Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad streets in New York city, you're Inside the ICE House, our podcast from Intercontinental exchange on markets, leadership and vision and global business. The dream drivers that have made the NYSC and indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs and harness the engine of capitalism right here, right now at the NYSC and at ICE's exchanges and clearing houses around the world. And now welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
We're going to do something a little different with our next two episodes of Inside the ICE House, starting with the one you're listening to right now, it's a special two episode arc with Aryeh Bourkoff, the founder and CEO of LionTree LLC, who happens also to be the host of KindredCast, a leading podcast produced by Kindred Media. It's a little funny how tech media and entertainment and venture capital moguls like Reid Hoffman, Mark Andreessen, Adam McKay, and the aforementioned Mr. Bourkoff take to the mics with as much relish as I do to bring audiences into another world with a shows like Masters of Scale, the A16Z podcast, Surprisingly Awesome and Aryeh's show, KindredCast. I mean, it's not like they need the money, as purveyors of the spoken word, but they soldier on and their product, not a surprise. Given the perfectionism with which they follow their primary pursuits is, to borrow a title, surprisingly awesome.
Josh King:
So, in this episode, we turned our New York Stock Exchange library over to Aryeh and his team at Kindred Media to record an episode with our own Stacey Cunningham. You've heard her on our show before, but never quite like this. Now, nearly two years on the job. Aryeh and Stacey explored her career, why companies should continue to go public and the state of the capital markets from the 2020 IPO outlook to the future of direct listings. The show you're about to hear was first released last week on KindredCast's own feed, but thanks to the folks at Kindred Media, we're re-releasing it on our channel to share with our listeners. While we're pleased to offer you that episode here, we hardly encourage everyone to subscribe directly to KindredCast, a biweekly podcast that brings you news views and insights from the world of media and technology week after week.
Josh King:
It's really a great listen. And he here's the extra payoff for you, the ICE House listener, when Aryeh and Stacey finished their talk, we turned the microphones around and made Aryeh our guest, where we discovered how this decade is shaping up to be a clash of the media and technology titans who are facing off to fight over how you spend your entertainment dollars and time. Our show, as always, is produced by Pete Asch with production assistance from Ken Abel and Steven [Romancheck 00:03:12]. I'm Josh King, your regular host, passing off the microphone until next week to Aryeh Bourkoff for our special presentation of the KindredCast episode, the fearless leadership of the NYSC's Stacey Cunningham. Take it away.
Aviva Roumani:
Hi, everyone. I'm Aviva Roumani, and this is KindredCast, a biweekly podcast featuring insights from deal makers and thought leader from the world of tech media and everything in between. KindredCast is a production of Kindred Media powered by LionTree, the investment bank for the creative digital economy. Today we hear from New York Stock Exchange president Stacey Cunningham, who assumed the role in May of 2018. In conversation with LionTree CEO, Aryeh Bourkoff. The pair discusses Cunningham's path from NYSE intern to president, the exchange's technological evolution and her outlook on the IPO market.
Aryeh Bourkoff:
Hi, everyone. I'm Aryeh Bourkoff. I am pleased to be sitting here at the New York Stock Exchange downtown at their podcasting studio with the 67th president of the NYSC, Stacey Cunningham. Thank you for being here, Stacey.
Stacey Cunningham:
Aryeh, I could not be more excited to be doing this with you.
Aryeh Bourkoff:
Amazing, really appreciate your being our latest guest on KindredCast to kickoff 2020. I know that the NYSC has your own podcast called Inside the ICE House, which you started actually right around the same time we started KindredCast. So, looking forward to listening to that one and being a guest on your podcast as well. So, that's nice. So, last year was a pretty tumultuous year for the IPO markets.
Aryeh Bourkoff:
And I'm eager to hear your take on it and much more about your career and where we're going at the New York Stock Exchange. But first to get started, you're the first female to lead the NYSC in the company's 227 year history. Can you tell me about how you got started and your path to leadership and what brought you here? And I say that because on the way in here, there's this great statue of the girl right outside of the New York Stock Exchange, which I think was moved here from near the bull. It's great to see and have it, took a picture of it, and it's just an amazing sight. So, I thought of you and now we're here. Tell me how you got here.
Stacey Cunningham:
Fearless Girl. She arrived last December. So, she moved right outside the New York Stock Exchange. And I think she's really an inspiring symbol. And what I love about her is she means so many different things to do different people, and it doesn't have to mean the same thing. Like any good art, you take what it means for you. She was originally placed in New York city down by the bull as a statement from state street about the fact that there should be more female leaders on corporate boards. I see her and I just think she's calling out the world and she's just got a fierce look and she's not scared and she's not intimidated and she's just going to go make her own mark and pave her way. And I think it's an inspiring symbol for women to think for themselves as well, not just for corporate America.
Aryeh Bourkoff:
Yeah. She has her hands on her hips and she's looking at the exchange and she's like, I'm going to take this on.
Stacey Cunningham:
Yeah, it's that moment in your childhood when you don't know yet what you're supposed to be afraid of. And you haven't yet been told all of the things that you're supposed to be thinking from society and that's such a pure state. And so if we can channel that a little bit more frequently and discard a lot of the news that we hear from how we're supposed to be and what we're supposed to look like, and the types of roles we're supposed to play, I think will all be stronger. So, I love that message from her. So, I'm really excited that she moved to the neighborhood and she's right outside.
Aryeh Bourkoff:
Does she remind you of somebody?
Stacey Cunningham:
No, she doesn't. And I'll tell you why. I mean, she embodies so many different people. My own career was not well planned out. I'd love to say that I, as a child, had aspirations to go tackle the world and that, like her, I saw my path and just went to go blaze it. But I think of my career as more unfolding, it was not well orchestrated, but it came together anyway. And I started and studying engineering in university and just expected that, that would be the area I went into, because I always liked math and science. And I hadn't had a lot of exposure to things out there in different careers. And I ended up with an internship on the trading floor of the New York Stock Exchange, mostly coincidentally.
Aryeh Bourkoff:
But your father was a stock trader here.
