Nasdaq President on Winning SpaceX IPO, Rule Changes

0:00 MOST IMPORTANT TO US IS PROTECTING INVESTORS. TO BE HONEST, I JUST DON'T KNOW WHAT EFFECT THIS IS GOING TO HAVE ON THE MARKET. MATT: JOINING US AT THE DESK IS NASDAQ PRESIDENT NELSON GRIGGS. TO BE FAIR, LYNN MARTIN MAY BE A LITTLE BIT BUMMED THAT THE NYSE MISSED OUT ON SPACEX. ON THE OTHER HAND, SHE SAYS YOU CHANGE THE RULES TO ATTRACT THEM TO NASDAQ. IS THAT THE CASE? WE RUN THOSE BUSINESSES VERY INDEPENDENT.

0:30 THERE ARE STRICT GOVERNING RULES. WE MAKE SURE WE FOLLOW VERY STRICT PROTOCOLS. WE STARTED THIS DISCUSSION WELL OVER A YEAR AGO. THE NASDAQ 100 FRANCHISE IS ABOUT $830 BILLION IN ASSETS UNDER MANAGEMENT. IT IS A JUGGERNAUT. WHEN YOU THINK ABOUT THE IPO MARKET IN GENERAL AND COMPANIES, WE KNOW THERE HAS BEEN A MASSIVE TREND TOWARD COMPANIES STAYING PRIVATE LONGER. SO YOU HAVE A DIFFERENT TYPE OF COMPANY GOING PUBLIC TODAY. SPACEX, OPENAI, ANTHROPIC -- THEY ARE A SKILL AND SIZE WE HAVE NOT SEEN.

1:04 WHEN YOU THINK ABOUT WHAT THE NASDAQ 100 IS SUPPOSED TO REPRESENT, IT IS THE 100 LARGEST NONFINANCIAL COMPANIES ON THE NASDAQ. PREVIOUSLY, PRIOR TO THESE RULE CHANGES, IT COULD TAKE UP TO A YEAR. LET'S SAY SPACEX WAS ON NASDAQ. IT DOES NOT REALLY REPRESENT WHAT THE INDEX IS MEANT TO BE. NASDAQ, RUSSELL, EVEN THE NEW YORK STOCK EXCHANGE CHANGE THEIR RULES FOR FAST ENTRY. THAT IS ONE COMPONENT WE FEEL STRONGLY ABOUT. MATT: THERE IS A REASON YOU TYPICALLY WANT TO SEASON THESE COMPANIES. CHANCES ARE THAT THE HYPE AND THE SCARCITY ARE GOING TO DRIVE THE PRICE SO HIGH IN THE FIRST FEW WEEKS OR A FEW MONTHS OF TRADING, AND NO PASSIVE INVESTORS WILL BE FORCED TO BUY THEM ESSENTIALLY AT THE TOP AS THEY CASCADE DOWN TO THE LOCKUP PERIOD X PARIS IN AUGUST.

1:55 I THINK THAT IS A BROAD GENERALIZATION. SOME STOCKS GO UP. SOME GO DOWN. PEOPLE BUYING SPACEX ARE THINKING ABOUT THE NEXT 5, 10 YEARS. THIS IS A GENERATIONAL COMPANY THAT IS CHANGING THE WORLD. DANI: WHY DOES IT MAKE A DIFFERENCE WHETHER IT IS INCLUDED IN THE INDEX IN THREE MONTHS? THEY COULD BE OVER A YEAR. WE THINK ABOUT WHAT THE WORLD SEES AS THE TOP 100 FINANCIAL COMPANIES. THAT REALLY IS NOT REPRESENTING THE INDEX. THAT IS WHAT RUSSELL SAID.

2:26 THAT IS WHAT THE NEW YORK STOCK EXCHANGE SAID. FAST ENTRY IS BECOMING SOMETHING THAT EVEN THE S&P IS LOOKING AT. FAST ENTRY, WITH THE CHANGE OF THE MAKEUP OF THE COMPANIES -- THE SIZE, THE SCALE, THE IMPACT -- WE BELIEVE THEY DESERVE TO BE IN THE INDEX IF THEY QUALIFY. MATT: WHY THE THREE TIMES FLOAT RULE, ESPECIALLY WITH A COMPANY THAT HAS SUCH BAD GOVERNANCE? ELON MUSK IS GOING TO CONTROL 85% OF THE COMPANY. IF YOU WANT TO SUE THEM FOR BREACHING FIDUCIARY DUTY, YOU ARE GOING TO HAVE TO HOLD 3% OF THE TOTAL MARKET CAP, AND THERE IS ONLY GOING TO BE 3% FREE FLOAT, SO YOU WOULD HAVE TO ESSENTIALLY BUY ALL THE SHARES. DUAL CLASS SHARES HAVE BEEN AROUND FOR A LONG TIME. WHEN YOU THINK ABOUT YOU NEED TO UNDERSTAND HOW AN INDEX WORKS -- THE NASDAQ 100 IS ONE OF THE FEW MARKET CAP-WEIGHTED INDEXES. MOST HAVE SOME FLOAT ADJUSTMENT.

