Trillions In IPO Funds At Risk Over Government Shutdown

Yves here. Let us all shed crocodile tears for the fact that Uber’s IPO may get done behind schedule.

By Michael Kern , a newswriter and editor at Safehaven.com, Oilprice.com, and a writer at Crypto Insider. Originally published at SafeHaven

Welcome to day 20 of the government shutdown over a $5-billion border wall that’s taken the SEC offline and put the future of ready-to-go Initial Public Offerings (IPOs) at risk.

As of December 27th, the SEC had only 285 of its 4,436 employees working, even though the agency’s electronic system for filing documents, EDGAR, (and IPO paperwork) is still online. All that means is a massive backlog of unreviewed filings.

So anyone who was looking forward to an exciting year of IPOs might be disappointed because it’s getting off to a very rock … delay.

The most mouth-watering of those potential IPOs are in the tech and biotech sectors, with investors hoping to jump in on a long-awaited Uber IPO, and possibly the same for rival Lyft.

Uber is possibly the biggest IPO that everyone’s been waiting for because of its massive valuation, most recently by Goldman Sachs and Morgan Stanley last month for up to $120 billion—up from the $76 billion JPMorgan valued the company after its August funding round.

This has gone beyond hints, with Uber CEO Dara Khosrowshahi stating that the goal was an IPO in the second half of 2019.

But rival Lyft is planning an IPO in the first half of this year, assuming the SEC gets back to work. According to CNBC, Lyft hired JPMorgan Chase to lead the IPO, putting a valuation on the company of over $15 billion based on a recent funding round.

Slack, the company messaging app platform, also has plans to IPO early this year, with a potential $7-billion valuation, while AirBnB has hinted at a 2019 IPO but not committed.

Then we have Peter Thiel-backed data mining company Palantir reportedly considering a late-2019 IPO with a potential $40+-billion valuation.

Others who might be affected include the disruptive zero-fee stock trading platform Robinhood, valued at around $5.6 billion, and clearly gunning for an IPO, as well as the $12.3-billion-valued Pinterest, which could shoot for an IPO in the second quarter of this year.

It’s also worth keeping an eye on shared office space startup WeWork, valued at around $42 billion (yes, even if you’ve never heard of it) for possible IPO news, and much smaller food delivery app Postmates, valued at around $1.2 billion.

The LATimes also reported this week that the $4+ billion IPO filing for bond-trading platform Tradeweb Markets may also be delayed by the shutdown.

“Another couple weeks and you’ll have serious IPO delays,” the LATimes quoted Carter Mack, president and co-founder of JMP Group, as saying. “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.”

But this goes beyond simple delays, David Hirschmann, president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, told Bloomberg. He says that due to potential market risks, some businesses have decided it was better to sell shares sooner and bankers may assess company worth lower because of a sudden downturn.

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8 comments

  1. The Rev Kev

    I’m sorry but I really cannot see the problem here. So the IPOs can’t go ahead for the tech and biotech sectors. Aren’t these the very same sectors that tell us how great “disruption” is in our lives and that we should all strive for it? Well here it is up close and personal. In any case, if mobs like Goldman Sachs and Morgan Stanley are fretting at the thought of missing out on all those juicy fees, the solution is simple. Firms like that should kick in and fund the 4,151 unpaid employees of the Securities and Exchange Commission to continue with their jobs until everybody officially goes to work. That could take it out of petty cash. Hell, they could take it out of their hookers and blow budget. Come April they could even be allowed to claim this money back off their tax as a necessary business expenditure. Some might say that this would set up a conflict of interest here but I don’t see it that way. After all, everybody knows who the Securities and Exchange Commission works for, right?

    Reply
    1. lyman alpha blob

      I’m with you. If the government shutdown is keeping a bunch of Silicon Valley grifters from making off with other people’s money, what’s not to like?

      On a related note, the front page article in our local paper today is about a real estate developer complaining that the shutdown is costing him money because he’s unable to access a Federally guaranteed loan. Sounds like another person looking to cash in using other people’s money. If the article was an attempt to drum up sympathy for those affected by the shutdown, they definitely could have picked a better subject – greedy real estate developers don’t generally elicit much goodwill. My neighbor the Coast Guard grunt who isn’t getting paid might have been a better choice.

      Reply
  2. fajensen

    Sorry, but, The only one of those Unicorn-priced IPO’s that won’t go SPLAT! more or less right off the gate will be Palantir. Slack and Pinterest will tank and languish for quite a while until Microsoft or FaceBook buys them.

    Guess, “They” will have to find another way to destroy all that ZIRP money less it used on real stuff causing inflation and rising interests :)

    I am very disappointed. I was actually looking forward to see Ubers IPO do a face-plant.

    Reply
  3. Tom Stone

    Every time I see these valuations for UBER I break out laughing.
    “Please, daddy! May I have another one?” is the phrase that comes to mind.

    Reply
  4. ChrisAtRU

    Well, maybe this will get the kleptocrats to act, because a bunch of working class shleps and those dependent on safety net transfers haven’t!

    Won’t someone please think about markets and squillionaires!

    Reply
  5. Knifecatcher

    My lesser known, extremely unsexy late stage tech startup has been rumored for an IPO this year. For purely selfish reasons I’m hoping they pull off the Uber IPO to keep the doors open for my company to cash out.

    After that, let it all burn. :)

    Reply
  6. John Wright

    How do they get to the headline “Trillions In IPO Funds At Risk Over Government Shutdown”

    This report from 2017

    https://www.bakermckenzie.com/-/media/files/insight/publications/2017/ipo-index/ipo_index_2017_report.pdf

    has:

    “Global IPO volumes in 2017 have reached the highest level in a decade,
    according to the latest research from Baker McKenzie.”

    “A total of 1,694 listings were recorded during the 12-month period, raising a total
    of USD 206.6 billion, a jump of around a third for both metrics in 2016”

    And 2017 was shown as a 10 year high, and only 206.6 billion were raised world wide, It is difficult to see how they get to “trillions at risk”

    Given that we are only 12 days into the new year, the IPO sourcing companies have a lot of time to market their shares.

    It seems that they want to get out while the getting is good and the shutdown is preventing that.

    They used to call this “moving from strong hands to weak”.

    Reply

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