Stacey Cunningham:
He was, but he never talked about what he did for a living and he didn't come home and describe his career. And so I had very little insight into what it was like to be in the markets. He just didn't spend time on that. The true story and is that I was trying to get a summer job waitressing and nobody would hire me, because I didn't have waitressing experience. And my father finally said, well, maybe through a connection of mine, I might be able to get you an internship. So, it was kind of that cliche summer internship.
Aryeh Bourkoff:
But purely coincidental between your father and you.
Stacey Cunningham:
Yeah. He just suggested that perhaps he could find me an internship up and he did, and he didn't work at the New York Stock Exchange, but he was in the industry and he was a trader for a Canadian broker dealer. So, he got me this internship. And when I accepted it, I just thought, fine, this will be a summer job that I go do for a few weeks. And I came down to the New York Stock Exchange trading floor. And within about 15 minutes, I thought, wow, this is what I love. I like math and science and I like engineering, but this is real passion.
Stacey Cunningham:
And I kind of felt like I found this secret that he had for all these years, about how exciting the markets could be and how interesting it was. The energy on the trading floor is just really contagious. And the sense of camaraderie and community was really important. So, my view of the markets have evolved tremendously, but that was sort of the first unfolding of the piece of paper that became my story. And when I look at that entrance, I knew that's where I wanted to be at. It felt like home. It felt like where I want-
Aryeh Bourkoff:
And when you started, you were one of the few females on the exchange.
Stacey Cunningham:
I was outnumbered for sure. Yeah, there weren't so many. At the firm, when I finally got to the point where I became a specialist and a market maker, there were 92 people at my firm in that role. And it was me and one other woman out of there. So, there were a few more women as support staff on the floor, but it was certainly male dominated. I didn't notice it. Really, it wasn't top of mind for me. It never occurred to me when I walked into this building that I was lucky to be walking in this building as a woman. I totally took it for granted. I had no logic that it shouldn't be that way or that at some period of time, I wouldn't have been allowed to. And I didn't think about that. And I think that's an important lesson, because for me, I was the beneficiary of those who blazed that trail ahead of me.
Stacey Cunningham:
And it put me in a position where I could take a job and not even think about the fact that it was a job that wasn't available to women earlier in history. There's a woman named Muriel Siebert who was the first female member of the New York Stock Exchange. It took 175 years to get one female member. And she fought for it. She was fierce. She was like that girl outside the exchange with her hands and her hips saying I'm coming in and she fought for it. I didn't even know her name when I started on the trading floor. I didn't know who she was. So, she wasn't a role model for me that I visibly looked up to. And she didn't influence me in that way, but she had tremendous influence on my career, because I wouldn't have been there if she didn't do what she did.
Aryeh Bourkoff:
But you also blazed your own trail. You had followed your own path to get to this point.
Stacey Cunningham:
Yeah. I followed my passion, followed what I love doing. And you work so hard. If you don't like what you're doing, it's much harder work. So, I think if you find something you like doing and you find a way to do it as yourself and not try to be somebody else, it just makes getting up for work a whole lot easier and more fun.
Aryeh Bourkoff:
Yeah. People always talk about the building a career based on a missionary or a mercenary concept, and or following your passion or economics. And I would say all economics follows passion.
Stacey Cunningham:
Totally agree.
Aryeh Bourkoff:
Much better to have a missionary pursuit of your career and to focus on that and let the capital, let the money, let the paycheck follow the passion.
Stacey Cunningham:
I totally agree. And that's how my career's unfolded. I've always focused on what should we be doing as a team? What should we be doing as a business? How do we find the right path and the right future for us as an organization? Much less about my own personal success. I've really never made a decision about my career with respect to what it means for me so much. I feel like it's really important to think about the organization and then your own personal test follows, because people want to hire people who are thinking about the success of the organization. And I've always had roles presented to me. They weren't things that I went out seeking.
Aryeh Bourkoff:
But your path is your path, but effectively you did open doors for a lot of other women now to come into leadership roles on the NYSC. Hopefully it won't be much of a fight as it was for you or for others. But what advice would you have for young women coming into the industry, coming into the New York Stock Exchange and how to really build a diverse career here?
Stacey Cunningham:
I think you have to embrace your differences. What makes you so much more valuable as an asset to the team is the fact that you are different and you do think different. When I look at building a management team, having diversity of thought is critical. I focus less on saying how many women or how many people of different backgrounds and more on how do I get people who think differently? And when you're really focused on getting people that think differently, they tend to have different backgrounds and different genders, and they sort of, again, follow together and you can't have everyone thinking the same way.
Stacey Cunningham:
And I think it's really important to build a team that really thinks more broadly. And culture is so important. And I do think you can have a culture that's consistent and this is a debate I've had with people, because they say, no, you shouldn't hire somebody who would fit into your culture, because you want diversity. You can have diversity and thought, but all be aligned on how you communicate with each other and how you respect each other. And so I do think having a consistent culture is really important too.
Aryeh Bourkoff:
But you don't want a culture to be so safe that you're not taking risk.
Stacey Cunningham:
Yeah. I didn't say safe. I mean we challenge each other and that's expected. It's not just allowed, it's expected. And we challenge each other respectfully and we think it's really important for everyone to be able to have a voice. It doesn't matter how senior you are. It doesn't matter who you report into. It's really important that if you have an opinion, you feel comfortable sharing it, because you don't get the benefit of having a diverse team if you're only hearing from a few players. And it's also important that not everyone communicates in the same way. So, I go out of my way to make sure if I know that there are people who tend to be less vocal on their own, that you actually call on them and say, well, what do you think about this? Because I know you're going to have an opinion that I value, but you might not share it with me. And so I'm going to ask you for it.
Aryeh Bourkoff:
Yeah. Where do you get this curiosity from? Where you effectively have many different interests. I saw that you sign up for a nine month culinary program. Tell me about that. And where do you have time and where do you have your different interests and where does it come from? What's the inspiration?
Stacey Cunningham:
Yeah. It's just things I like doing. I really like to eat. So, that explains the culinary bit. When I knew at some point in time, it was time for me to leave the trading floor. I wasn't quite sure what I was going to go do next, but like I said, I knew I'd like to eat. So, I figured I would go to culinary school and I knew at that point it wasn't going to be my next career, but I knew it was an interest that wasn't ever going to go away and it would be a skill that would always be useful, because we all will tend to eat. So, I went to school for nine months and it was fun. I had a really great relationships that I built through that program that I still have today. And I was surprised by how similar it was to work in a restaurant kitchen as part of school.
