In an unexpected twist resulting from the government shutdown, the SEC announced on Thursday that companies can proceed with their Initial Public Offerings (IPOs) using an obscure automatic approval process, now with the added benefit of skipping pricing information entirely.
With 90% of SEC staff furloughed, startups can now file their IPO paperwork, which will automatically become effective after 20 days. This process, though previously available, is rarely used, as companies typically prefer to have their SEC reviewers examine their disclosures before going public. The key difference now is that the SEC won’t penalise companies for omitting pricing or price-dependent information during the shutdown, making this workaround more appealing.
In other words, companies still undergo vetting, but it occurs after retail investors have already purchased shares. While this might not seem ideal, it remains to be seen whether investor protection will work better after the money has already changed hands.
It’s important to note that companies remain legally liable for their disclosures, and the SEC can require amendments later if necessary.
