US government shutdown threatens to disrupt IPO market momentum

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By Manya Saini and Niket Nishant

(Reuters) -A U.S. government shutdown threatens to stall the IPO market’s long-awaited comeback, just as strong investor demand and successful debuts had breathed life back into new listings.  

The U.S. government shut down much of its operations on Wednesday as deep partisan divisions prevented Congress and the White House from reaching a funding deal.

With the Securities and Exchange Commission running only essential functions on a skeleton staff, the agency will stop processing IPO paperwork, leaving companies primed for Wall Street debuts such as actress Jennifer Garner’s baby food company Once Upon a Farm and electric-aircraft maker Beta Technologies in limbo.

The fall window has been gathering momentum, with a wave of successful debuts, raising hopes that 2025 could be a breakout year for IPOs after high interest rates and volatility stalled the market for nearly three years.

“A shutdown grinds the SEC to a halt, which means no prospectus reviews, no comments cleared and no green lights for going public,” said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

“It’s bureaucratic purgatory at the worst possible time, just as the IPO market was beginning to thaw from a deep freeze,” Schulman added.  

U.S. IPOs have raised $52.94 billion from 263 listings as of September 29, the highest since 2021, according to Dealogic. The largest listings of the year included LNG giant Venture Global, buy-now-pay-later lender Klarna, and AI cloud firm CoreWeave.

In addition to Once Upon a Farm and Beta Technologies, life insurer Ethos Technologies was also among the biggest companies to file for an IPO recently. Representatives for the three companies did not immediately respond to requests for comment on Tuesday.

The pipeline for the rest of 2025 and going into 2026 features several other high-profile would-be issuers, including medical supplies giant Medline, SoftBank-backed PayPay, and corporate travel management platform Navan. 

“Already this is shifting timelines back for deals that were on the fence,” said Matt Kennedy, senior strategist at Renaissance Capital, a provider of IPO-focused research and ETFs.

“If it lasts more than a week, the IPO market will grind down to a halt, cutting short the rebound we were expecting.”

TEMPORARY SETBACK

While government shutdowns are typically short-lived, the longest in history — 35 days spanning December 2018 to January 2019 — occurred under President Donald Trump’s previous administration.

At the time, the IPO market came to a virtual standstill. But a few companies sidestepped the SEC by locking in their IPO prices weeks in advance, allowing them to proceed with listings despite the shutdown.

While the shutdown lasts, the IPO freeze could ripple across Wall Street, delaying deals for banks and limiting listing fees for exchanges.

Still, as with 2019, listings are likely to bounce back, said some market-watchers. Strong investor demand, hefty inflows into IPO-themed funds and the best after-market performance in years will continue to lure companies to the market, said Lukas Muehlbauer, research analyst at IPO research firm IPOX.

A weeks-long shutdown could potentially dampen market sentiment and spur volatility, but the fall window was generally the strongest for IPOs and would likely shrug off a shutdown blip, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial.

“IPO activity should be pretty solid and dominate any near-term hiccups around a shutdown,” Saglimbene added. 

(Reporting by Manya Saini and Niket Nishant in Bengaluru; editing by Michelle Price and Krishna Chandra Eluri)