Stacey Cunningham:
It was very similar to working on the trading floor. You had to have very focused communication, very quick communication, quick decision making. You didn't have time to think about placing blame, had to figure out how to solve a problem and move ahead. Those skills I very much value from my days on the trading floor. And I saw they're very similar skills to working in restaurant kitchen. And I apply them every day in my career. And I think that's also something that we should just be thinking about is we're all made up of our experiences and what are our backgrounds and our skill sets. And they're so transferrable. You can use them to tackle whatever new initiative. I mean you've switched gears a number of times. And you use what you learned.
Aryeh Bourkoff:
I also like to eat. When I first started, the first job I had was at Smith Barney in high yield bonds and research and the person running the group, a guy named Allen Ginsburg said, "You're going to work for me." And I said, "Well, what do you do? What do you focus on? Which industries?" And he said, "Well, media, technology, telecoms, food and restaurants." And I thought to myself, I like to eat, but I don't know what else he said, so let's do it.
Stacey Cunningham:
Exactly.
Aryeh Bourkoff:
And [inaudible 00:15:27]. I just focused on the communication side of the business effectively.
Stacey Cunningham:
It's a good pivot. There's a lot of shared food love on a trading floor as well as in a restaurant kitchen.
Aryeh Bourkoff:
Yeah. Well, before we get to the markets and the exchange, I wanted to ask you about your leadership style. Because one of the things that our listeners really look for in KindredCast is what are the leaders of tomorrow? What do they look like? How do you prepare yourself to run these complex organizations? And I always go back to managing your time. So, tell me about how you organize your day. How do you think about your priorities? How do you think about your time splits? Is it internal versus external? How much is it management versus working with companies? Tell me about your day.
Stacey Cunningham:
So, I think when it comes to a day as the head of the New York Stock Exchange, you have very little control of what your day is going to look like. There are so many different things. You might have ahead of state that's coming in to visit. You might have listed companies that are here celebrating an anniversary or a milestone or an IPO or there's market news out, global events and it becomes a trading focused day. Those vary so much that it's important for me to have a sense of how much time do I want to spend on things generally. So, actually carry have a little snippet of how much time in general should be spent on external facing clients, executing against our strategic goals for the year, advocating in DC for issues that are important for our listed companies. And sort of just allocated a certain percentage of time to each of those things. And then monthly or every so often I take a look at it and I say, is that how I'm spending my time?
Aryeh Bourkoff:
I do the exact same thing, by the way. I feel like you have to align your calendar with your mind.
Stacey Cunningham:
Yes.
Aryeh Bourkoff:
And if you do that properly, your goals will just take care of themselves. Because if you say, I want to be doing the following things externally and you align your calendar for those percentages to be prioritized, that will happen. I have a weekly check and a monthly check. Exactly those percentages.
Stacey Cunningham:
Because it's so easy. There are things that will always demand your time. And they're the squeaky wheels, will raise their hand and ask for more time on your calendar. And I found, when I started in this role as the head of the exchange that about a year and a half ago, I very quickly saw that I had lost control of how much my time was spent where. There are certain things, whether it was speaking engagements or media opportunities, there were a lot of things that would just come up and they would take up a lot of my time. And I realized, wow, if I don't make this a conscious decision about how I want to allocate my time, somebody else is going to decide for me.
Aryeh Bourkoff:
Yeah. You live in, you work in New York city. You wake up in the morning. If you do nothing with your schedule, it will be filled up already. I call that defense. If you actually want to play offense and start putting things on your calendar that you really want to do, that's critical, but you have to have room for both. And so I always say, if it's a hundred percent defense or a hundred percent offense, it's not really working, have to be a good blend.
Stacey Cunningham:
Yes, I agree.
Aryeh Bourkoff:
Because it will get filled up either way.
Stacey Cunningham:
Yeah. And you'll have those days where you thought they were going to be offense and they just get wiped out, because something came up and you're in defense, but it's over time on average, how's it going?
Aryeh Bourkoff:
Okay, good. I like that a lot. So, tell me about the New York Stock Exchange, how it's evolved, where it exists today? It's been almost 228 years, and there's been a lot of talk about technology development across all industries. And obviously all the companies you focus on, but how technologically advanced is in New York Stock Exchange?
Stacey Cunningham:
I have seen this institution evolve so much over the 25 years that I've been part of it in some way or another or associated with it or around it. And when I think back, our mission is still the same. We're here to help companies raise money so they can go out and change the world. And they're providing opportunities for investors to share in their success. That's what we do every day, how we do it has changed a lot over the years. When I was on the trading floor, it was largely manual. If a company was listed on the New York Stock Exchange, roughly 85% of its trading happened on the New York Stock Exchange. And majority of it was either manual or verbal interest, certainly from a volume perspective. Now trading in the US markets is much more fragmented. It happens across 60 different venues, 13 exchanges, 40 different dark pools, which are owned by broker dealers.
Stacey Cunningham:
And it's a much different place and you have to use technology and you have to be using sophisticated technology. So, we process today, our systems process, 80 billion messages on a given day that compares single digit billions of Google searches per day. So, it's a lot. You can't do that as people on the trading floor.
Aryeh Bourkoff:
Can't do that on Excel.
Stacey Cunningham:
No, you're not doing it in Excel and you're not hitting keyboards to do that either. So, what we've done is integrated the most sophisticated technology, low latency, high throughput technology with human judgment. So, the people on the trading floor are no longer manually executing any of those trades for the most part, but they're using algorithms. And then they're applying their human judgment to adjust the algorithms. So, when there's news out or there's a sector that's particularly busy or a particular company is not trading in line and there's sort of a temporary disparity they can in and provide adjustments to the algos, but they're trading in an automated fashion. And because we keep that combination of people with technology, we have better outcomes. So, our stocks trade with less volatility, which means their investors save money.
Aryeh Bourkoff:
So, it's not purely algorithmic, for example. I always say the best technology is the one that recedes into the background and it's almost invisible, but very high powered and high performance. You've advocated for the necessity for an in-person exchange, which is a bit counterintuitive, given how much focus there is on technology and algorithms. So, tell me about this in-person exchange concept.
