another anywhere from six to eight.

Friday we'll be busy. All right. So if I would have said to you in January, this year there's going to be a pandemic. You will not be able to access your office. Neither will anyone else. And 22 million people will lose their jobs at some point. And we're going to have a record year for new issues. You probably would have said, what? So that must have been shocking, I guess, even to you, someone who sits in the middle of all this. Yeah. And look, don't forget the election as well. I think we're right. You know, anytime we were coming in from last year, which was a really robust year for us, we had just about 190 companies go public to even think about this early in March when really the pandemic kind of

came to the forefront that we would be at a pace that is surpassing last year, I would laugh. I mean, I would laugh. I would say, you're out of your mind. I would say you're crazy. And this year in itself has been truly unique. And to be quite frank, it's amazing. Yeah. No, it really is amazing. And I think it demonstrates the resilience and the technological capabilities of the plumbing of our markets. And that's been tested before. You and I were both around during 9-11. Oh, yeah. And we got things up and running then.

So, but this is like, I don't want to say bigger than 9-11. It's certainly different and probably less frightening on a moment-by-moment basis than that one specific day. But this doesn't end. Like this is an ongoing issue and you guys still have to make everything happen each day. So what does your day look like? You've got your list of issues. You've got new issues coming down the pike that you have to be aware of. Walk us through how that all goes.

Yeah. So I would say, you know, the daily, you know, routine doesn't change. What I would say is that the daily hours in which we work, that in itself has really changed. So think about it. So I live in central New Jersey, normally takes me about an hour to commute into the office. So that's some downtime. Usually I'll leave the office around six o'clock. On the way home, unfortunately, takes an extra half an hour. So there's another hour and a half. Now, from the standpoint of, you know, I wake up, I log on, you know, we're working.

And because there's no more commute and you have the accessibility of Zoom, we're talking to people at all times and all hours. So from the standpoint of getting things done, speaking to people, communicating, it's really, it's more busier, I would say, than it's ever been before. But really understanding you're trying to, you know, you know, speak with companies,

speak with the banks, you're trying to coordinate events, you're trying to really understand what's important to people, what are their goals and they're trying to accomplish. And right now, everybody's trying to go public. So why is everybody trying to go public? Do you think does it have to do with the fact that you might have a change in administration? Or are people nervous that at some point, investor enthusiasm is going to run out while we're dealing with this pandemic and the window might close? Like, what do you think is the bigger driver of this? We've been a cyclical bull market for an extended period of time, right? There's been ups and downs along the way, but for the most part, at some point in time, I'm not saying the show will end, but there will be a pullback in the marketplace. And I just think right now, because of the pandemic, because of the election, and I think because of the unforeseen unknown in the future, there was a stopgap in the beginning of the

year where companies really, they just grinded to a halt whether or not they can access the public capital markets, because as an investor, you couldn't really forecast, right? You didn't know what the pandemic was going to do to your bottom line. And so therefore, from an investor, how do I invest in X, Y, or Z? And that was one impact. And then you got the back end of the year, which is the election. And so as we got towards March and March led to April and people started to get a little bit more comfort with the marketplace and the environment in which we were at, there was still a lot of cash sitting at the sidelines. So if you're managing money for people and you know there's a lot of private companies that have been private for an extended period of time that had their eyes being set to be a publicly traded entity at some point in time, that had their eyes being set to be a publicly traded entity at some point in time.

It seems like a lot of that backlog came to the market front, came at a wave unlike we've ever seen before. And I can tell you that it hasn't slowed down. So I think we'll stay busy. I think the election, maybe we'll have a little bit of break in the action. I can assure you I will have a break in November for Thanksgiving. I'm going to Mexico. I've taken two days off this year, and one of those was a half day. I signed on a lacrosse tournament. I got called away, but ultimately, we're not stopping. We're not slowing down. I think we should stay, at least in my opinion, pretty robust from the listing standpoint, at least until Q1,

