Nasdaq’s Head of Healthcare Listings on the State of IPOs During the Coronavirus Pandemic

On Friday, April 3, Nasdaq welcomed biopharmaceutical company Zentalis (Nasdaq: ZNTL) to the exchange through a virtual IPO. Nasdaq’s Jordan Saxe, Head of Healthcare Listings, answered questions about the IPO environment and pipeline, as well as how Nasdaq supports a successful public company debut during the pandemic.

Q: Biopharmaceutical company Zentalis (ZNTL) held its initial public offering (IPO) on Friday, one of the few companies to do so amid the COVID-19 pandemic. Can you describe how this was done given the current environment?

A: A virtual IPO is part of Nasdaq’s response to the global coronavirus pandemic, which allows companies and Nasdaq employees to practice social distancing and limit travel in order to flatten the curve. Companies forgo the traditional IPO road show that takes place in person, and instead hold virtual investor meetings.

In fact, since the SEC’s 2005 adoption of certain reforms around the IPO process, the traditional IPO road show has included a virtual component for information disclosure and dissemination to institutional and retail investors. In the past 15 years, nearly every Nasdaq IPO has included a virtual component of some kind.

Zentalis was able to pivot from a traditional, two-week roadshow where the management team and underwriters would meet in-person with investors. These important meetings still occurred, but the virtual nature led to efficiencies in time and cost. The managing underwriters, who coordinate these roadshows and identify the investors to meet with, were still able to execute the roadshow by leveraging technology and video conferencing as opposed to relying on planes and automobiles for face-to-face meetings.

Q: How did the IPO first trade take place on Nasdaq?

A: The Nasdaq IPO process, led by Jay Heller and the IPO execution team, has been positioned for years to open IPOs electronically and remotely. Even during a time when physical trading floors are closed, Nasdaq uses its same technology to launch IPO first trades in coordination with the lead underwriter to provide best-in-class IPO execution. At Nasdaq, we refer to this as the “Modern Day IPO.” We can even arrange a virtual Nasdaq Opening Bell to celebrate the company’s public debut until the company can come to the Nasdaq MarketSite to celebrate the milestone onsite. Zentalis celebrated their IPO today through a virtual Nasdaq Opening Bell ceremony.

Q: Considering the pandemic disrupting the global IPO momentum, what is the outlook for the IPO market? Are there sectors with a robust IPO pipeline?

A: Q1 was busy up until the pandemic, with 27 IPOs raising $5.9 Billion on Nasdaq’s U.S. markets. The pipeline is still robust. At this time, we are not seeing companies withdraw their S-1s, which is the filing companies use to register their securities with the U.S. Securities and Exchange Commission (SEC). In fact, the companies are updating their S-1 registration statements to remain current. It is hard to predict the future, and this could all change. But as of today, we see three distinct IPO launch periods for the remainder of 2020: Summer, which we expect to get stronger as we near Labor Day; Labor Day until Election Day, which we anticipate could be robust; and the few weeks between Thanksgiving and Christmas, which traditionally have seen activity.

Q: With Zentalis going public, how has the biotech sector performed, as well as the Nasdaq Biotech Index?

A: The Nasdaq Biotech Index (NBI) is performing marginally better than the S&P 500 year-to-date. Further, the Median Offer to 30-day performance for the Nasdaq BioPharma 2020 IPO class is 38.5%,* which is a major reason why investors are looking at the healthcare sector for growth opportunities. The healthcare sector continues to be one of the better performing sectors. It is vital that we provide a platform for these companies to access capital to help advance scientific breakthroughs and develop lifesaving drugs so that Nasdaq-listed or future Nasdaq-listed companies may be part of the solution for COVID-19.

*Source: Nasdaq data

Q: To help stop the spread of the novel coronavirus, many companies are encouraging employees to work remotely. How are the capital markets adjusting to this new reality?

A: The financial industry is adjusting to this situation well. Firms improved their systems after the 9/11 terrorist attacks in the U.S. in 2001. At Nasdaq, mobility and technology is in our DNA; we pioneered electronic equities trading when we were founded in 1971. Other exchanges eventually modernized their systems after Superstorm Sandy shuttered trading floors in 2012.

Q: Amid the recent volatility, some politicians and market commentators have suggested temporarily shutting down the markets, or shortening trading hours. Should the markets remain open? 

A: Our markets, and all markets – debt, equity, foreign exchange – operate to provide liquidity. Closing the markets is a bad idea. It breaks a basic tenant of trust between the marketplace and investors. We have seen the market mechanics and infrastructure work well over the past four to six weeks, even with this record volume and volatility. Closing the markets would have multiple negative impacts, on companies, broker dealers and investors alike. Investors must be able to digest global activity and news, while they maintain access to their funds. Breaking the trust by closing the markets would lead to a panicked rush to the door. The equity markets are there to be a permanent place to access capital. Permanent. 

For more information on Healthcare listings at Nasdaq, click here.

Contact Jordan Saxe, Head of Healthcare Listings at Nasdaq, at Jordan.saxe@nasdaq.com

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