any way you slice it? It hasn't been a
pretty year for stock markets in the U. S
. And abroad as stocks have slid. So has
the number of I. P. O. S
. 2022? We're seeing a major slowdown in companies
going public amid geopolitical tensions and macroeconomic factors like inflation
and supply chain disruptions. Joining us now to discuss
is john tuttle, vice chairman and chief commercial officer
at the new york stock exchange, john such a
pleasure to have you thank you for coming on.
The number of global I. P. O.
S. Is down nearly 50% year over year.
What do you think are the main factors leading to
such a dramatic decline? Well, great to be
on. And yes we are down. And particularly
when you contrast 2022-2021 or even 2020 which were both
record years for the markets. Look, I think
there's three things that are that are really happening and
they're interrelated first is macroeconomic and uncertainty which continues in
the marketplace around the size, timing and frequency of
the Federal Reserve's actions in increasing rates tackling inflation.
How that's going to impact companies and their valuations.
Simple finance tells you higher interest rates means future cash
flows are less valuable. So investors are building,
building that into their calculus as they value companies and
consider which companies they want to invest in the second
to your point earlier is geopolitical, we've seen increased
energy prices, increased food prices. How are these
, increased costs, working their way into companies cost
structure and what does that mean for their earnings and
potential future growth as well. So, investors are
thinking through that and the third piece is just an
overall shift by investors from growth at all costs to
looking at companies that have positive VPs have free cash
flow, have Ebola and uh, and are taking
a much more conservative bend. So the appetite for
new equity issuance has waned when, when you contrast
that with 2021 In 2020 really, for those three
reasons, I just laid out, you are at
the iconic New York Stock Exchange House, the environment
there. And how is it different from 2021?
Look, you know, we've been in this business
for a long time, over 230 years. And
if you pull the lens back, the chart starts
in the bottom left and it ends in the upper
right. What I think is important is that our
markets remain open and accessible for companies and for investors
during periods of uncertainty and stress. So companies can
come back and access capital that they may need offensively
or defensively. And investors have the ability to exchange
their shares for cash and cash for shares. So
, you know, markets being open. We're processing
at some cases near record volumes and message activity here
at the exchange, but everything is running seamlessly and
making sure our markets are open, helps build and
foster confidence. Are you seeing increased competition when it
comes to other exchanges because of the limited number of
companies that are currently going public, john well,
what I think is really interesting is that this opportunity
, you know, we view this moment as an
opportunity to really showcase what differentiates the new york stock
exchange, not only from any other domestic exchange,
but any other global exchange. And how we trade
stocks is different and it results in better market quality
, meaning tighter spreads, less volatility and a better
experience for companies investors. So they're focusing more on
the fundamentals of why they're going public and the trading
of their shares, which is a which benefits the
new york stock exchange. Again, vis a vis
any other exchange. And as you well know,
SPAC market also seems to be down. What have
you seen when it comes to SPAC i. P
. O. S, Do you think there's a
concern over regulatory scrutiny? There certainly is? There's
no doubt about it. In fact, there are
about 600 active spats in the marketplace right now,
roughly 100 and 30 announced business combinations that are in
some pending stage. Some of those will get done
. Some of those will be canceled as we've seen
in a lot of media reports as well. But
the SPAC issuance market. So new specs coming to
the market will will be slowing down and has slowed
down significantly. You see a lot of the bulge
bracket, investment banks pull back from underwriting the product
and I think, you know, we've, we've
had a healthy pause and over time. Um the
SPAC will will will have its place in the capital
markets. It's more options for more companies to go
public in a pathway that may be more tailored to
meet their objectives. And it's an interesting corporate finance
tool that will be around for a while. But
we're not going to see levels of issuance of spats
like we saw in 2020 or 2021. The region
seeing the most dramatic plunge in I. P.
O. S as you well know is the Americas
, why do you think that is john I think
you're seeing it down almost everywhere around the world.
The America is if we look, you know,
we actually see a lot of opportunity coming out of
Canada, a lot of energy and resource related companies
that are looking to recapitalize the company given the energy
prices right now. And investor appetite for those type
of companies in the United States, you have to
, you have to look at the sector, tech
has seen a significant self but energy and that includes
green and renewable energy in many cases has actually outperformed
the market. And if we look at south America
, you know, the geo geopolitical environment continues to
shift. We see Colombia shift leftward. We see
chile shift leftward and we have an upcoming election in
brazil. So things have quieted down a little bit
until some of that, some of that geopolitical driven
volatility or uncertainty makes its way through the market.
You and I were talking about geopolitical tension throughout this
interview. The covid lockdowns in china. What's happening
in Ukraine? How much has that weighed in on
companies when they decide whether to go public or not
? I would say it depends on the company and
what their exposure is to any of those regions.
I think generally speaking, uncertainty in the marketplace drives
volatility and there's an inverse relationship between market volatility and
I. P. O. Activity because when you're
taking a company public, you want to de risk
as much as possible. You want to have to
the extent is possibly a certain experience when you're going
into the marketplace. So to the extent activities and
supply chain related activities out of china and southeast Asia
or the war in Ukraine impact the company and brings
volatility to the market place that will of course impact
their timing on going public. Well john it's a
pleasure talking to you. We hope you come back
on the show soon, john tuttle, vice chairman
and chief commercial officer at the new york stock exchange
. Thank you again sir.