because you got to start looking at the financials of companies that have been on file and just from companies we're speaking to on the pipeline and the backlog. It's really robust right now. And I think in the near term, we're going to see a lot of companies go public. So you're talking with mostly syndicate managers. When you're talking to the banks, you're talking to the people that are actually putting together the deals and pricing them. Yeah. So no, I speak with everybody. So, I'll speak with the cash traders, you know, actually the guys on the front lines that are facilitating the opening from the banks. I'll talk with the equity capital markets. I'll speak with, obviously, the syndicate, really important on getting the deals done from the allocation standpoint. I'll spend a lot of my time,

you know, just working with the sector heads. It's really a mutual relationship in which we have, you know, sometimes we have people that are looking for right partners, whether it's on the legal side, whether it's on the underwriting side. And, you know, a lot of times when, you know, the corporates or the banks and lawyers for that matter are working with potential prospects, they're making introductions to ourselves. So we're always looking to provide a path forward for a company to be a publicly traded entity. And we think of our value proposition is really robust the way we support companies, not only just on the trading standpoint, but from the corporate services standpoint. And then obviously the marketing visibility and PR.

It's a pretty unique package. So long story short, I'm speaking with everybody from sponsors to bankers to lawyers. If you could find the half an hour of my time, I'll speak with you as well. And I appreciate this. Well, I mean, it's very symbiotic, right? Because you guys want the listing and you want it to go well. You want it to be priced efficiently so that the company feels as though they reached a very good level of money they've raised and a good valuation. But you also want the end investors to have some benefit of being there.

And that's a very difficult balance. And a lot of that is out of your hands, obviously. But everyone wants the same thing. So the IPO process itself is very interesting in that way. It's not a counterparty kind of thing, which is what most of Wall Street is. It's rarely one side versus the other. Do you see it that way? Yeah. Well, I would say this. I think anytime that a company is going public, it's a celebration. It is a milestone event. And the capital in which they raise on day one, that's really happening the night before. So regardless of what takes place on your IPO day, up, down, or indifferent. And I've been there with many companies. Obviously,

their stock has popped. And I've been there with many companies, you know, when unfortunately their stock has gone down on a day one. But the story hasn't really changed from the night prior to the day of their IPO. And so when you see times that are really good and robust and companies do perform well, hey, look, it's fantastic. It's a celebration, but we got to get back to work the next day to run the company. When you work with a company, again, raise their capital the night capital the prior evening, and it's not so robust on the IPO day. Every deal is independent, and you never know how the institutional investment or, and for that matter, retail investors and traders are going to react. But again, I would look at it as it's a milestone event. Don't be short-sighted. Keep your eyes on

the prize. We're looking at this as a long-term event, regardless of what happens on your first day, where your partner for the long-term, I've seen stocks go up. I've seen stocks go down. Not everyone's going to go up 20, 30, 50%. So let's, let's get into that a little bit. The ultimate example of people looking at an, at the first day of an IPO and being shorts-sighted and getting pessimistic because you already know where I'm going, right? It's Facebook. So this is an example of, I mean, we don't have to do the autopsy again. I just think that there was so much enthusiasm and demand and the deal was so large, it was difficult for the brokerage firms who were placing the deal with clients to get a true read on how much supply there was, how much demand,

where it was all going. So Facebook didn't really have a great opening. And then for the first couple of months was shaky. And then of course, it turns into one of the best companies you guys have ever listed. And it's one of the best companies you guys have ever listed. And it's one of the best investing. Even if you bought on the first day at 40, wrote it down to, I don't know, 22, 23, and then the stock is in the hundreds of dollars per share, not long after. So that's an example of, I think maybe people looking at the IPO day one and then judging the whole future of a company's trading on that. And that would have been a big mistake. Look, I mean, look, look at it. You were out that

day though, right? You, you, you were, you were on vacation that day. Well, you know, to be quite frank, I think, you know, post Facebook, we took a hard, you know, look at the mannerism in which we do open IPOs and we thought there could be a more efficient way. And I think that's where, you know, my role without question, you know, totally evolved to the standpoint of let's engage more with our partners on the banking side. You know, let's talk, you know, with the legal community a lot more, you know, what does everybody need to be successful on that day one? And it was, you know, it was transparency. It was leveraging NASDAQ technology. It was without question the control aspect. So we in turn partnered with the overall community, the investment community to

build a, you know, to build a process, which we call today is the modern day IPO. So we introduced technology. We introduced transparency. We've leveraged our technology and we put it actually on the desktops of all the major banks. So when you talk about efficiency and really kind of taking out the unforeseen surprises, doesn't exist anymore. There is true transparency from the point of setting up an IPO in the morning up until that time when we officially opened it for trading.

