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US: Government shutdown affects IPO deadlines

 |  January 2, 2019

The partial shutdown of the US government could cause serious problems for some initial public offerings.

The US Securities and Exchange Commission revealed last week that it would not declare any effective registration statements during the shutdown, which is necessary for companies hoping to go public, according to The Wall Street Journal.

Data shows that an average of about three dozen companies go public on US markets each year during the first quarter. Since there is no way of knowing when the shutdown will end, companies looking to file an IPO in early 2019 face an uncertain future.

If the shutdown continues, companies could decide not to proceed with a roadshow in early January. In addition, market uncertainty might also result in delays since firms will likely avoid pricing an IPO when stocks are falling.

“Before you start the roadshow, you want to feel like you’ve got some visibility and you want to feel like the markets will be favorable two weeks out,” said Andrew Fabens, a partner and co-chair of the capital markets practice group at law firm Gibson, Dunn & Crutcher LLP.

The shutdown isn’t just impacting IPOs. Around 30 million small businesses will likely be affected by it, with SMBs looking for a loan from the US Small Business Administration (SBA) not receiving a response during the shutdown. In addition, businesses in areas with a high number of government employees will likely feel the strain as consumer spending falls.

And earlier this week it was revealed that the Federal Trade Commission (FTC), which was investigating Facebook and its practices, will be forced to shut down the probe because of the shutdown.

“The key part of any investigation is the information-gathering stage, which is revealing documents and talking to people,” David Vladeck, former director of the FTC’s consumer protection bureau, said. “It just stops. And it has to stop in an organized way.”

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