IPO holdup: SEC can't process applications during partial government shutdown

While bankers have been working feverishly to get IPOs ready, Securities and Exchange Commission officials tasked with approving those IPOs haven’t been working at all the past 17 days as the partial government shutdown continues — a reality that could derail one of the biggest quarters for IPOs in years.

FOX Business has learned there is a backlog of more than 41 IPOs that need to be reviewed by the SEC before they can go public, according to data from Dealogic. The actual number of IPOs ready for review may be higher since many companies choose to file confidentially.

The companies in the SEC pipeline range in valuations from an estimated $6 million to upwards of $100 billion.

The first quarter of 2019 has been expected to be an unusually hot time for IPOs, with some of the largest “unicorns,” private tech companies with billion-plus valuations, including Airbnb, Pinterest and Palantir Technologies, signaling they could be going public, while Uber and Lyft have reportedly already filed the paperwork and are actively moving towards an IPO. According to Columbia Law School professor John Coffee, individual IPOs this year could reach “record-breaking levels of $20 billion or more.” Uber was last valued by private investors at $72 billion but some Wall Street banks think Uber may be worth as much as $120 billion. Lyft is valued at $15 billion.

With the possibility of markets careening into even more volatile territory as 2019 continues, time is of the essence for companies looking to go public. As JPMorgan's global chairman of investment banking Jennifer Nason noted, “Anyone thinking they had plans to go public in 2019 is accelerating those plans. The first half of 2019 could be a lot better than the second half of 2019 or 2020.”

The SEC’s inability to review deals now may mean some companies hold off their IPOs until a later date when they feel market conditions are favorable again.


The SEC review process for IPOs takes roughly six weeks to be approved by examiners looking at the deal — the very people placed on furlough. According to Coffee, “This may result in a wave of offerings that will be postponed.”

Other experts, though cautious, remain optimistic. “The big unicorn companies, such as Airbnb, Lyft and Uber, may see brief delays,” according to University of Florida professor and IPO scholar Jay Ritter. Ultimately there will still be more money raised in 2019 than 2018, “due to the big unicorns going public.”

In recent years, the IPO market has slowed: Both the number of companies going public and the amount of revenue generated from those companies going public have decreased. The last big year for IPOs was 2014 when $85 billion was raised, the most money generated by IPOs in a decade. In 2016 the amount of money raised slumped to $19 billion. Given the poor performance of IPOs in recent years, 2019 only needs one or two big companies to surpass 2014.

Coffee notes the SEC closure will also affect other key functions of the agency — like examinations, rulemaking, and enforcement action — functions that are critical but less relevant to investors in the short run. “Markets aren’t waiting on the next investigation; they want the next IPO.”