Exclusive Interview: Scott Cutler of NYSE on Growth of Tech IPOs and Capital Market Leadership

Henry Truc |


The IPO market in the U.S. has been on an absolute tear the past two years, with over 450 new listings and nearly $130 billion in proceeds. In fact, the first three quarters of 2014 have already surpassed the record numbers from 2013 as a whole.

Some of the biggest names to go public during this time have been major household tech companies such as Twitter (TWTR) , GrubHub (GRUB) , Wayfair (W), King Digital (KING) and most recently, China ecommerce behemoth Alibaba (BABA) , all of which chose to list on the New York Stock Exchange. Established in 1792, the NYSE has a prestigious history as a leader in the capital markets, and its iconic building is quintessential Wall Street. Supporting more than 2,300 listed companies with a cumulative market capitalization of $27.5 trillion, the exchange is a fundamental foundation for the U.S. and global economy.

Yet, it wasn’t until in recent years that the NYSE was able to gain significant momentum into the world of new tech listings, becoming the most popular destination for technology IPOs in 2012.

Scott Cutler, Executive Vice President and Head of Global Listings at NYSE, spearheaded the exchange’s efforts during this shift. Cutler manages the exchange’s relationships with the NYSE issuer community of global companies. He is also responsible for the Exchange’s relationship with the investment banking, private equity, venture capital and legal communities to attract new listings. In addition, he oversees the Capital Markets business including, Initial Public Offerings for operating companies, Structured Products, Closed-End Funds, and REITs listing on the NYSE or NYSE MKT.

equities.com had the opportunity to speak with Cutler to get his insight into the largest IPO in history, the NYSE’s next targeted areas, and the state of small and mid-cap companies in the public markets.

EQ: To start us off, can you tell us about your background and your role at the NYSE?

Cutler: I’ve been at the NYSE coming up on nine years. I run the Global Listings and Capital Markets business here. Prior to that, I was in technology investment banking out in San Francisco and I started my career as a corporate securities lawyer doing IPOs, M&A, and venture financing fund formation. I’ve sort of been full circle around the capital markets life cycle for over 20 years.

EQ: The recent Alibaba IPO was a significant moment for the market, and certainly one for the NYSE. Can you tell us about what this milestone event meant for the exchange?

Cutler: It was an important transaction for Alibaba, for China, and for the technology market. For us, it was one of a hundred IPOs that we've executed over the course of the year. But as the largest IPO in history, there was a significant amount of work and testing and preparation that we put into that to make sure that the IPO went off as smoothly and that there was confidence in execution for a deal of that size and scope.

EQ: As we've seen in the past with big IPOs like that, investors may take the execution for granted because they don’t see what goes on behind the scenes, so having it go off seamlessly actually is a very big deal.

Cutler: I can tell you that we definitely didn’t take it for granted. Nor do we take any of our IPO transactions for granted, but I think what it highlighted—and you saw it in full display from the press coverage at the NYSE that day —is the amount of control, the amount of preparation, and the amount of expertise that the NYSE puts into the IPO product itself.

That is the differentiator for us and the rest of the competition. It’s that focus on quality of execution that I think distinguishes the NYSE from any other marketplace, and that's why all of the transactions of size, importance and scale choose to go to the NYSE.

EQ: To that point, Alibaba is the latest and largest example, but you’ve had a lot of big-name tech companies coming to the NYSE, including LinkedIn, Twitter, and now Lending Club. That wasn’t necessarily the case in the past. Can you talk about the strategic initiatives and investments the exchange has made to position you to do so?

Cutler: When I started, we had no meaningful or material market share in technology IPOs. Today, we've got a majority of the IPOs from tech that come to the market, and that's been part of a multi-year effort for us to build out our brand and our network in the technology community, which includes both venture capital and private equity, and the business leaders in that community. I think we've been able to show and demonstrate early on a new relevance to the global marketplace that is the NYSE and how we’ve sort of turned this global marketplace for the benefit of the technology community.

We've been a really strong advocate for things that have been important to the tech and the venture capital community. For example, we played the leading role among exchanges to get the JOBS Act signed into law and the technology community, as well as the entire emerging-growth community, benefitted from our leadership efforts in that regard. We view ourselves as having that leadership position in capital markets across all sectors. In some sectors, we're really trying to focus that brand to give it more life and visibility.

EQ: The IPO market itself has been on a record pace since about the fourth quarter of 2012. Last year was a great year, and this year certainly has been very healthy. Do you anticipate this trend to continue? What are some of the drivers for that trend to move forward?

