US Markets

IPOs should ramp up, even as barriers for smaller companies remain, NYSE president says

NYSE's Farley: 2016 dismal year for IPOs but next year looks good

The prospects for initial public offerings are looking up next year, after a rough 2016, NYSE Group President Tom Farley told CNBC on Friday.

"I do think next year we're going to see a couple of those really big names and then probably a couple more in 2018," Farley told "Squawk Box," in response to a question about Snap Inc.'s impending IPO.

Incoming Nasdaq CEO Adena Friedman also expressed optimism about IPO activity for 2017, telling CNBC last month "there's a very healthy pipeline of companies ready to go public."

While the number of public companies has decreased dramatically over the last two decades, due partly to the challenges small businesses face, going public has still brought companies success, Farley argued.

"There are some difficulties with a smaller company being public because of [big firms like] Starbucks, because of Dodd-Frank, because of activist investing and dealing with that. But all the benefits of going public still exist," Farley said.

"What doesn't get talked about is … the aggregate market cap of public companies has tripled, so the average size of a public company, I guess, if you do the math, is up six times in part because of that cost," he added.

As more companies consider mergers or acquisitions, the NYSE faces a challenge, because when companies combine, the exchange loses a listing, Farley said.

But activist investors are focusing on spinoffs, or when companies restructure and split to create new businesses, he said. "It by and large balances out." Some notable recent spinoffs, included Xerox, HP, and Alcoa.

But, naturally, all company activity operates under a key caveat, Farley contended. "That could all change. If we have another bout of extraordinary volatility in January, all bets are off."