The government shutdown could force companies planning to go public in the early part of 2019 to postpone their IPOs.
The Wall Street Journal reported that the partial closure of the Securities and Exchange Commission (SEC) is to blame for the delay, with companies including Gossamer Bio, Alector and Blackstone Group LP’s Alight Solutions putting planned IPOs on hold for this month.
The shutdown, which is now the second-longest on record, has forced the SEC to furlough thousands of employees, as well as stop reviewing and approving all corporate registration statements, including IPO filings. During past shutdowns (1995, 1996 and 2013), the agency was able to use surplus cash to stay open, but it doesn’t have enough funds this time around.
Data shows that an average of about three dozen companies go public on U.S. markets each year during the first quarter. Since 1995, there have been only three years that had an IPO drought in January: 2003, 2009 and 2016.
Lori Begley, managing director at BMO Capital Markets, is advising companies that have completed most of the regulatory review process to still postpone their IPOs. “With the SEC in partial shutdown, you can’t effectively price the transaction,” she said.
And the shutdown isn’t just impacting IPOs. Around 30 million small businesses are expected to be affected by it since firms looking for a loan from the U.S. Small Business Administration (SBA) will not get a response during the shutdown. In addition, businesses in areas with a high number of government employees will also feel the strain as consumer spending falls.