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From Ringing the Bell to First Trade: Behind the Scenes of a Virtual IPO

Go behind the scenes of a virtual IPO with Jay Heller, head of capital markets and IPO execution at @Nasdaq.

Despite the uncertainty surrounding the novel coronavirus pandemic, companies are still seeking to tap the public markets. To enable these companies to facilitate their initial public offerings (IPOs) in a safe and healthy environment, Nasdaq has shifted to virtual IPOs and remote first trades. Jay Heller, head of capital markets and IPO execution at Nasdaq, shares his unique insight into how Nasdaq empowers these companies during this unprecedented time.

When a company considers a virtual IPO, what, if anything, changes in the process of preparing the public offering?

One of the most important aspects of planning an IPO is the ability to communicate the company’s vision to the investor community. Typically, these investor meetings take place across the country, and for the most part, in person. Pivoting to virtual roadshows during the current environment allows management teams to communicate a clear and concise roadmap for success in the future while maintaining social distance. We have seen roadshows truncated down to four days in the current environment versus the historical seven to eight day schedule.

On the day of the virtual IPO, what does your routine look like while working remotely? Do you have to prepare any differently? 

From my standpoint, nothing changes! Nasdaq has invested the time and resources to build and deliver a process that is agile and fully functional from anywhere in the world. Our goal has remained constant: providing a proprietary platform that is designed to protect all investors, while leveraging data and technology to ensure the underwriting community has everything they need—whether that is in their primary location or a remote environment.

How does the experience change for the companies going public on IPO day at Nasdaq?

Our team takes great pride in delivering a seamless execution of the client’s first trade on Nasdaq, while communicating with all parties involved in this milestone event.  Our new listed clients have been celebrating with a virtual bell ringing on our Nasdaq Tower in Times Square during the COVID-19 pandemic. In the future, we look forward to having additional celebrations at the MarketSite to ring the Nasdaq Opening or Closing Bell in person. Above all, the IPO day is such a special and historic event for a company, but it is also just “day one” of a long-term partnership we have with our issuers. 

How does the first trade work from your home? What does your setup entail, and can you discuss the technology that supports this work?

Jay Heller First Trade at Home

Whether executing an IPO in our offices at the Nasdaq MarketSite in Times Square or from my home office, the process is the same. However, the commute is much better!

Starting at about 7:00 AM ET, my team goes through the normal process. This includes checking in with the lead bank that is stabilizing and updating the underwriting and trading community on when we will start the price discovery process. Importantly, Nasdaq IPOs are not eligible to open with the rest of the markets. Leading up to and right at the markets official opening, the activity tends to be more robust than the over the normal course of the day. IPO day is such a special and historic event for a company, it has always been our belief to separate these once-in-a-lifetime events away from the markets’ official opening at 9:30 AM ET. 

Throughout the price discovery process, data, communication and transparency are paramount. During this time, Nasdaq provides updates through our data feeds, as well as our technology, which is available to all member firms. Every second through this process, Nasdaq provides updates on the current reference price, opening cross size, and imbalance data points. Nasdaq delivers this information via data feeds, or through our innovative suite of IPO tools. The underwriting bank that is stabilizing also will have access to our proprietary IPO Bookviewer. This innovative desktop solution enables them to have complete transparency on their desktop to support their ability to open a security at the proper price.  

What are the benefits and challenges of working on a virtual IPO? 

The process remains the same whether I or other members of my team are working remotely to support the IPO. We have direct connectivity into the Nasdaq network with no latency while providing best-in-class service to ensure a successful day one. 

I do miss sitting on the desk with my colleagues—I consider them my extended family. We conduct virtual meetings daily and communicate throughout the day. But from the process of facilitating an IPO virtually, nothing changes from our end.  We test our systems and IPO process every week. Most of the time we are testing in the office, however with the ongoing situation, the teams have been testing from home. Recently, I tested our systems from an Amtrak train on my way to Washington, DC. There is no limit to where we can operate from. Although this pandemic was unexpected and unprecedented, from a resiliency and execution protocol, nothing has changed in the IPO process.

How does Nasdaq’s virtual IPO execution differ from NYSE’s new process to provide Designated Market Makers (DMM) remote access to floor-based systems for opening an IPO?

For Nasdaq, nothing has changed in how we execute an initial public offering. We are thrilled to welcome Zentalis Pharmaceuticals and Keros Therapeutics to the Nasdaq family through recent virtual IPOs. These innovative companies chose to go public during this pandemic. Nasdaq’s platform enabled the underwriting community to not only have complete transparency, but also the confidence to execute an IPO on Nasdaq during the coronavirus outbreak. On Nasdaq, the exchange does not determine when an IPO officially opens for trading—that timing is up to the stabilizing bank. Only when the stabilizing bank communicates to me or a member of my execution team do we open the security for trading. However, during the price discovery process, we constantly update the trading community about the first trade timing, especially as we draw closer to the official opening. 

I have been in my current role since 2012, during which I have executed over 1,000 IPOs in partnership with the underwriting banking community. The Nasdaq IPO process, which we refer to as the “Modern Day IPO” was built with invaluable feedback from the banking community. Although the DMM will now have remote access to the NYSE floor-based systems, I want to point out that Nasdaq’s Modern Day IPO process has been helping companies raise capital for many years.

IPO Pricing and Execution

Once the worst of the virus has passed, do you think virtual IPOs will continue to be a feature for Nasdaq? If so, why? 

First, we wish our partners and listed companies and all their families safety and security during the pandemic. We look forward to the day when we can safely get back to normal day-to-day operations. We have offered unique remote bell ringing ceremonies outside of our physical MarketSite studios for years, recently for Lyft and Peloton to name a few. We see the virtual Nasdaq Bell Ceremonies on our Tower as an extension of the creative ways our clients can open and close the market. As far as virtual IPOs in the future, I think over time we will better understand how the evolving events shape the process. The subset of companies that have chosen to go public recently have had successful performance thus far, (Zentalis +30% / Keros +70%). Within the investment community, in person management meetings have been an important aspect in their investment decisions. We might see evolution in the IPO roadshow process, perhaps a combination of both virtual and in-person meetings. Whatever path is chosen, Nasdaq is here to support all companies, banks and investors.


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