In a development resulting from the government shutdown, the SEC announced on Thursday that companies can proceed with IPOs using an obscure automatic approval process. This process now includes the added benefit of allowing companies to skip providing pricing information entirely.
With ninety percent of the SEC staff furloughed, startups can now file their paperwork and have it automatically become effective after twenty days. This option has always existed, but firms rarely use it because they generally prefer having SEC reviewers examine their disclosures before going public. The key difference now is that the SEC will not penalize companies for omitting pricing or other price-dependent information during the shutdown, which makes this workaround more attractive.
In practical terms, there is still a vetting process, but it is the kind that occurs after retail investors have already purchased a company’s shares. This situation may seem problematic, though perhaps it will be a surprise to learn that investor protection works more effectively after the money has changed hands.
It is important to note that companies do remain legally liable for their disclosures. The SEC also retains the authority to demand amendments to the filings at a later date.