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Trillions In IPO Funds At Risk Over Government Shutdown

Wall Street

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. Related: Bad News Builds For Global Markets

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.

By Michael Kern for Safehaven.com

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