Cutler: If we look at some of the factors during this period, we’d see that we’ve had a bull market. We’ve had a flight of capital from the rest of the world to the United States, which will benefit the equity market. We’ve had a sustained period of growth and low volatility. Those factors have contributed to a wide-open IPO market for companies from literally every sector, ranging in size from a small biotech company to Alibaba, from places like Colombia to China, to all over in the United States. It’s been one of those rare times where all the elements have combined to create really perfect conditions for creating a fantastic stew of IPOs over the course of the year.

The question is going to be whether we are positioned for that to continue. I think with the volatility we’ve seen over the past month or so, the market has taken a little bit of a breather and I think as long the conditions persists that have been around for the last 12 months, we’ll continue to see a very active IPO market. Those things need to continue for the IPO momentum to continue on the pace that it's been on.

Scott_Cutler_2____NYSE.jpgEQ: We’ve talked about your success in the tech industry, but are there other areas in the market that you're looking to target?

Cutler:If you look at the big sectors in the IPO market: Financial Services, Consumers, Health Care, and Technology have really been the four leading areas. We spend a lot of time there but we're also a global marketplace, so we're spending time in China, Latin America, Europe, and in the far reaches of the globe to make sure that we're positioning the U.S. capital market for companies from all over the world.

All of this requires a tremendous amount of effort and focus on the part of our team to be able to ensure that the NYSE remains the center of global capital raising, which we've been for the last several years.

EQ: There is growing interest from investors, at least on the institutional level right now and eventually perhaps for the retail audience, to participate in the private markets. Companies are also able to defer going public further down their roadmap than before. How is the NYSE addressing this space?

Cutler: I guess I look at it a little bit differently. I don’t think that companies are making the conscious choice to avoid the public markets. I wouldn’t say that they're making other choices to avoid the public markets. I think the reality is the private markets are flushed with excess capital right now and as a result private companies have tremendous opportunities to access capital.

At the same time, the markets have changed dramatically over the course of the last decade with decimalization, research settlements, the economics of supporting emerging-growth companies, as well as regulation, which has made the public markets either more expensive or some might say less attractive. But the simple reality is the public markets are still the only way that a company can provide full access of liquidity for its employees, have the currency for growth and acquisition, and receive the branding that's associated with the world's leading companies.

That value proposition hasn’t changed, and in fact, it's only become stronger. I think we see this not only in the small emerging-growth IPO but we're actually seeing that also within our larger public company base. We're seeing a record level of spin-off and carve-out IPO transactions from existing public companies of assets that are targeting either a different investment profile or a different growth profile, and being unlocked in terms of value within these larger conglomerates. That’s another big trend that is favorable towards public markets.

EQ: For companies looking to raise capital, an IPO is still the Promised Land for all the reasons you just mentioned to access the public markets. What are some important concerns that management teams need to realize in regards to operating as a public issuer once they do so? How is the NYSE supporting and helping to educate them?

Cutler: For any private company, you have to be prepared for the public markets. You have to be prepared for the disclosure, the transparency, the quarterly reporting, and management communicating with a public company shareholder base. Of course, with all of that comes a higher level of scrutiny and a higher level of professionalism than operating as a private company.

So number one, I think companies need to be aware of that and I think they are. We actually provide a whole suite of services and tools to help companies better communicate with their investors. They have to understand who their investors are and need to provide resources and training for folks in CFO roles or investor relations to be able to do their job better. We very much view our role as to be able to provide products and services to help public companies operate in this environment.

EQ: Most of these concerns are especially relevant to the small and mid-cap companies. You mentioned decimalization, which has really impacted this particular market segment. The JOBS Act was hoping to alleviate some of that. Do you feel that small and mid-cap stocks are now getting the type of support that they need to grow?

Cutler: The answer is no. It could be better because a lot of the small and mid-cap stocks still have to fight to attract liquidity and trading in their stocks. They have to fight to attract research coverage and support from the banking community for their companies. With the way the market has changed, we've turned a marketplace into more of a trading marketplace.

As a result, a lot of the larger-cap, more-liquid names are the ones that receive a tremendous amount of support. Yet, we as public markets need to do more to be able to support small and medium-cap sized companies. That’s the entire industry.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
BABA Alibaba Group Holding Limited American Depositary 104.50 0.56 0.54 10,837,111
GRUB GrubHub Inc. 43.79 0.59 1.37 1,959,975
TWTR Twitter Inc. 18.03 -0.06 -0.33 41,687,600


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