(Bloomberg) -- Just a few weeks ago, 2019 was being touted as the biggest year for flashy public market debuts in a decade. Nine days into the year, the U.S. government shutdown could ruin the fun before it even gets started.
Uber Technologies Inc. and Lyft Inc., both of which have filed confidentially with regulators for initial public offerings, believe the shutdown could slow the timeline of their listings, according to people familiar with the matter. While the final outcome depends on how long it takes for the Securities and Exchanges Commission to reopen and how substantial the feedback is when it does, neither company has gotten any comments from the agency, said the people, who asked not to be identified as the details aren’t public.
Uber and Lyft had been targeting their IPOs for the first half of the year. Spokesmen for each company declined to comment.
The ride-sharing giants, among the year’s most hotly anticipated IPOs, aren’t the only ones likely to face delays. With thousands of SEC employees furloughed until the shutdown ends, the agency can perform only the most basic of market functions, with limited staff available to “respond to emergency situations involving market integrity and investor protection,’’ according to a notice on its website.
Bond-trading platform Tradeweb Markets LLC has also filed confidentially for an IPO that could value it at more than $4 billion, but the timing may be delayed by the shutdown, people with knowledge of the matter said Wednesday. Meanwhile, some companies involved in active mergers and acquisitions have signaled to investors that their pending takeovers could drag on.
“Another couple weeks and you’ll have serious IPO delays,” said Carter Mack, the president and co-founder of JMP Group LLC. “Even if the shutdown ends and the SEC gets back to work, there’s going to be a backlog of deals filed in the interim that haven’t been assigned to examiners.”
After the market volatility that marked the end of 2018, some companies had been waiting to see whether 2019 would start with a rebound, Mack said.
“Normally you’d see companies taking advantage now, but they’re not,” he said.
In an emailed statement, the SEC wrote: “Prior to the shutdown taking effect, we encouraged filers to reach out to us to ask for acceleration of the effectiveness of pending registration statements, and we declared approximately a dozen registration statements effective.”
The shutdown leaves Jay Clayton, the Wall Street deals lawyer picked by Trump to run the SEC, hamstrung in fulfilling two of the president’s pro-business priorities: to soften rules and entice more companies to go public. As more firms blame the shuttered SEC for delaying their plans to raise capital, evidence is growing that the shutdown is starting to take a toll on corporate America, an ominous sign for a president who relishes touting economic growth as evidence his policies are working.
While Trump is known for publicly lambasting and praising officials he’s nominated for jobs, Clayton has largely stayed off the president’s radar. But when Clayton interviewed for the SEC job, Trump made no secret about what he thought the independent agency should focus on: boosting IPOs.
During a meeting more than two years ago at Trump’s Mar-a-Lago resort in Florida, the then president-elect cited statistics showing that U.S. stock sales had fallen off a cliff, people familiar with their discussion said at the time.
Clayton had come to Trump’s attention because the former Sullivan & Cromwell law partner had written a policy paper for the incoming president’s transition team arguing that smaller companies should be exempt from some rules when they go public.
When Trump nominated Clayton in January 2017 he said he would “play an important role in unleashing the job-creating power of our economy by encouraging investment in American companies.”
During Clayton’s tenure, IPOs have started to reverse a two-decade decline. The ability for any company to file documents confidentially –- as used by Uber, Lyft, Tradeweb and others -- was one of the key changes Clayton has made, giving executives a chance to get feedback from the agency and iron out any issues before publicly announcing a stock sale.
Now, there’s no one at work to provide that feedback.
“The president has been a strong advocate for, and made significant progress in, improving our capital formation regulatory regime, ” White House spokeswoman Lindsay Walters said in a statement. “So far there is no evidence that the shutdown has had a material impact on IPOs.”
David Hirschmann, president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said the lobbying group has started to hear from companies concerned about delayed IPOs.
“Timing is everything, and these are issues that for particular companies come at a critical time,’’ said Hirschmann, whose group called on Congress and the Trump administration to end the shutdown this week. “You need government to work.’’
With no end to the shutdown in sight, companies still aiming to list in the first quarter of will likely be marking one key date in their diaries: Feb. 14. That’s the deadline to price an IPO without having to provide updated financial information based on a 2018 audit, said David Goldschmidt, global head of capital markets at Skadden Arps Slate Meagher & Flom LLP.
“If people aren’t able to do their deals by then there’s a chance we could lose a good part of the first quarter for IPOs,” he said.
--With assistance from Nabila Ahmed, Drew Singer and Margaret Talev.
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