Stacey Cunningham:
We empower people with technology. So, we believe strongly that the combination of people and technology is so much more powerful than either one of them on its own. And you can run an exchange fully electronic, but we have a better result when we apply human judgment on top of that. So, taking the artistry and the creativity, the judgment and experience that human beings have from understanding business and industry and layering that on top of sophisticated technology, we're able to give our customers a better result. And that's really important to us. I mean, the analogy that we often use, because it really equates is the airline pilot. A plane can fly itself. We have technology that can do that. But when we're putting ourselves on a plane, we like to have somebody sitting in the cockpit that's going to be able to grab those controls during takeoff, during landing. And anytime you hit some unexpected turbulence.
Aryeh Bourkoff:
For human judgment.
Stacey Cunningham:
For human judgment.
Aryeh Bourkoff:
So, does that work? It sounds logical, but how do you measure the success of that process?
Stacey Cunningham:
Our stocks trade with less volatility. So, our stocks trade better and particularly develop during periods of market stress. So, a year ago we were coming out of periods of high volatility in the market. The quoted spread the prices, the bid spread on companies that are listed on the New York Stock Exchange widened out by 40% less than fully electronic exchanges. And that's because we require the people on the floor to meet certain standards. Those trading firms down there, they have obligations that we put on them. And as a result, that's value that we're providing to the investors who are coming in and out. And we want to make sure that during times of market stress, that's where we're stepping up, not stepping down.
Aryeh Bourkoff:
So, does that come with a cost of investment or is it with a different cost structure, because you have a human component to it versus purely technological?
Stacey Cunningham:
Yeah. We pay for it. We invest in it, we invest heavily in it and it's additional value that we give to our listed companies. And so by giving them that experience, we're the premium offering. We're saying that if you want to have security and insurance, this is the model that's going to give you the best possible outcomes. It is insurance in many ways. You want to know that you have somebody there who's accountable. That doesn't exist in other marketplaces where you actually have somebody who has responsibility.
Stacey Cunningham:
And we do it through a number of different ways. One is regulatory. So, our rules require them to be there. The market makers that we have on the floor by rule have an obligation to meet certain standards that we put on top of them. And those standards are above and beyond industry standards that would elsewhere. And two, we also pay them because they're not going to sign up for that just because they're nice guys. I mean, you've been in the industry for a long time and people need incentives to do things. And so to take on that added risk, we compensate them through a number of ways, one through just financial payments and two also through giving them some trade offs around how they trade throughout the day as well.
Aryeh Bourkoff:
And that seems like a blueprint that could be adopted by all companies or technology companies in our industry. To have a push for efficiencies and a push for automation and a push for algorithms and use of technology, but an overlay of human thought and judgment along the way. And that seems like the right blueprint, whether it's regulated or not, it seems like that's where we should be going.
Stacey Cunningham:
Yeah. I mean it's hard to use the word technology company anymore. I mean what's not a technology company. If you think about the way technology has changed the landscape of our business and any other business that's out there, it's really hard to draw those lines. Think the tech companies that have this view as tech companies, are they tech companies or are they media companies or are they consumer vendors? I mean you look at all these companies that are coming to market and we have a front row seat. For two centuries, we've been watching the companies that come to market changing the way we live, work and play every single day. And the earlier versions of tech companies, I think are just now companies that are providing a service or a product. And they're using technology to facilitate that like so many of the other companies who have evolved their businesses throughout the years.
Aryeh Bourkoff:
Yeah. You can't compartmentalize technology as a division or the be all end all of a company. It has to be sort of the blood in the veins of these companies.
Stacey Cunningham:
Right. Right. Yeah.
Aryeh Bourkoff:
I agree with that. So, what is your pitch? So, let's say a company that wants to go public. They're coming to the New York Stock Exchange. They're talking to you Stacey. And they're saying I'm strongly considering the NYSC as my top pick. Why should I come here? Why should I list here?
Stacey Cunningham:
There are four real differentiators that tend to be the reasons why companies choose to work with us. And the first one is that market model that I talked about. We invest heavily in having the combination of people in technology when trading stocks. And it means that it saves investors money and it saves companies money anytime they're trading their own stock. So, period, cost savings there. And that's the biggest differentiator. Second it's also the network. So, you want to be among your peers and we have 75% of the S&P 500 listed on the New York Stock Exchange. Those are potential partners, clients. There's so many connections we can put by bringing that network together.
Aryeh Bourkoff:
There's an ecosystem here.
Stacey Cunningham:
There's an ecosystem here and it's not just companies that are all happen to have the same names on a slide deck. We bring them together and we provide opportunities for them to learn from each other and also network and build relationships through that sense of community. The third is our marketing invisibility. I mean, everybody knows the profile that NYSC has and leveraging that platform to amplify the message that a company has is a big part of what we do. I mean, I've been doing it all day today.
Stacey Cunningham:
And then fourth is the suite of services that we have to help make them a better public company. It's tough to be a public company and it's not getting any easier. There are a lot of tremendous benefits that you get from being public and having that access to liquidity. But at the same time, there are some challenges. And so we have a suite of investor tools that help them navigate that. And that kind of all in offering is really why companies choose us. And we have been the capital raising leader for so many years and the leader of all the large IPOs that choose the New York Stock Exchange for those reasons.
Aryeh Bourkoff:
It must also be iconic for these companies. When you walk down the street and we walk down Wall Street and Broad Street and you see the building and the company's name and flags and banners on this iconic structure. And we're sitting here in a very beautiful library within the building. It's all been refurbished and it's really nice and clean and everything, but outside, it is just a pillar and structure of American finance. We were involved a number of different deals, but one of the more recent ones is the Virgin Galactic listing. And we were helping Richard Branson and the team.
Stacey Cunningham:
That was a fun one.
Aryeh Bourkoff:
That looked like a fun one. Yeah. The fanfare must be a big part of it as well at the end of the day.
Stacey Cunningham:
Yeah. I mean, I think that fun and that visibility also helps their business. If they can have a good time and highlight that, it's a great marketing event for them, we'll lean into that for them also. And it's just such an iconic institution that there is a lot of pride in that. It's not lost on us that we're built on shoulders of giants and their icons that have been changing the landscape of not just this nation anymore, but globally. That's really what makes us up. And so being able to tap into that all the time is a really fun part of this job.
