It’s an unintended consequence of the government shutdown: new filings for IPOs are expiring. Investors may be disappointed to find out that the IPO they were considering isn’t going to be offered on time, including the contentious Uber and its spiritual sibling Lyft. But what does that mean for the eager IPO investor? And when will the IPOs resume?
Uber, Lyft, and many other IPOs have had their offerings delayed by the US Securities and Exchange Commission, which is currently working with a skeleton crew. IPOs need to be reviewed and approved before they can actually be offered to the public and they also expire. Thus, IPOs like Uber and Lyft are going to need to be reapplied for once they have expired.
That could have some significant ramifications not only for the individual companies involved, but also for the stock market as a whole. Analysts believe that IPOs could be held back for months following the shutdown and, of course, investors will also have to wait on the IPOs that they found interesting.
While these companies are still able to reapply for their IPOs once the government is reenacted, there are several consequences that can’t be avoided:
- Their timelines are now thrown off: An IPO is designed to generate investment income; without the IPOs operating on schedule, these companies may need to revisit their strategies. Some companies have already decided not to offer to the public for exactly this reason, as the volatility and large price swings have frightened them. The build up momentum these companies had invested in will also be lost.
- They won’t get the attention they desire: Rather than IPOs coming out one at a time, they may very well come out suddenly. For competing companies like Uber and Lyft, this means that they may not get the investor attention that they wanted.
- There may be a lack of investor faith: Delayed IPOs and a crashing market all mean that investors may not be as ready and willing to invest at all, especially if the stock market continues to fall during the shutdown. They may need to adjust the valuation of their company based on this lack of investor faith.
And, of course, Uber’s IPO may have a specific concern: since the company can’t seem to stop generating bad news, a delayed IPO may only lead to a worsened reputation before the IPO actually hits. Uber has already experienced another large scandal in the time it has taken for its IPO to be delayed.
As the savvy investor knows, tumultuous times often yield the biggest rewards. While none of this seems like particularly good news for the companies initiating a public offering themselves, it may still be good news for some investors. If investors believe in the fundamentals of a specific company, it may very well be an opportunity to buy into these companies at a low rate. The lower investor confidence is, the less competition there is. The more IPOs there are, the lower companies are going to need to value and price themselves.
Of course, companies that can weather this storm are likely to delay their IPOs altogether, as the volatility and uncertainty within the market makes it very difficult to predict how any IPO might go. At the same time, with many companies (and consumers) pulling back on their spending, and a new recession likely to follow, many companies may also want to leap at the chance now to get another round of funding and secure their own stability.
Whether or not the IPOs will be profitable, it’s also not known when applications will be able to be processed. Applications are going to be delayed as long as the government is shutdown, so investors will need to continue to keep an eye on the IPOs that they’re interested in. Investment may need to come after the more pressing and urgent concerns of the nation are addressed — but, as with in many such cases, these investments may yield even better than average opportunities.
Regards,
Ethan Warrick
Editor
Wealth Authority
