After the market turbulence at the end of 2018, the forecast was for a bumper year of initial public offerings, with a number of high-profile names – including Lyft and Uber – among those planning to hit the US markets in 2019.
But the partial US federal government shutdown, now in its fourth week, is disrupting plans, delaying the regulatory approval process and making investors nervous.
It is the latest example of the way the impasse over President Donald Trump’s proposed border wall is sending ripples through the US economy, beyond the 800,000 federal workers who are going unpaid and the regulatory agencies that are shuttered.
Analysts say almost every step of the public listing process is affected as companies wait for the Securities and Exchange Commission (SEC), the agency in charge of approving IPOs, to get back to work.
The SEC directed questions from The National about processing delays to a statement posted on its website saying: "Only an extremely limited number of staff members are available to respond to emergency situations involving the safety of human life or the protection of property, including law enforcement."
Companies are still able to file their offering through the agency’s electronic system but there is no one to review it, offer comments and work with the issuer on finalising the terms in accordance with regulations, said Thomas Gorman, a securities lawyer and expert on SEC enforcement.
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Although issuers could press ahead without the SEC, he said, they run the risk of attracting enforcement action at a later date.
“The IPO process largely depends on the SEC staff being able to review the proposed offering prior to the registration statement becoming effective,” Mr Gorman said. “Accordingly, if the staff is not available to conduct the review process as now, effectively the IPO process comes to a halt.”
Although January and February generally offer slim pickings, 2019 was expected to see a busy start after last year’s turmoil prompted several companies to delay their IPOs.
Caught up in the shutdown is a bumper crop of tech offerings, including two “decacorns” – companies valued at more than $10 billion – in the form of Uber and Lyft.
Dara Khosrowshahi, the Uber chief executive, has made clear his intention of taking the company public this year ever since taking over from Travis Kalanick in the wake of a string of scandals. Bankers are reported to have floated a $120bn IPO valuation.
Uber and Lyft both filed draft registration statements with the SEC on the same day last month as they race each other to a public offering.
Neither company would comment on what the shutdown means for their timelines.
However, in an interview last week, Mr Khosrowshahi said the plan was on track but that a strong balance sheet meant a delay would not be a problem.
"It's a desire," he told the Wall Street Journal, but "if it doesn't happen it doesn't happen".
“I’d be disappointed and I think our shareholders would be disappointed but the company would be just fine."
His words echo analyst warnings that big companies will be better placed to ride out delays in accessing investor cash while smaller companies may be more vulnerable. Other potential issuers including Pinterest and Slack, which also have billion-dollar valuations and major investors, can survive, but smaller start-ups looking to an IPO for their next round of funding may have to trim operations instead.
At the same time, issuers have one eye on forecasts of a looming recession.
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The warnings come amid deepening gloom about the impact of the shutdown, which is now coming to the end of its fourth week.
The White House has doubled its estimate of the cost to the economy. The Council of Economic Advisers, an agency within the executive branch, calculated that the shutdown cut quarterly economic growth by 0.13 percentage points for every week it lasts as a result of hundreds of thousands of workers going unpaid and the effect of agency closures.
The end of the shutdown will not mean the IPO pipeline resumes immediately, said Patrick Healy, who runs Issuer Network, an advisory service.
“To make matters even more difficult, it’s been almost a month now,” he said. “It’s not like the SEC will turn on the lights and open back up. They’ve got a backlog to dig out.”
Even if Mr Trump and the Democrats struck a deal to re-open government tomorrow, delays could still linger until March, he said, as staff make their way through the documents already filed.
And the longer the shutdown continues, the more issuers may find they have to refile their financial information.
“The data in those filings can become stale,” Mr Healysaid. “Just the passage of time by itself ... may require them to be updated.”