So we have really kind of thought about this long and hard. We never guess what's right for our partners. What we try to do is ultimately have collaboration. Let's work together that we can build a superior product that's ultimately going to protect investors. And then obviously the companies that choose to list on our exchange, they're our partners for the long haul. But then when you got to think about the underwriters, the bankers, well, it's our job as the exchange to give them as much information as possible. So we built a technology

platform that really allows us to kind of mitigate any of that unforeseen risk. Again, you never know if a stock is going to go up or down, but I think the point and the premise is you can be as prepared as possible and do your job as efficiently. Right. So, and that's a long time ago. That's now eight, I guess, eight years ago. And, and a lot, a lot has changed with both technology and I think with just the mentality around IPOs. And so of course, this year has accelerated the mentality around IPOs and everyone loves IPOs. All right, so let's get into some of the numbers. And these were provided by NASDAQ. So I guess they're as close to up to date as possible. I know there are some deals this week, but it looks like you guys have done 170 IPOs year to date, raising around $42 billion.

And about two thirds of them have gone up from where the deal was priced. That's pretty phenomenal. If you ask me all around, like everyone loves this situation, right? Well, sure. I look, if you're investing in IPOs right now, the returns have been extremely phenomenal.

I would say, so we're up to 174. You know, the numbers are over 42 billion. By the end of the week, we'll be over 180. It's like the deadlock, except going in reverse. The numbers just keep going up. And so, yeah, look, if you would have invested, if you were fortunate enough to get an allocation, let's just say that on every IPO that did go public on our exchange this year, you'd be pretty happy and you'd be pretty satisfied. And I think there's some exciting names that are coming up in the near-term future as well that people are going to get really excited about as well.

What do you think are going to be the biggest deals coming on the NASDAQ between now and the end of the year? Are you at liberty to mention or not? We can't talk specifically on those names, but when we can, I'm happy to do that. I like to talk about my children that have already been, you know, listed on the exchanges. What was the largest deal on NASDAQ this year? So the largest deal, so let's see. So we had PDD, we had Royalty Pharma, which were two good ones. We had Warner Music Group. We just recently had a really fun one, which was GoodRx. They raised over a billion dollars. So, you know, you're seeing a lot of raises this year. Yeah, GoodRx, like, you know, it's so emblematic of a lot of the companies that people are excited

about. Is it a tech stock? Not kind of, but not really. It's like a price comparison engine for people that want to buy pharmaceuticals and get the lowest price for their drugs. So it's kind of healthcare. It's kind of tech. Who cares? It's a growing company. It's public. Let's analyze it.

Let's trade it. Let's buy it. So I think it's great. It's a tech company now. You get a little bit of tech evaluation. But no, that's a company we've had on the radar for a long time. Me personally, I've been watching it for a long period of time. I, you know, couldn't have been more excited to work on that IPO.

Now, again, I have a team. So, you know, I'm just one guy here, but we have a team at Nasdaq that really helps to facilitate all the new listings. But, you know, GoodRx was one that we kind of tracked, really excited about, you know, what they do and the way, you know, it's an innovator. They're changing the way that people can obviously, you know, they receive their medicine. They think, you know, one of the other companies, and this was a fun one, not to kind of diverge from the topic was Zoom. You know, Zoom went public last year. You know, so when, you know, Eric was at the market

site with the team, we celebrated. Oh, is Zoom on NASDAQ? Zoom is on NASDAQ. So I'm, you know, how old school I am. I still count the number of letters in the ticker and use that to tell me which exchange it's on. And I know that's not the case anymore, but I can't help it. Yeah, you're not alone. Zoom is one of the hottest stocks of the last 20 years. I don't even think anyone would question that. I didn't realize that that was a NASDAQ listing. Yeah.

