IPOs Will be Delayed by Government Shutdown

January 15, 2019
890 Views

This year’s partial government shutdown has so far had only a minor impact on the stock market IPOs. Compared to political issues like trade disputes in 2018, the shutdown has done little to put investors on edge.

While private investors might not be worried about the shutdown’s impact on the economy, investment bankers find themselves in a different situation. According to a report from FOX Business, the Securities and Exchange Commission currently has a backlog of 41 IPOs that cannot be processed while the federal government is without funding.

Q1 2019 Was to Be One of the Biggest for IPOs in Years

According to analyst estimates, the 41 IPOs that are currently in limbo have valuations ranging from $6 million, all the way up to $100 billion.

Before the shutdown dragged into the new year, it was expected that the first quarter would be one of the best for IPOs in years. Companies like Pinterest, Palantir Technologies, and Airbnb, had all signaled their intent to go public this year.

Uber, the global ride hailing company, was also expected to move towards an IPO in 2019. The company has already filed paperwork with the SEC, and Wall Street traders believe that the valuation could range from $72 billion, all the way up to $120 billion in the best-case scenario.

While delays won’t stop IPOs from happening altogether, they could create more risk. Stocks opened strong in 2019, but there is potential for volatility later in the year, depending on how well the economy performs, and how much the Federal Reserve is willing to slow its interest rate hikes.

The longer it takes to process IPOs, the more risk there is that promising investments will come to market at a time that is less favorable.

IPO Market Has Cooled Since 2014

Headline-grabbing IPOs would be good for the market in the first quarter. If lawmakers can work to resolve the shutdown during this crucial time, then the SEC could still approve some IPOs before April.

The last big peak in the IPO market was 2014, with $85 billion raised. Recently, startup companies have been able to raise more from venture capitalists than they could on the open market. A strong start to 2019 would reinvigorate the IPO market, and generate some much-needed funding for America’s most promising businesses.

As with all aspects of the shutdown, the longer it continues, the more harm will be done to the U.S. economy, investors, federal employees, and the government itself.

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