Aryeh Bourkoff:
Yeah. So, are you much of a historian now, because as you said, you've been [crosstalk 00:27:38]-
Stacey Cunningham:
More so than I was.
Aryeh Bourkoff:
Yeah. I bet. You're a young woman. You have a long way to go in your career, but obviously you have the whole weight of the two centuries, a performance of the exchange on your shoulders. And it's a great, great story. What are some of the longest listed companies on the NYSC?
Stacey Cunningham:
So, the longest listed is Con Edison. The first listed is Bank of New York. So, Alexander Hamilton founded Bank of New York in order to facilitate his plan to nationalize the state stead and that whole thing. And so that was the first company traded by the New York Stock Exchange. But it wasn't consistently listed. We just had a changing in the guard, because Sotheby's was the oldest listed company that we had, but they are no longer listed as they went private.
Aryeh Bourkoff:
I'm aware.
Stacey Cunningham:
I know you know, you had a little something to do with that.
Aryeh Bourkoff:
Little something to do with that one. Yeah. But a great iconic brand, a great a company and 275 year old brand must have been listed a long time ago.
Stacey Cunningham:
Yeah. It's fun to see companies reinvent themselves throughout the years too and how they've changed. That's a fun part of the job. IPOs get all the attention. An IPO is a big high profile event and everyone's looking for those. My favorite days that when companies come back to celebrate their milestones and they're doing interesting and exciting things, so that those are the fun ones for me.
Aryeh Bourkoff:
The NYSC is as dynamic as the companies that list here.
Stacey Cunningham:
Yeah, you have to be, you don't get to be 228 years old and we're coming up on our 228th birthday in May and you have to be willing to break some glass and change the way you do things to keep evolving and keep going.
Aryeh Bourkoff:
Things are always changing. So, I'd love have to get your perspective on the markets, given your perch and given that you see everything here. We're in obviously a bull market, the exchanges hit all time highs every day now.
Stacey Cunningham:
Today.
Aryeh Bourkoff:
Today. Exactly.
Stacey Cunningham:
Or I think we finished today that way too.
Aryeh Bourkoff:
Yeah, exactly right. But companies are staying private longer. There's access to capital everywhere, private of an end public markets. As a result companies that go public maybe have less of a growth slope as the ones that used to go public earlier. And we've seen, as a result of that, especially in 2019, some high profile misses like WeWork as an example that everyone always points to. So, tell me about the state of the markets. What's changing? Are companies going public too late in the game? What are the right companies to go public? What's your advice for private companies that are thinking about the IPO?
Stacey Cunningham:
There's a lot wrapped up in there. And these are topics that we're obviously really passionate about for a number of reasons. When you look back at the 2019 IPO market, it seems like a really long time ago, but if you recall, the government was shut down this time last year. So, the first quarter was pretty slow. And then the second quarter was very, very busy. That was a little bit counterintuitive since there was so much volatility in the market coming out of the end of the year, because typically when markets get volatile, the IPO market slows down. But as you mentioned, we were on this 10 year bull market run. And so what we saw instead of companies slowing down, we saw a lot of companies say, we want to be ready to go public, because we're not quite sure if we might lose the opportunity.
Stacey Cunningham:
And the fact that there's so much private capital available has enabled them to stay private, but they weren't quite sure if that was going to stay that way. And so we saw a lot of companies getting ready. And so in Q2, once the government was reopened, we were very, very busy and it was on track to be a record year. And we did a hit some records. What we then saw was what you highlighted. There were some large ones that didn't quite make it out the way they had hoped. And it started to really push the envelope around some of the issues that have been bubbling up for a long time. And the fact that companies are staying private, I think is very problematic, not just for the markets in general, but for the US. And I think it's a trend we need to address.
Aryeh Bourkoff:
People will hear that on this podcast and say, well of course Stacey's going to say that at [inaudible 00:31:18] she wants to be public. So, what are the reasons why?
Stacey Cunningham:
I'll tell you why. Yeah, I know it sounds self-serving. Frankly, I could look as a great growth opportunity for us to build out private market infrastructure and to say, we're going to make the private markets more efficient. The reason why I don't like that as a business opportunity for us. And it's not to say we won't do it, but I don't like it. And the reason why is because this nation is built on a story of shared success. And I said, our mission is to help companies raise money so that they can go out and change the world and provide opportunities for investors to share in that success. And if you're cutting out that second part of the equation and people don't get to share in that success, you're going to say, why should I support capitalism? Why should I support free enterprise? It doesn't work for us.
Stacey Cunningham:
If companies are staying private longer, when their growth trajectories are really steep and then they sort of level off as they come to the public markets, the public markets aren't going to always be there ready and waiting for them. And you're going to see a lot of opposition. And as we're in this election cycle, we're actually hearing a lot of dialogue around, is this the right economic system for us here? So, I think the fact that companies are staying private longer is contributing to the bifurcation of wealth. And I don't think that's something we should lose sight of. I think we need to address that.
Aryeh Bourkoff:
It's an excellent point, because buying a share of stock in a company is perhaps the most democratic thing that we have in the US.
Stacey Cunningham:
It's what's made us what we are. I think if we change that, we're redefining the fabric of this nation and I don't think we can minimize the importance of that.
Aryeh Bourkoff:
So, going public too late has been one of the problems. Any other issues in terms of why the public markets say no to companies that hit the market?
Stacey Cunningham:
Yeah. So, I think there are three categories of issue that we see with companies staying private too long. And one is that bifurcation of wealth. And I frankly can't emphasize that enough too. There's a lack of discipline in governance in the private markets that the public markets demand. When companies are small and they're still working out some of those kinks, that's fine. When they grow to be very large companies and they have bad habits that are growing with them, that becomes more problematic. I think we've seen a couple of examples of that and there's more than one company that's gone through this exercise where we started to question some of the discipline and governance that they have. And so getting companies out sooner introduces that discipline and governance, that's really important.