So, I mean, so they came out, you know, I think they priced their IPO at 36. We opened it in the mid 60s. Again, this is, you know, Q2, I believe, of last year. And no one, I mean, no one could have, you know, really been a forward looking person saying, hey, we're going to go into a pandemic. You're not going to be able to do roadshows anymore. But again, the show doesn't stop and the show has to go on. So when you look at the technology of Zoom, they've grown into $130 billion company. The stock price from the mid 60s today is trading upwards to 470,

475 in that range. It is- Is that one of the most widely traded stocks on NASDAQ still, I would assume? Yeah. Yeah. It's always kind of in the high in the hot dove let's get into um let's get into the spack thing so um special purpose acquisition corporations i i mean in my prior life as a retail broker i used to sell these they were always terrible um i mean one or two of them actually turned out okay i think but like 50 of them didn't but i know that the spack now has found a new level of respectability and a little bit more prestige and the deals are getting bigger and they're working out in some cases, some cases still not, but like that's any other company. So we won't

hold that against them. How many SPACs have you guys raised? And what is that in terms of the 42 billion in money that's been raised on NASDAQ? How much of that do you think was in SPAC money? So this year out of the, let's see, out of the 174 listings this year, 56 have been SPACs. You're probably talking about $13 billion of the $43 billion. I would say. So it's a decent, it's a decent amount. Oh, absolutely. It's definitely a decent amount. But the last year was a very robust year for SPACs as well on that. It's like we did 43, the capital raise was over about a billion.

What you're seeing, there was, there was a lot of divergence in the SPAC market. Again, my opinion, I think the pandemic, right? When the pandemic hit earlier in the year, it was really, you know, January, February was pretty robust. But when the pandemic really hit and companies weren't able to raise capital, the SPAC, you know, kind of came back to the forefront outside of some really well-baked biotechs that tested the waters previously before the pandemic. And the nice thing about the SPAC is twofold. And I can understand what you said about your past because, you know, my life prior to NASDAQ, I've been here for 13 years. I was at a few VDs.

I was a partner in a smaller VD. The only syndicate I ever got offered were SPACs and pipes. And if they're offering it to you, think about how many people passed. Spot on. That was always my attitude. Yeah, you can have as much as you want, Josh. We love you. I need to get the deal done.

Here, call your friends and families. Maybe they want some too. Everybody wants to lose money. But now I think, you know, the nice thing with the SPAC today, well, one, when the pandemic hit, people were looking for opportunities to invest and people were still looking for means to kind of raise capital. The nice thing from the SPAC is a tender offer. You as an investor, you have a say on the future of the potential company, right? So you invest your capital. Everything is done at a unit for the most part. It's $10 a unit. That investment goes into a trust account. It's yielding, you know, your interest is invested in treasury. So you're really not investing or yielding. Not much interest these days. Right. Yeah. I mean, we're talking. Right. But the point is that the money is sitting in escrow in effect so that if the deal gets

voted down, everyone takes their cash back and goes home. It's not a stock price that plummets to zero. No, not until the closing, really. Not until they buy an electric truck maker. You don't have to laugh. You don't have to comment. All right. Fair enough.

Good idea. All right. So I agree with that. you don't have to laugh you don't have to comment all right fair enough good idea all right so i agree with that so in other words you say like all right nobody can really do a traditional road show because there's nobody to meet with and you're not getting on an airplane okay fine so now all of a sudden here's this vehicle that it turns out there's investor demand for people will buy them and we can bring companies public faster and skip that whole IPO roadshow process. And the entrepreneur is happy who gets to bring their company public. The market is happy because they get a new name to invest in. So I get what you're saying.

It meets a lot of different people's needs everywhere along the food chain. But now, what do we do? 150 of them this year between you guys and the New York? Yeah, probably so. It'll probably be in that ballpark. Okay. So do you get concerned? Like when is it too many?