3:21 THIS WAS AN ELEGANT WAY TO SAY WE MADE AN ADJUSTMENT AFTER WE GOT FEEDBACK IN THE CONSULTATION. IT IS REALLY A GUARD RAIL TO MAKE SURE THERE IS REPRESENTATION, AND IT GRADUALLY SCALES OVER TIME. IT USUALLY TAKES ABOUT A THIRD OF THE COMPANY'S FLOAT HAS TO BE PUBLIC. THIS IS A SMALL REPRESENTATION IN GENERAL. IT IS REALLY REPRESENTATIVE OF WHAT THE INDEX COMPLEXES DO WITH SOME SORT OF FLOAT ADJUSTMENT. DANI: DO YOU THINK THERE IS ANY RESPONSIBILITY OF INDEXES, OF EXCHANGES, TO BE PUSHING FOR BETTER GOVERNANCE THROUGH RULES?

3:56 YOU HAVE A COMPANY WERE ELON MUSK, EVEN THOUGH HIS ECONOMIC INTEREST IS 42%, HIS VOTING POWER IS 85%. THE FLOAT IS EXTREMELY LOW. THERE ARE A LOT OF GOVERNANCE ISSUES. WHERE THE U.S. THE NASDAQ STEP IN TO ENCOURAGE GOOD GOVERNANCE, ESPECIALLY FOR A COMPANY THAT, TO THE POINT YOU HAVE BEEN MAKING, IS GOING TO SO QUICKLY BE FORCED UPON RETAIL INVESTORS THAT ARE FOLLOWING THE INDEX? WE HAVE LONG BEEN SUPPORTIVE OF DUAL CLASS SHARES ON NASDAQ.

4:25 IF YOU CHOOSE TO INVEST IN SPACEX, THAT IS YOUR DECISION. IF YOU DO NOT WANT TO, YOU DO NOT HAVE TO. YOU WOULD HAVE TO BUY THE INDEX, OK? WHEN YOU THINK ABOUT THE IDEA OF DUAL CLASS, WE ALL KNOW THERE IS SHORT TERMISM IN THE MARKET. THE ABILITY TO THINK LONG TERM -- I THINK YOU HAVE TO HAVE ALL SIDES OF THIS BEFORE YOU JUMP IN AND SAY BAD GOVERNANCE. YOU LOOK AT THE PERFORMANCE OF MANY COMPANIES WITH DUAL CLASS SHARES.

4:56 THEY OUTPERFORM. THE FOUNDERS ARE INVESTING FOR THE LONG TERM AND WANT TO BUILD A COMPANY THAT IS DURABLE OVER NOT JUST A QUARTER, BUT OVER DECADES. THAT IS WHERE A LOT OF DUAL CLASS SHARES ARE MEANT TO BE. MATT: WHAT ABOUT BAD PROFITABILITY? YOU HAVE THE FORCED BY TIMING AT THE IPO. WHEN THE X PARIS LOCKUP ENDS, THERE WILL BE A SECOND FORCED BUYING EVENT. FOR A COMPANY THAT IS GOING TO LOSE MORE MONEY THAN ANY NASDAQ 100 COMPANY HAS EVER LOST -- I THINK THE BIGGEST LOSS EVER WAS INTEL IN 2024.

5:33 THIS COMPANY IS ON TRACK TO LOSE MORE THAN $20 BILLION THIS YEAR. IF YOU ARE MAKING AN INVESTMENT CASE. I'M NOT HERE TO TALK ABOUT INVESTMENT IN SPACEX. MATT: A LOT OF OPERATORS HAVE PROFITABILITY RULES. THE NASDAQ IS A RULES-BASED INDEX AND WE DO NOT HAVE A PROFITABILITY RULE. IF YOU LOOK AT WHAT THESE COMPANIES ARE DOING IN THE WORLD OF AI BUILDOUT, THEY ARE SPENDING FOR IT NOT A QUARTER, NOT TWO YEARS.

6:04 WE TALK ABOUT INVESTMENT IN THE LONG TERM. LITERALLY, THE VISION -- HE IS INVESTING FOR THE LONG TERM. MATT: THAT IS A FAIR POINT. ASK IF YOU DON'T WANT TO BUY THE INDEX, YOU DON'T BUY THE INDEX. IF YOU DON'T WANT TO BUY THE STOCK, YOU DON'T BUY THE STOCK. IT IS AN INVESTOR CHOICE. THE BIGGEST THING I AM FOCUSED ON IS THAT YOU DON'T GET TOO HUNG UP ON WHAT THE RULES ARE DOING AND INVESTORS IN THIS COUNTRY HAVE THE -- THE ABILITY TO INVEST WHERE THEY WANT TO INVEST. DANI: YOUR AVERAGE INVESTOR IN THE U.S. IS BUYING PASSIVE FUNDS.

