Due to the government shutdown, the SEC revealed Thursday that businesses are permitted to move forward with IPOs via a little-known automatic approval mechanism, now with the added benefit of omitting pricing details completely.
What’s unfolding is that, with 90% of SEC personnel on furlough, startups are able to submit their documentation and have it automatically take effect after 20 days. This possibility was always present; companies seldom utilize it because they prefer SEC reviewers to actually examine their disclosures before going public. The change here is that the SEC will not penalize companies for excluding pricing or “price-dependent information” during the shutdown, making this alternative more appealing.
To put it differently, there’s still examination, just the kind that occurs after individual investors have already acquired shares in a company, which appears . . . not ideal, but perhaps we’ll be surprised to discover that investor safeguards function more effectively after the funds have been exchanged.
Companies do remain legally responsible for their disclosures, and the SEC retains the authority to request revisions at a later time.
