The initial public offering market has been sputtering this year, and now a possible government shutdown threatens to bring it to an abrupt halt.
The Securities and Exchange Commission says it will suspend its processing of IPO registrations—along with other filings requiring agency review—if Congress can’t pass an appropriations bill by September’s end.
In a contingency plan released in July, the SEC said a lapse in appropriations would mean its corporate finance division would be unable to process filings, provide interpretive advice, issue no-action letters, or conduct any other normal activities. “As a result,” said the agency, “new or pending registration statements or applications for exemptive relief will not be processed regardless of the status of any review of those filings.”
After the recent tepid performance of
Arm Holdings
(ticker: ARM) and
Instacart
(CART), which is officially called Maplebear, an SEC hiatus would be another hurdle for anticipated deals including shoemaker Birkenstock, home builder Smith Douglas Homes, or computer game maker VNG Ltd.
“It makes no sense to pursue an IPO when there’s an impending government shutdown,” said Riley Mullin, an equity analyst at the IPO research firm Renaissance Capital. No companies completed IPOs during the monthlong shutdown that began in December 2018, he recalled.
The window for IPOs this year could shrink uncomfortably if a shutdown occurs and extends close to the IPO’s normal holidays around Thanksgiving and year-end, Mullin said.
Counting companies with at least a $50 million market capitalization, there have been 78 IPOs priced this year, according to Renaissance. That is a 22% increase over the comparable period of 2022.
There have been 130 IPO filings so far this year—an 18% increase from the 2002 stretch. Among those in the offing is Birkenstock. Barron’s couldn’t immediately secure comment from the company, and its securities attorneys declined to comment.
Federal securities law has a provision allowing firms to go ahead with an IPO without the SEC’s explicit signoff, Mullin said, but he doubts any are likely to test those waters—especially given the performance of large deals such as Arm’s, which jumped 25% above its $51 a share offering price, then gave those gains back.
“After the performance of these bellwether deals,” said the Renaissance analyst, “the IPO market has been shaky, independent of a shutdown.”
Write to Bill Alpert at [email protected]
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