Stacey Cunningham:
Third, the valuations in the private markets are not based on many buyers and sellers coming together and truly making a determination based on information and disclosures that the companies are sharing and really valuing a company it's based on limited information and limited investors that doesn't lead to really robust valuations. And so what we see is these inflated private market valuations, in some cases they're inaccurate just because they're not robust and in a lot of activity, in some cases they're inaccurate intentionally. That's even worse. And we can't expect that then those companies come out to the public markets and get repriced downward, because now the public markets are really valuing these companies and we can't have them be an exit strategy for the public where the public investor ends up getting hurt and then expect them to show up next time.
Aryeh Bourkoff:
Yeah. Or it's opaque and you have private market evaluations which are hard to decipher from a transparency perspective.
Stacey Cunningham:
Yeah. There's just not the same disclosures.
Aryeh Bourkoff:
Correct. And then you get public and you're asking the public to not only value it, but define the metrics as well. That's a different analysis and a different way to run a company as an owner and as a manager. There are all kinds of dynamics at play here. But the markets are healthy. So overall.
Stacey Cunningham:
Yeah. The markets are healthy. And I don't think we're going to see a shutdown on IPOs. You mentioned WeWork. WeWork isn't the first company to test some of these limits, but it was an extreme example. So, it got investors to take a step back and say, well, wait a minute, should we be asking questions that we haven't been asking before? There was this mindset that growth at all costs was okay. And now investors are saying, well, I want to know how a company's going to be profitable. If it's not profitable today, maybe I can live with that. If they can tell me how and when they're going to get there.
Stacey Cunningham:
Investors are being more discerning now about the profitability of companies. They're also pushing back on some of the governance issues. Some of those have developed because founder, CEOs of massive companies had this power, because people didn't want to miss out. If I think about 2018, 2019, FOMO comes to mind. People just did not want to miss out on being in the next iconic company that was going to grow. And now in 2020, I think it's show me the money, show me how you're going to get there.
Aryeh Bourkoff:
Or show me the transparency.
Stacey Cunningham:
Show me the plan, yeah.
Aryeh Bourkoff:
Show me the control.
Stacey Cunningham:
Yeah, show me the plan.
Aryeh Bourkoff:
Show me you're ready.
Stacey Cunningham:
Show me you're ready. Show me you're mature company that is worthy of giving you my money. Having that transparency is important. I think there's a balance. I think about my job. It feels like it's all about balance. It's balancing investor protections with investor access. So, if companies stay private, investors don't have access. And I think that's a bad trend. And so we lobby against those things, but we also want investor protections to be there too. Balancing issuer flexibility. So, companies being able to run their businesses, but still providing transparency into their businesses. So, one of the issues that comes up a lot is quarterly reporting. The challenges of being a public company and how that evolves. And it's a lot of work to go through those exercises. Now we want to make sure that companies have the right disclosures, have enough transparency so that investors can make informed decisions, but still have the flexibility to go run their businesses and focus on the things that matter most.
Aryeh Bourkoff:
If I'm a CEO with a board as a private company, listening to you talk to me here or in a private conversation. And I'm thinking, okay, I agree with you. I'm going to get ready. I'm going to have a transparency, the right controls, the right metrics, the right governance. And I'm going to go public earlier. So, how early can I go public is the question I get all the time. Because I want to go earlier. I want to have access to my stock for everyone, I want liquidity. I want a real float. Which size threshold really matters and makes it material?
Stacey Cunningham:
I think when you're looking at the stability a company has in returns and some of the predictability they have, it's a little bit of art and science combined when you look at how companies are growing. I mean, I sometimes hear from CEOs, well I want to wait until I know exactly what all of my numbers are going to be each quarter. Yes. I know you never know that, but at the same time they want that predictability and steady nature. That's usually when their growth has leveled off a little bit though. I think that's too late, if they're looking for that. But having a reasonable way to project that and they've had some growth, they have a base of business. They've already completed their sort of first phase growth. And they're looking for what they're going to add on onto their business now to continue that growth is a really good time to come out and tell investors that story.
Aryeh Bourkoff:
There's no technical number. There's just saying if you're less than a billion dollars of asset value or enterprise value, you should not go.
Stacey Cunningham:
You would hear some technical numbers out there. But I think that they can be debated. I've heard some numbers that I think are a little too high.
Aryeh Bourkoff:
Should call your local advisor basically.
Stacey Cunningham:
Yeah. Yeah. I can't give legal advice money.
Aryeh Bourkoff:
There are alternatives though, to going public in a normal way, because some people would say going public is difficult. It's burdensome. I have to go talk to investors. I have to find my investors. Of course probably worthwhile and probably have a lot of long term benefits to doing that. But there are other ways to go public these days, there's direct listings, there's something called SPACs, which is Special Purpose Acquisition Corporations, which is effectively building cash as a public company and then finding the [crosstalk 00:38:26].
Stacey Cunningham:
It's what Virgin Galactic did.
Aryeh Bourkoff:
Virgin Galactic did. Yeah. We're familiar with the space. So, how do you advise companies on direct listings or traditional IPO process or the SPACs? Have there been too many of these things happening, too little, too few? What's the balance?
Stacey Cunningham:
Everything we just talked about is sort of why you're starting to see things change and how you're seeing companies think about new ways to go public. When you look historically at the drivers and the benefits of being a public company, it really comes down to four things. One, you want to raise money. So, raising capital or access to capital more broadly. Two, liquidity for early investors and employees. Three, having a currency so you can engage in M&A and four, a visibility and credibility event. Having that public company stamp of approval. Traditionally raising money was the primary driver, which is why we saw companies go public sooner, because they needed money. But now because there's so much private capital, they can wait and they're actually waiting until they need one of those other reasons. So, that liquidity is actually one of the reasons that a lot of tech companies are pointing to now. They've been paying their employees in stock options or restricted stock for 10 years and they want to go buy a house, it's hard to do.
Stacey Cunningham:
So, becoming public makes that easier. Because those dynamics have shift, it allows you to take a step back, which frankly is a healthy exercise to do in any business at any time to take a step back and say, well, why am I doing it this way and do I have to? Barry McCarthy, the CFO of Spotify, asked that question and said, I don't need to raise money, but I want to be public. And do I have to do that at the same time? He came to us, the New York Stock Exchange, in 2016 and said, "Hey, I have this idea. Can we work through it?" And we worked on it for a year and a half with Spotify, with the SEC, with their lawyers and advisors and came up with the direct listing, which allows a company to decouple capital raising from going public.
