Global geopolitical uncertainty has weighed on the markets as of late, and the ongoing U.S. government shutdown has stalled the IPO pipeline, says Nasdaq President and Chief Executive Officer Adena Friedman.
The government shutdown, now in its 33 rd day, is not good for the U.S. and has challenged the public markets, Friedman said. Still, many companies are utilizing the downtime to prepare for an initial public offering (IPO) when the government has fully reopened.
“We continue to see that really every company is looking to tap the public markets as soon as [the government] reopens,” Friedman said during a CNBC interview at the World Economic Forum in Davos-Klosters, Switzerland.
“With the hope that the government does reopen in the coming days, weeks, then I think we will see that there is certainly less of a time window for these companies to go [public], but they are all ready to go,” said Friedman. “If the shutdown does extend for weeks, we’ll see more and more companies wanting to go public in a shorter window.”
Business leaders, entrepreneurs and government officials are gathered in Davos to discuss how the private and public sectors can work together to make the world more equitable and stable as part of the forum’s central theme of “Globalization 4.0.”
The forum comes amid increased geopolitical risks concerning trade, Brexit and the U.S. government shutdown. During the fiscal quarter leading up to Davos, volatility was high, but several companies still pursued an IPO. Should volatility return with the same vigor, “if you’re a strong company, with a strong story and strong fundamentals, you’ll be able to get out even in a more volatile environment,” Friedman said. She noted that at the start of this year, there was a 35% increase in companies that wanted to IPO with Nasdaq.
As exchanges ready for a potential wave of IPOs, there has been some pushback on IPOs with a dual-class share structure, which is when a company issues various types of shares that often have different voting rights. Although, Friedman acknowledged that the vast majority of companies do not go public with dual-class shares.
“We would like more companies to tap the public markets,” said Friedman. “We do believe it’s good for the country, good for the economy to have more companies in the public markets, so if we look at the practicality of allowing these founder-led companies to come with a dual-class [share structure], it’s better than them staying private and investors not being able to invest with them at all.”
Friedman elaborated on that point when speaking with Yahoo! Finance Editor in Chief Andy Serwer, saying that a private company is typically only available to a select number of investors, whereas when a private company goes public, it then becomes available to millions of people.
“Our view is that, frankly, going public is the first step to giving some level of inclusive growth because you are allowing those average savers access to these great companies that they otherwise wouldn’t be able to invest in,” Friedman said. “And, that will help with the wealth disparity and the divide that has developed in the country recently.”