Time Running Out for IPOs as Government Shutdown Threat Looms

Time Running Out for IPOs as Government Shutdown Threat Looms

As the specter of a government shutdown grows nearer, companies looking to go public are racing against the clock to launch their initial public offerings (IPOs) amid an uncertain market.

·      Hamilton Insurance Group Ltd. and health-care payments software firm Waystar Holding Corp. both filed for IPOs on Monday in a bid to beat the potential government shutdown.

·      The waiting period for IPO filings and the subsequent roadshow preparations have prompted companies to file this week to avoid having to price their deals on a Friday.

Uncertain Prospects for Next Week

Speculation arises regarding whether companies would still file for IPOs next week, depending on whether a government funding extension is reached. The risk of remaining on file for an extended period looms if a shutdown occurs.

·      The looming shutdown, anticipated as early as November 17, could severely affect the US Securities and Exchange Commission (SEC). SEC Chair Gary Gensler has stated that minimal staff will be available, with up to 93% of their 4,600 employees facing furloughs.

·      A government shutdown could halt new listings, forcing companies to accelerate their efforts to go public or face significant delays in the approval process.

·      Lengthy shutdowns could compel companies to consider tapping public investors in the following year, which might result in a congested market and poor results. Some companies may aim for December listings but would be pushed into January in the event of a shutdown.

IPO Market Struggles

The IPO market has faced challenges throughout the year but started showing signs of recovery after strong listings from Arm, Instacart, and Klaviyo, which priced their offerings at or above the high end of expectations. Despite these promising launches, stocks have seen declines since their initial trading days.

·      The market was effectively closed for new offerings in the IPO market for the past two years.

·      Experts hope that a strong IPO from Birkenstock, recently approved and publicly launched, could bolster the market's prospects before a potential government shutdown.

Putting IPOs on Hold

Many IPO advisers and bankers believe that the most prudent strategy may be to temporarily halt IPO plans, considering the uncertainty surrounding government funding.

·      IPO reviews and processes could potentially resume immediately following the end of a government shutdown.

·      Companies could request an acceleration of their filings as suggested by Gensler, but the effectiveness of this approach remains unproven.

As the market braces for the possibility of a government shutdown, the fate of IPOs hangs in the balance. Companies are left with the challenging decision of whether to press ahead with their IPO plans or put them on hold in anticipation of a more stable and predictable market environment.

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