Stacey Cunningham:
Now, it worked great for Spotify and it worked well for Slack, the second company to go that route. And there's only been two. So, it's kind of hard to point overall. But what we saw was they actually traded with less volatility. And what's great about a direct listing is it democratizes access to the public event. There isn't a allocation to a handful of institutional investors the night before.
Aryeh Bourkoff:
No roadshow.
Stacey Cunningham:
There is a roadshow. That's actually interesting. And I think you'll see that change a lot more going forward. So, there's an investor day, which is different from the IPO. And I think that's why a lot of people say you can't do a roadshow. You do this investor day. You actually can still go do both. And so Spotify and Slack did a roadshow as well as broadcast and investor day. What the investor day does and is interesting, is it democratizes access to information about the company?
Stacey Cunningham:
So, every investor, every public investor can go watch that in investor day in advance and know what are they planning for the future? What's their guidance, what's their story and is this something I want to invest in? And then they on a level playing field with the most sophisticated investors out there if they it to partake. So, there's also no lockups. So, the holders can immediately sell if they want to. Really, what it does is it gets you much more quickly to a mature state of a company where buyers and sellers can come together without artificial impairment. So, if you think about an IPO, there are some artificial constraints you might want to buy more as an institutional investor, but only receive a certain allocation. And you may really actually want to sell, but have to wait for a lockup release and retail investors very often don't have the same access to the IPO.
Stacey Cunningham:
So, really what a direct listing does is just put everybody in a playing field and says, go. What we've seen is Slack in particular, which was the second one, so it was a more known process, had the third largest opening trade of all time in the US markets, even though it was a much smaller company. 1.8 billion worth of shares of Slack traded hands on a $19 billion company. So, it was 10%-
Aryeh Bourkoff:
Trade one.
Stacey Cunningham:
Trade one. Just the opening trade.
Aryeh Bourkoff:
Wow.
Stacey Cunningham:
Just the opening trade. It was number three. It was Alibaba, which was the largest IPO of all time, than Facebook and then Slack. So, it was really significant. That's price discovery.
Aryeh Bourkoff:
Well, you're making the case for direct listings, because there's only been two, but lower volatility, total equal access and good results and liquidity and everyone knows the story at the same time, what's the downside?
Stacey Cunningham:
It's more work on the company. And I think that's where you'll see some of the evolution in it. I think the banks will provide more services for the companies through this process as well. Not all companies are the same. Some of them are looking for stronger relationships with institutions and I think you'll see some evolution there. And some of them might want to raise money at the same time as becoming public.
Aryeh Bourkoff:
Raising money and having somewhat of a more concentrated, loyal investor base that you go and find and cultivate, and frankly are there with you for the whole time. That's the process of raising capital and nutritional IPO.
Stacey Cunningham:
Yes. And you can choose a loyal investor base. I think you'll see that start to happen a little bit more with direct listings too. And as companies work with banks on how can they target investors. Because it doesn't stop you from doing that part as well. It's just opening it up to others. So, the next phase is to be able to raise capital and we filed with the SEC to be able to introduce that functionality.
Aryeh Bourkoff:
In November.
Stacey Cunningham:
We filed in, it'll take some time to work through that as I would expect. It took us a year and a half have to get the Spotify one out the door. We're optimistic. There's been a lot more engagement and a lot more support, more broadly for the initiative. The message I would have for companies, think about your goals, think about what you're trying to achieve with a public event and look at the tools that you have available and figure out what's right for you. And you have advisors and there are bank advisors, you would advise them. I would advise them. And we can help them through that process. And it just doesn't have to be one size fits all.
Aryeh Bourkoff:
What I'm hearing from you overall is the markets are still very healthy. Companies have learned some lessons given the 2019 and 2018 period of volatility and some of these processes. There are other structures available to companies to go public. Sometimes should go public earlier versus waiting too late. To put all this together and give me your outlook for 2020 on the IPO market.
Stacey Cunningham:
I think it's good. I do think we need to see some large companies come out to the public markets with a clear story about their profitability and their numbers and see investors welcome them. Because I think there's some anxiety around what we saw at the end of 2019 that I think once we see the window is open and you can become a public company and there is a benefit for that, it sometimes gets lost in the story. On average, the IPOs last year performed well, they are up. There's some high profile ones that got a lot of the attention, but really the vast majority have performed well.
Aryeh Bourkoff:
Investors did their job.
Stacey Cunningham:
Investors did their job.
Aryeh Bourkoff:
The ones that count true did well.
Stacey Cunningham:
Yeah. And many of them did well. Consumers on average were up. When you look at 2020, we're going to see just a more discerning investor. And I think you'll see some companies retrench a little bit and make sure they have the right story for investors. And frankly, I think that's a good thing for the market. Investors should be asking questions. You look at things like dual class voting rights, the type of governance issues that companies have. They're more relevant because they're so much bigger now. If a founder was bringing their company public at an earlier life cycle, they owned all the shares. So, they didn't have to worry about getting a vote, because they had the votes.
Aryeh Bourkoff:
The dual class structure referring to is there's a straight economic ownership and then there's a voting class that's concentrated with the founder or founders typically.
Stacey Cunningham:
Right. So, some shares have more voting right. And you'll see founders wanting to preserve their voting rights. It actually started with media companies back in the day. But some of the tech companies are following suit now, not as many as you would think. It gets a lot of attention. You feel like investors should have shares. And I sometimes get into some debates around whether or not we should allow that style of voting structure. And my concern is, again, investor access. If I say we won't allow that voting structure in the public markets, I get concerned that companies will just stay private if they want to maintain that control.
Aryeh Bourkoff:
The argument that speaking on behalf of sort of the media companies and the tech companies about dual voting classes, saying we could enable us to make longer term bolder decisions by having the votes in hand while we can be more forward looking and make some maybe short term decisions on sort of economic dynamics. And people are eyes wide open, because they know what they're investing in. And so if there's more volatility, so be it, but we have to make longer term decisions without worrying about dilution.
Stacey Cunningham:
Yeah, exactly. And you could focus on the long term and investors have that transparency to know that this is the structure, but then they have the dollars to vote with whether or not they want to invest in you and your decision making.
