Morning Markets: Tech investors and founders alike hope that 2019 will be the year of the decacorn IPO. The government shutdown is in the way.
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The highly-anticipated Uber and Lyft IPOs may move forward more slowly than expected due to the partial government shutdown. According to Bloomberg, the two famous U.S. technology companies “have yet to receive feedback from the U.S. securities regulator” regarding their yet-secret IPO filings.
We know a lot about Uber’s numbers, but not everything. We know less about Lyft’s, but do have some notes on the broad strokes. Their eventual public S-1 IPO filings will represent the culmination of nigh-endless work and tens of billions in global capital (Uber’s funding list is nearly farcical in length). And as Bloomberg notes, the firms wanted to go public in the first half of this year.
If that timeline is in jeopardy isn’t clear, as the timeline for the shutdown itself isn’t clear. If the government hiatus continues for weeks, Uber and Lyft could likely still get out in the quarter if their filings don’t need more work. If the shutdown continues for months—and the President has threatened as much, and more—the picture gets cloudier.
There are other companies looking to go public that could be impacted by the same issues. Recall that we are expecting Slack, Airbnb, Pinterest, and others this year. The 2019 IPO class is tipped to be decked with big names. They could be pushed back, too.
What’s the big deal, especially given that many of the companies we’re discussing are anything but young? Haven’t these companies been private for longer than historical norms? What’s the rush?
Let’s construct a scenario: The government stays shut down for another month or more. The SEC doesn’t get to IPO work until after, pushing most debuts into the second quarter. (I’m spitballing here, but walk with me.) And in that time period, the stock market falls, costing the Nasdaq 1,000 points.
Finally, Lyft and Uber get to go public. But they are now forced to do so at a valuation discount due to changed public markets. That’s a big lot of not good for the pool of global capital that is expecting Uber to debut at one valuation or another. If the company gets a haircut, it could bring a lot of pain.
The longer the shutdown, the longer the SEC disruption, the more risk that the 2019 IPO class takes on in the form of potential market volatility. It’s hard to go out when things are good if you literally can’t due to government dysfunction.
2019: Already dumber than 2018?