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Nasdaq Stock Exchange President: we're not in a rush to go back

Nasdaq Stock Exchange President Nelson Griggs joins Yahoo Finance’s Akiko Fujita to discuss NYSE trading floor reopening and the economic outlook as the Senate passes a bill that could force Chinese companies to delist from U.S. stock exchange.

Video transcript

AKIKO FUJITA: Welcome back to "The Ticker." We are continuing to see all three major indices pushing higher today, coming back from a three-day weekend. The Dow leading the gains, now up on nearly 680 points. The S&P 500 staying above that 3,000 level, up 56. And the NASDAQ is up 84 points. We, of course, got some positive developments this morning when we saw New York Governor Andrew Cuomo ringing in the opening bell over at the New York Stock Exchange, as they partially reopened their trading floor.

I want to bring in Nelson Griggs now. He is the president of the NASDAQ stock exchange. And Nelson, you know, I know the NASDAQ doesn't have a physical trading floor the way the New York Stock Exchange, but that-- you know, what you saw today, that certainly had to be at least a positive sign that things are moving in the right direction.

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NELSON GRIGGS: Yeah, I think in general, the way the markets have operated over the last two months has been a real positive step, just for how we are able to conduct ourselves in any environment. So although today is another move in the right direction, it's been, you know, relatively smooth, although there's been some volatility.

AKIKO FUJITA: How are you viewing the timeline in terms of returning to a new normal, as normal as things can be?

NELSON GRIGGS: Yeah.

AKIKO FUJITA: I imagine you're juggling many different elements from what the New York Stock Exchange is, but what kind of timeline are you operating under?

NELSON GRIGGS: Yeah, so we are-- during the last two months, we have already done 15 IPOs. You might have seen Warner Music launched their IPO today. There will be seven more this week. We've done a lot of secondary offerings. So the one unique thing about NASDAQ is we didn't have to make any changes to our model during this time.

So although we love to-- I'd love to go back to work and the fanfare around an IPO much more vibrant when you have people at the NASDAQ market site, we are in-- we're not in a rush to go back. I think we're looking at this as trying to be measured in how we go back. We've got 30 offices. We're in in 30 countries around the globe. So we do see different pockets kind of operating in different time frames to get back. We just want to make sure we're doing it safely, but we're not going to need to be a first mover or rush to go back.

AKIKO FUJITA: Yes, certainly to your point, especially given how busy you've been on the IPO front, you have been able to move things along. One thing, though, that has been missing is the big roadshow. There's some talk among these companies about, you know, whether that model, sort of the in-person roadshow is really necessary anymore. You know, things have been working online. How-- has that permanently changed as a result of what we've undergone over the last two months?

NELSON GRIGGS: Well, we'll see. We're certainly getting plenty of test cases, and you'll see a lot more coming up. We're looking also at a lot of conferences, investor conferences that are happening online. Investor-- we have a very large investor relations business that's happening today online. So they say it takes 90 days to form a new habit. We have many new habits being formed, so I think you will question, does it make sense to fly throughout the country to go to see investors if this is actually working out really well as it is today.

AKIKO FUJITA: Let's talk about what's happening with China, specifically the question mark above the future of US-listed Chinese companies. I know the NASDAQ I recently proposed some restrictions placed on foreign companies, essentially, looking for more vetting on that front. The Senate has now passed a bill that requires foreign companies to undergo the same kind of audits that American companies do. I'm curious about the timeline of all of this. Why did the NASDAQ feel the need to move forward on this now?

NELSON GRIGGS: Well, we have a-- through, I guess, the course of time, we do have our own rules for listed companies. And we've had several, for I'd say the last four or five years, schedule some changes to make sure they're meeting the standards we think are appropriate. But it is also an ecosystem. So there's bankers, there's accounting firms, there's the SEC. But clearly, there's some heightened tensions at the government level.

But on July 9, Senator-- the Senate chairman-- sorry, the SEC Chairman Clayton is going to hold a conference July 9 with the industry leaders to make sure that we are doing the right thing to protect investors. We obviously want to maintain ourselves as the global hub for growth companies to come list. At the same time, we have to have the right disclosures. So I think we'll see more coming over next handful of months.

AKIKO FUJITA: One of the Chinese companies that's listed on the NASDAQ, Luckin Coffee, had shares halted back in April after accounting fraud revelations surfaced. How much of what played out on that front has been a wake-up call for the NASDAQ, in terms of the need for increased scrutiny, especially on Chinese companies?