Aryeh Bourkoff:
There's a great example I found in France, because the French exchanges require one class of stock. If I'm not mistaken, but the longer you hold the stock, you accumulate more votes. So, rewards loyalty of the investors. So, if you sell your stock short term, you lose your votes. So, if you hold it for a long period of time, you accumulate more votes. So, it also prevents some activism and irregularities and the trading and volatility.
Stacey Cunningham:
Yeah. We actually have that in our listing standards that you can do that. And we have a handful of companies that leverage it. It's referred to as tenured voting, because the longer you are an owner, your votes count for more. We haven't seen a number of companies take advantage of that structure.
Aryeh Bourkoff:
I like that a lot.
Stacey Cunningham:
It's interesting.
Aryeh Bourkoff:
Remind me how many listed companies are on the NYSC?
Stacey Cunningham:
It's between 22 and 2300.
Aryeh Bourkoff:
And which one's your favorite?
Stacey Cunningham:
It's like children, you love them all the same. Some days you like some a little bit more than others, perhaps.
Aryeh Bourkoff:
But in an average year, newcomers join the club.
Stacey Cunningham:
It varies obviously by market conditions. And I would say in the 50 to a 100 range typically might join, but the numbers change. So, the numbers of been dropping overall and a lot of that's through M&A and fewer companies coming public. So, the number of public companies in total, in the US, is down by half over a 20 year period. So, that's pretty significant. And that's why I do get focused on making sure everybody has access to those opportunities. I know it seems self-serving, but if making sure investors get access to all the opportunities out there, we're really hurting ourselves.
Aryeh Bourkoff:
That's how we have to advise companies with a full toolkit, as you mentioned, because going public is one option, M&A is another option and they're related to one another.
Stacey Cunningham:
They are, yeah.
Aryeh Bourkoff:
As is the cost of capital.
Stacey Cunningham:
Right. A lot of this is capital allocation. And how do you want to use your money during different periods of time and different market conditions and what investors are thinking of you. And if there is a discrepancy, apply capital differently. I think that's an important part of what we're seeing happen in the markets. I mean, that's something that gets talked about a lot and we hear about it with buybacks, because it sounds like CEOs are trying to inflate their stock prices or they think their stock is worth more than it is. And they're going to allocate capital differently.
Aryeh Bourkoff:
Correct.
Stacey Cunningham:
The freedom of the markets and market forces is really what makes them so efficient.
Aryeh Bourkoff:
Ultimately your job as a CEO or any CEOs job is to allocate capital and allocate resources, including human capital.
Stacey Cunningham:
Yes, exactly.
Aryeh Bourkoff:
So, while we're on your favorites, I want to test your media personal interests here. So, we just finished winter vacation. Which books are you reading now? Which books did you particularly enjoy? Audio or reading.
Stacey Cunningham:
Yeah. So, I will say 2019 was an audio year for me. I hadn't done a lot of audio books in the past, but I went on to a trend of listening to books, especially ones that were narrated by the author. Like Malcolm Gladwell had narrated Talking to Strangers and I had a very podcast asked feel to it. He had incorporated music. That was a fun one. Or Trevor Noah's book, which I had never read, Born a Crime. He narrates that. And it's really quite funny. I think you and I were together when I saw him speaking about it.
Aryeh Bourkoff:
Yes.
Stacey Cunningham:
And I thought I got to go read that book. And someone came up to me and said, no, don't read it. You have to listen to it. And that's really what got me onto listening to books. So, that's what I've been listening to lately.
Aryeh Bourkoff:
It's easier to multitask also, I find.
Stacey Cunningham:
Yes. I realized how much more I could get done if I could listen to them.
Aryeh Bourkoff:
Exactly right. Okay. So, which book that you've read or listened to has had the biggest impact on your professional life in terms of leadership and inspiration?
Stacey Cunningham:
I don't know if it applies professional. One of the books though that I feel like, and this is an old one, but still applies. The Ayn Rand books. And so Atlas Shrugged for me was one that really hit me, because it made me rethink what I think. It was a test. It was like, do you really believe this or not? And so I had to think about how I think about things. And I came back in some places reaffirmed and I came back in other places, no. But it really tapped into the spirit of the obligation to do and accomplish everything you can as a person. And I thought that was a really impactful book.
Aryeh Bourkoff:
I like that. Favorite podcast aside from Inside the ICE House, which is your podcast.
Stacey Cunningham:
Well, aside from KindredCast too.
Aryeh Bourkoff:
Okay. We covered that one. That was good.
Stacey Cunningham:
Okay. For sure that one. So, KindredCast followed by Inside the ICE House. And listen to a lot of news ones. So, The Daily is one that I listen to. I like Brian Koppelman's too. I think he's got an interesting group of guests on there, but I probably most often am listening to a lot of news ones.
Aryeh Bourkoff:
Great. Last one. Any TV shows that you're watching now?
Stacey Cunningham:
Well, I got into The Crown and now I feel like I earned it, because there's just so much happening. I feel like I have the whole backstory now.
Aryeh Bourkoff:
It's real life.
Stacey Cunningham:
It is. It was a good one.
Aryeh Bourkoff:
Well, Stacey, I want to say I admire you. I'm so respectful of the career that you've built so far and just the beginning stages. And I can't wait to see what happens from here and I really appreciate our collaborations and you being here today.
Stacey Cunningham:
Aryeh, getting to work with people like you is what makes this job fun.
Aryeh Bourkoff:
Thank you so much.
Stacey Cunningham:
Thanks.
Aviva Roumani:
I hope you enjoyed our show today. If you want to check out any prior episodes, find us and subscribe at Apple Podcast, Spotify or wherever you listen, feel free to leave a review as well as it helps people find the show. You can also follow us on social media at KindredCast for behind the scenes, photos and info. Listen to KindredCast on SiriusXM every Saturday and Sunday at 2:00 PM eastern, on business radio channel 132 or stream shows on demand in the SiriusXM app.
Speaker 6:
[inaudible 00:52:07].
Speaker 1:
The information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor is affiliates make any representations or warranties express or implied as to the accuracy or completeness of the information and do not sponsor approve or endorse any of the content herein. All of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell. A solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.