One of many of the roles of the Securities and Exchange Commission (SEC) is to review IPO filings, as top attorneys and accountants must make sure companies are complying with the mind-numbing securities regulations.
But in the face of the government shutdown, the IPO market could come to a halt. And the big question is obvious: What does that mean for the Twitter IPO?
According to a report in The Wall Street Journal that ran Sunday, Twitter will likely file its S-1 this week. That is, the filing will appear on the SEC’s EDGAR database — and that should happen regardless of the government shutdown because it is a routine matter.
But that’s only part of the process. While Twitter can still easily report information to the SEC, there could be amendments to the S-1 which would require guidance from experts at the agency. There will also need to be reviews of investor communications and the roadshow.
It is true that the SEC has additional funding that will keep it operating for a couple weeks. But the agency will still have to scale back operations and prioritize things like exchange activity, potential insider-trading and money funds. Processing applications for IPOs, on the other hand, will not be business as usual.
And if the shutdown lasts a month or so, it may give Twitter little room to pull off its IPO this year. For the most part, the market closes down in early December and does not get back into gear until late January. As a result, Twitter may instead want to wait until the federal government ends the shutdown before disclosing its IPO filing.
Keep in mind that company originally filed its S-1 on a confidential basis, under the rules of the JOBS Act. And Twitter probably does not want to have its filing in limbo.
But hitting the brakes is hardly idea for the social media site considering Twitter has put its IPO on the fast track and social companies like Facebook (FB), Pandora (P), Yelp (YELP) and LinkedIn (LNKD) have been red hot.
Unfortunately, the company may not have a choice, and the Twitter IPO may just have to wait.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.