6:40 ARE THEY EDUCATED ENOUGH TO BE LIKE THE GOVERNANCE IS AN ISSUE? THAT IS A GREAT QUESTION. IF YOU GO BACK MAYBE FIVE YEARS AGO, RETAIL INVESTING IN THE PUBLIC MARKETS WAS ABOUT 10 PERCENT. TODAY, IT IS UPWARDS OF 25%. THE RETAIL INVESTOR IS SMART. THEY HAVE GOTTEN MORE EDUCATED. THEY ARE PARTICIPATING IN THE OPTIONS MARKET FOR PROTECTION. I WOULD NOT SELL THE RETAIL INVESTOR SHORT. I THINK PASSIVE INVESTMENT IS GIVING THE OPPORTUNITY TO MAKE THESE INVESTMENTS. AND OF COURSE THE NASDAQ 100 IS REMARKABLE. IT HAS BEEN THE S&P OVER THE LAST 30 YEARS BY AN AVERAGE OF 3%.

7:18 I THINK THEY HAVE DONE VERY WELL. IT IS THEIR CHOICE HOW EDUCATED THEY WANT TO BECOME. MATT: I GO BACK TO THE COMPETITION BETWEEN NASDAQ AND NYSE. HAPPY TO TALK ABOUT IT. MATT: WE HAVE OTHER HUGE LISTINGS COMING UP WITH AI AND ANTHROPIC. WHAT ARE THE CHANCES YOU BEAT THEM OUT ON THAT AS WELL? A COUPLE OF THINGS SO THAT I CAN BRAG FOR A MOMENT. THERE IS MORE MARKET CAP ON NASDAQ THAN ANYWHERE. WE HAD A 4 TRILLION MARKET CAP SWITCH IN THE LAST YEAR. MATT: THOSE ARE AMAZING STATS.

7:55 FOR YOUR INVESTORS -- 'S WE ARE VERY PROUD. WE ALWAYS THINK ABOUT WHAT IS GOING TO BE THE VALUE TO THE ISSUER. DRIVEN TO MAKE THAT HAPPEN. I THINK IF YOU LOOK AT, AS WE GO TO PITCH ANY COMPANY, EVEN NEXT WEEK IS ROBUST. WE HAVE A GREAT COMPANY IS GOING ON THE NASDAQ. RAISING OVER A BILLION DOLLARS IS THE GOAL. WE HAVE SPACEX. WE HAVE A ROBUST PIPELINE WHICH IS DIVERSIFIED ACROSS DEFENSE, TECH. MORE AI COMPANIES, HEALTH CARE, CONSUMER. WE ARE VERY EXCITED ABOUT HOW WE ARE POSITION. WE DO THINK WE HAVE A WONDERFUL STORY FOR INVESTORS. WE HELP THEM UNDERSTAND HOW TO COMMUNICATE WITH SHAREHOLDERS. WE HAVE AN AMAZING VISIBILITY PLATFORM. GLOBALLY, WE ARE PART OF THE INNOVATION ECONOMY. COMPANIES ARE DRIVING THE ECONOMY FORWARD. WE LOVE OUR STORY.

8:47 WE ARE ALWAYS FOCUSED ON IT. DANI: ONE OF THE OTHER DECIDING DEVELOPMENTS IS S.E.C. APPROVAL FOR MORE HOURS OF TRADING, FIVE DAYS A WEEK. MATT: IS THAT EXCITING? DANI: AND MAYBE TERRIFYING. I'M ENVISIONING A WORLD WHERE LIQUIDITY IS MORE THIN. GEOPOLITICAL EVENTS, YOU WAKE UP AND SAY, I MISSED A FLASH CRASH OVERNIGHT. TODAY, STOCKS TRADE ALMOST 18 HOURS ALREADY.

9:18 THEY OPEN UP AT 4:00 AND GO PAST THE 4:00 TRADE HOUR. THEY'RE LOOKING TO EXTEND THAT WITH GLOBAL DEMAND FOR COMPANIES. NASDAQ IS PARTICIPATING TO MAKE SURE WE HAVE CORPORATE GUARDRAILS, INVESTOR PROTECTIONS. WE CAN HELP NOT ONLY THE TRADING COMMUNITY, BUT OUR ISSUERS. IT IS COMPLEX AND WE NEED TO MAKE SURE IT IS A WELL-RUN MARKET. THERE ARE STILL GOING TO BE QUESTIONS ABOUT HOW MUCH DEPTH THERE IS AN WE NEED TO BE THERE TO SUPPORT THAT.

9:46 MATT: QUICK PERSONAL QUESTION. WE ONLY HAVE 30 SECONDS. YOU AND I BOTH WENT TO THE SAME UNIVERSITY. YOU DID MUCH BETTER THAN I DID. THAT IS NOT TRUE. MATT: DID YOU SEE PHISH AT THE FIELDHOUSE IN 1992? I DID. WE HAD AN AMAZING BAND THAT COME THROUGH. DANI: PHISH WOULD GO TO FRAT HOUSES? DAVE MATTHEWS, PHISH -- MATT: THE SPIN DOCTORS. DANI: A PERFECT NOTE TO END ON.

10:22 THANKS FOR HAVING ME. MATT: WE HOPE TO HAVE YOU BACK