007 – Jeff Thomas on the State of the IPO
Jeff Thomas is a Senior Vice President at Nasdaq and the Head of Western US Listings and Capital Markets.
Top 3 Takeaways:
- The IPO window should remain open through the upcoming election cycle as long as volatility levels don’t rise significantly. In 2016, volatility raised in part due to the election but also due to global growth concerns related to China and Brexit. That year, we saw half as many IPOs on the Nasdaq as we’ve seen so far in 2019.
- Venture-backed companies are interested in direct listings for two reasons: 1) they can provide full liquidity for investors and employees at the time of the listing with no lock-up, 2) therefore, large buy-side investors can build positions faster compared to traditional IPOs with smaller floats.
- Rule changes will need to happen for companies to raise capital during a direct listing. In a traditional IPO process, the underwriting banks assume a level of liability. It’s unclear who would bear that liability if a direct listing incorporated a capital raise today.
- [0:33] Jeff talks about his role at Nasdaq.
- [1:26] Jeff talks about the health of the IPO markets.
- [4:19] Direct listings are the number one topic Jeff and his team at Nasdaq are asked about from venture-backed companies.
- [5:12] When compared to a traditional IPO, direct listings put more work on companies in the process of going public and don’t allow them to raise capital during the process.
- [7:45] Opportunities for education in the direct listing process.
- [9:00] Jeff believes the biggest value of a direct listing is in the removal of the lock-up period for all investors.
- [12:10] The fees for a traditional public offering and a direct listing are relatively similar. Jeff elaborates on the different roles that underwriters and analysts play in each process.
- [13:55] From the Nasdaq’s perspective, traditional IPOs and direct listings are relatively similar. Nasdaq is paid the same in fees and interacts with the various parties in the same ways.
- [14:56] Jeff talks about the current challenges that prevent companies from raising money alongside a direct listing.
- [15:52] Jeff shares his thoughts on companies raising a private round ahead of a direct listing.
- [18:59] CFOs think about pricing IPOs differently than VCs.
- [21:22] Nasdaq has now done over $25B in secondary liquidity for pre-IPO companies through Nasdaq Private Market. Jeff believes the demand for liquidity will remain.
- [25:33] Nasdaq’s role as a provider of liquidity.
- [26:50] Nasdaq’s efforts in finance reform.