Or are we not there yet? Or is that above your pay grade to even worry about? Like what's your thoughts on that? No, I worry about everything. If I didn't worry about things, I'd still have a full head of hair. I mean, I worry about a lot of things. I would say this. If we were having this conversation maybe about two months ago, I would be very, very concerned because there was a lot of paper on the market.

I mean, there were a lot of SPACs that did list. But what you've really seen from the sponsor standpoint, you've seen, I guess, the divergence from just the typical SPAC sponsor. So now we're looking at, you know, former general managers of, you know, the sporting teams, we're looking at politicians, we're looking at other athletes, we're looking at people in private equity, people that have been successful in their, you know, their past lives running, you know, you know, publicly listed entities for the most part. So you're seeing- Everyone has a SPAC like everyone used to have a book. Yeah. Or everyone, right? Everyone has a reality show.

Everyone has a SPAC in 2020. That's cool. I get it. I get it. But the other thing is, is that the quality of the business combination, or I guess the recognition of the companies that are choosing to do a business combination with a SPAC, they're more relatable. So you can relate to a DraftKings, you know, obviously like a Nikola Motors or a Virgin Galactic or, you know.

Is DraftKings NASDAQ? That is. And DraftKings was actually occurred right in the middle of the pandemic. We did a virtual road. We worked with their virtual road show. We did a virtual first trade for them at the market. So you mean like the celebration, how you kind of, you know, you ring the bell that day. So, you know, we haven't had any disruption from anything across the board with that. But Jay, don't you agree with me that DraftKings could have just come public through a traditional IPO? They did not need to be. It's a legit company.

There's cash flows. There's serious management. What's in it for them to have gone the SPAC route as opposed to a traditional NASDAQ exchange IPO? Is it just because of the pandemic or was there something special about the particular SPAC they talked into? Cause I don't know. I'm not judging. I really don't know. No, I think it's optionality. It really all depends on you as a company and what you're looking to do. Now, whether it's DraftKings or any company, if let's just say,

I'm a private company, I've been in business for 10 years. I've taken my business to the level in which I can, and I just can't break through the ceiling. You know, so we've become, we're a billion dollar company and that's all we're ever going to be. And there's nothing wrong with that. But if I'm trying to get to that next level, I may need some help. And so what does that help? Maybe I can find, you know, the sponsor of the SPAC that has tremendous experience in my specific sector and my business line that can really bring that expertise in. So maybe they'll join my board. Maybe they'll join my management team. Maybe they'll, you know, they'll just be a straight investor, but it's somebody that I can rely on that has the experience to help me kind of break

it out. It's not just the money. It really genuinely is about having allies who already are in place, ready to be involved with the company. I would say so. I mean, without question, I think that's a, that is the point behind it. And look, when you think about from the typical IPO, you're working with, you're doing the roadshow, you're working on the allocations, you know, from the SPAC standpoint, usually what's going to happen is you're going to do a business combination with the SPAC. You'll probably have a pipe that'll be involved. So you're kind of picking and choosing the type of shareholders that you want, that may be looking to invest in you. So it's, you know, it may not be the divergence of, you know, you know, 50 to 100 different institutional investors,

maybe getting one or two different anchors that really believe in you as a company and want to invest with you for the long haul. So I don't, I don't think they go away. I think the quality definitely has improved. And the nice thing, and what you're seeing is that some of those, that paper, as I, you know, I refer to the I refer to, the SPACs that have gone public earlier this year, even last year, announcements are coming on board. And you're seeing these announcements really on a daily basis. And that's taking some of the supply that's been on the market off the market, which allows for new SPACs to be created and new investable assets from the IPO. Okay, that's a fair point. So there is some replacement going on as these companies consummate deals. So the last thing I want to get into then is, you know, it's, it's so funny,

like a year ago we, I was doing blog posts and people were writing articles about how there's like a disappearing amount of stocks. Like they were saying the Wilshire 5,000 Index can't even find 5,000 companies to fill it out. Now there are 10 to 20 new tickers coming along every week, and I am losing track of what and who all these companies are. And so we're literally in another dimension as far as how many companies are listed. Now we're making new ones faster than private equity firms can take them off the market. I think the same thing is happening with the active passive debate. A year ago, it looked as though nobody would ever be an active investor ever again and trade individual stocks and Vanguard would end up owning 90% of the market. People were genuinely worried about that. I think this year it's been the opposite. There are now more new active

