US government shutdown freezes IPO market
The US government shutdown has put the IPO market at risk of "freezing" just when investors are expecting a strong return of listed deals.
The US financial markets are in shock as the US government is forced to shut down much of its operations after Congress and the White House failed to reach a budget agreement. This situation not only affects the economy in general but also directly threatens the fragile recovery of the IPO market after many years of gloom.
The U.S. Securities and Exchange Commission (SEC) is currently operating at minimal capacity with limited staff. This means the SEC will temporarily suspend processing IPOs, leaving companies that were preparing to debut on Wall Street, such as Jennifer Garner's baby food company Once Upon a Farm and electric aircraft maker Beta Technologies, to wait indefinitely.
The US IPO market has been picking up in recent months after being held back by high interest rates and volatility for nearly three years, with a number of successful deals fueling hopes that 2025 will be the year of the big comeback.
As of September 29, US companies had raised nearly $53 billion from 263 IPOs, the highest level since 2021.
However, the government shutdown has stalled this recovery, with Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, describing the current situation as “a state of administrative limbo at the worst possible time.”
Long-term confidence in the IPO market
Historically, government shutdowns have not lasted very long, although the longest one on record lasted 35 days in late 2018 under President Donald Trump. At that time, the IPO market was virtually paralyzed, although some companies were able to circumvent the law by pre-pricing their shares to continue listing.
If this one drags on, the impact will spread to banks, exchanges and related investment funds. However, many experts believe that the recovery will return as soon as the US government reopens, because investor demand for new stocks is still very strong.
According to analysis by IPO research organizations, the wave of money flowing into IPO funds, along with the positive post-listing performance of many recent companies, will continue to be the driving force for businesses to find their way to the public.
Even with some short-term setbacks, the IPO outlook in the final months of the year is still considered quite solid.