NELSON GRIGGS: Yeah, I think a lot of the activities we took were already in play before that time. You don't just, you know, form these changes overnight. So we had had discussions about some changes we were considering. I think it was a another data point that said it was important for us to go down this path. I think it was also an impetus to have the industry get together and have this discussion on July 9. So I think there's a handful of things have come up that-- making sure investors are protected is the most important thing here, while at the same time, maintaining a balance of what we can expect of companies. So you know, it was a data point.

AKIKO FUJITA: And Nelson, to the point you raised, I mean, this discussion of sort of increased vetting and changing of auditing rules has been an ongoing discussion over the years. And yet, we've also seen overseas, you know, the Hong Kong exchange changed their rules to try and attract some of these big listings back home as well. Are we getting closer to a reality where we see big names like a Baidu or like an Alibaba potentially say, you know, look, with all of these tensions, it just doesn't make sense for us to be here. And if so, what is the big risk to the NASDAQ?

NELSON GRIGGS: Yeah, I don't think we're quite at that point yet, although you are seeing a handful of these companies considered to dual list on both the markets, Hong Kong and the US. So I do feel there are-- they are local brand in that marketplace. So I can see where that can make sense for them. But I think about NASDAQ in general, the listing revenue of NASDAQ is about 12% of our revenue. Chinese listings are about 5% of our overall listing. So while it's not a threat to NASDAQ, we certainly would like to be seen as a-- again, the US in general-- as a place for global companies to come and list. So again, a little early to make that prediction, but clearly, it's a global marketplace.

ZACK GUZMAN: Yeah, Nelson, if I could just jump in here, I got a question about the way that we've seen SPACs really catch on here in the year 2020. I mean, direct listings had been all the rage before. But now, I mean, how does it impact your guys' business and what you're thinking about the unusual spike in SPACs? I mean, Draft Kings was just the most recent big name one.

NELSON GRIGGS: Yeah, I think we're seeing it become more of an accepted vehicle. They've been around a long, long time, but I'd say in the last 12 months, we've seen a renewed interest in SPACs, particularly of, you know, different issuers of SPACs. So it'll be a lot more competition, as we're seeing all these SPACs come to market, to actually find an asset to acquire.

But when you see a successful outcome like a Draft Kings, we have more business combinations coming, we're seeing about 70% or so of SPACs actually find an acquisition target. And they're very sizable deals. So if the IPO market stalls, I think a company thinking about how they get public, there's going to be different options, whether it's an IPO, whether it's fighting a SPAC to partner with. You know, it's another vehicle, but it's been remarkable.

ZACK GUZMAN: Obviously, as we've seen the volatility come down a bit here, do you think that that kind of reverses the course here, in terms of companies maybe choosing to go that route over the traditional IPO route?

NELSON GRIGGS: Well, I think companies, when they're-- you know, you don't make these decisions overnight. If you're going to go think about an IPO path, a lot of things you would have to do to be IPO ready would want to be-- would make you attractive to a SPAC, as well acquirer. So if you're going to take that 12 months to prepare for an IPO, do all the things from an accounting perspective, et cetera, that's a lot of work. So we are starting to see the IPO market open up. We're going to have a very busy June, and we're certainly hopeful that continues.

AKIKO FUJITA: Yeah, so let me just follow up on that because it sounds like the pipeline has been pretty robust at a time when you'd think a lot of companies are maybe second guessing. Going into the second half of the year, do you expect that to continue? I mean, what are you what are the conversations you're having with companies?

NELSON GRIGGS: Yeah, we're obviously hopeful. I think this next week or so you're going to see some very large names come to market. Those ones-- those were companies that were very far along the path in the March timeframe and have just picked up that work. And now that the market has stabilized, we're seeing them prepare themselves to go public.

We've also had, obviously, a lot of biotechs go public because they don't have to really predict, you know, their next couple of quarters as much as a, say, a technology company or a retail company. So what you're going to start seeing is now another batch of companies, if they can start the process of going public and that happens in June, July, August, we think it could be a pretty robust timeframe here because they really would like to get out before the election comes in November. So again, I-- with the stable market, with the ability to do these meetings online and prepare for an IPO, I think there's a lot-- there's a big pipeline, for sure.

AKIKO FUJITA: OK, Nelson Griggs, president of the NASDAQ stock exchange, good to have you on today.

NELSON GRIGGS: Thanks for having me. I really appreciate it.