traders than ever before. They have all these different on-ramps to get involved with stocks and options, and they may not be big, but they're trading big. What's that been like for NASDAQ? Because you guys aren't a broker. You guys are an exchange and you want as much of that volume to find its way to your listings as possible. So what do you guys have to do to stay front of mind and be part of that conversation, given that so much of it is happening away from you? Yeah, well, think about NASDAQ. I think people think of NASDAQ as being an exchange in which companies choose to list, but that's just a small piece of the pie. I mean, so from the trading standpoint, we do have the deepest pools of liquidity. We do have what's

called, you know, our transactions area, which has been obviously earlier in the year when there was a lot of volatility, which meant more trading that was extremely robust. You know, from the index side, we have an index business as well. You know, we, we price over 45,000 different indexes every single day. We have partnerships with all the major managers all across the world. And then from the technology side, we as NASDAQ, we, you know, our technology is used to power over 130 different exchanges around the world. And then we're not even talking about the global exchanges that we as NASDAQ own. So it's a very resilient business model.

But when you talk about the partnerships, yes, I deal with the equity capital markets, but our other teams, we're working with all the online brokers to ensure that they get great service. They have connectivity to us. You know, the Robin Hoods, you know, the Fidelities of the world, all the retail, the Schwab's, all the retail brokers that, you know, I like to say, you know, they're all our partners. We have to ensure that we deliver a product that creates confidence in the markets, which is probably the most important that is designed to protect investors. And everybody feels at the end of the day that they had an equal shot to participate across the board. Well, here's what I want to say. You are instilling confidence. The financial markets are one of the few things that went on as though it were business as usual

without even a hiccup this year. So many aspects of American life just couldn't for obvious reasons, but the financial markets never let us down. We had this vicious, very fast bear market. And then people slowly started to realize, wait a minute, there's like law and order in the markets. Like things are working. There is liquidity. There are both buyers and sellers. The mechanics, is liquidity. There are both buyers and sellers. The mechanics, the nuts and bolts are all still in place, even though people aren't showing up to the exchange. Honestly, I think it's like one of the few things that's keeping our economy from really being in a bad place is the fact that the capital markets function. And you have so much to do with that, both your company, but also you personally, Jay.

So on behalf of investors and fund managers and asset management people and wealth management people everywhere, I would just say thank you. You don't have to respond to that. I don't want you to. It's okay. I just want you to know that I feel that way and a lot of other people, even if they haven't realized it, they probably do too. And then I would just say to everyone listening,

every time you see another IPO come out on the NASDAQ, just understand that that was Jay Heller in his boxer shorts, in his kitchen, on his headset while pouring bowls of Cap'n Crunch for the kids. And this guy is doing it all right now. So Jay, anything we didn't cover? I mean, we didn't talk about sports and stuff. No, I would say this. We're living in a time that's really unique. And one, I thank you for the time today. But if you just kind of think about where we were three, five years ago, three to five years ago, the path forward was really an IPO. ago, three to five years ago, the path forward was really an IPO. Now what you've seen is, you know,

that Midwest town that I like to say that has like one stoplight, one streetlight, one stop sign, it's kind of turned into the superhighway. So you can do an IPO, you can do a direct listing, you can do a SPAC, you can do a business combination with a SPAC, a spin out, a carve out, anything that you want to do, there's a lot of optionality. And the one thing that we want to do, we just want to see more companies listed here in the U S and we're going to do whatever we can to support them along the way. I thank you for the time. Happy to join anytime you'd like and you know, best to you and your family.

Jay, Jay, you're the man. We'll check in with you again. Keep doing what you're doing and say thanks to everyone there for us. And we'll talk soon. Thanks for us. And we'll talk soon. Thanks for listening. Check us out at the compound news.com for daily investing and market insights. You can watch all of our videos at youtube.com

slash the compound rwm. Talk to you next week.