The Government Shutdown Could Derail Twitter IPO

The news of the upcoming Twitter IPO was huge when it filed with regulators on September 12 but Monday, Quartz reported that the company plans to make the filing public this week with the goal of listing its shares within a few months but the process is now on hold because the SEC is shut down along with the government.

It’s clear that Twitter is eager. IPOs are normally full of government and Wall Street red tape. The SEC could object to wording in the prospectus and ask that the document be updated and resubmitted; if the S-1, the document where financials are stated, has to go through a series of revisions, that can hold up the process significantly. All of these negotiations take time and have to be in place before the road show can begin.

David Lynn, a partner with law firm Morrison & Foerster and former chief counsel at the SEC’s Division of Corporation Finance, told Forbes, “If the company is towards the end of the process and trying to price its transactions, it presents a lot of uncertainty and potential difficulties.”

Related: Would You Buy Twitter’s IPO?

The good news is that Twitter likely started the process in July although the announcement was made in September. Because of this, the company may be further along in the revision process than some reports indicate.

But how could the government shutdown derail Twitter’s IPO plans? IPOs are carefully orchestrated to reach the public during times of market strength. No company wants to IPO when the market is in a period of correction or longer-term weakness. As an increasing amount of market watchers are sounding the alarm of a market due for correction, Twitter likely wants its IPO ready as soon as possible to begin trading during a period of strength.

For every day that the SEC is shut down, that’s at least one more day of delay. The shutdown isn’t likely to last long but history reveals a shut down that lasted as many as 21 days—a disaster scenario for Twitter.

To be fair, the shutdown isn’t likely to have a huge effect on the process unless it stretches much longer than most people believe. Regardless, Twitter could find itself a victim of unfortunate market timing regardless of the shutdown but if the IPO were delayed, Twitter and its underwriters would rather it be as a result of something other than SEC delays.