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One of the few bipartisan agreements these days in Washington is both sides' refusal to bend to strike a deal over the current partial government shutdown, now in its fourth week. While the media focuses on the paychecks missed by government workers, the shutdown could derail the biggest IPO of 2019: the Lyft IPO.
The bottom line for investors is that the shutdown might delay – or even stop – some of the blockbuster initial public offerings (IPOs) now getting ready to hit the market. And it will especially impact those that need the hype of an undistracted media.
The good news, however, is that it could work in the favor of lesser-known companies that do not need smoke and mirrors to raise capital.
There are two reasons the shutdown is wreaking havoc on the IPO process.
The first is that IPOs are delayed simply because the U.S. Securities and Exchange Commission (SEC) cannot process them. Since the shutdown, fewer than 300 of 4,400 SEC employees are still working, and they are mostly in enforcement.
The second is where the smoke and mirrors really comes in. IPO hopefuls may have stale financials on record and will have to add another quarterly report to their documents before they can come public, delaying their public debut.
This can impact the most highly desired IPOs of 2019, including Uber, Airbnb, and Pinterest.
For Lyft, in particular, the backlog can push the IPO back enough to drain the investor enthusiasm that they've spent countless months trying to build. Lyft was hoping to beat its rival, Uber, to the punch buy staging a public offering this spring. The shutdown delay could foil that plan.
Even worse, investors may wake up to realize the company's profitability, or lack thereof, killed their appetite for shares.
While it did not matter so much over the holidays, the growing backlog of deals is now a problem for the most anticipated IPOs.
But the good news is that when the shutdown finally ends, the environment for IPOs could get significantly better for investors who know where to look.
And we'll show you how you can use this to your advantage…
When the Shutdown Ends, the IPO Floodgates Will Open
An average of more than 30 companies go public in the United States during the first quarter each year. When the government fully reopens, we could easily see a mad rush of companies hitting the market. And investment bankers will have a vested interest in kick-starting the process to earn all those fat underwriting fees they've been missing.
The shutdown may turn into a good thing for interested companies, as the market swoon of late last year certainly made investors nervous. With the rebound in the stock market – the Dow is up 3% on the year already – conditions look much better for issuers, and that means for investors, too.
This is especially important for companies that do not have the name recognition of an Uber or Lyft. Many investors only want to participate in IPOs when market conditions are firm because they are in for the short-term profit of a flip.
Not every company has the allure to bring people in just so they can say they own a piece of that company. It's going to be popular to own Lyft, at least in some people's minds. Of course, its financial condition may turn it to ice, ready to melt down when the news hits the fan.
For those "other" companies, when the backlog finally starts to clear, the competition for investor dollars may intensify.
That's why investors need to be armed with the best information…