In a development related to the government shutdown, the SEC announced Thursday that companies can proceed with IPOs using a vague automatic approval process, but this time with the added benefit of skipping pricing information entirely.
What’s happening is that 90% of SEC staff will be furloughed, and startups will be automatically furloughed in 20 days after filing paperwork. This option has always existed. Companies rarely use this system because they prefer to have SEC examiners actually review their disclosures before going public. The difference here is that the SEC does not penalize companies for omitting pricing or “price-sensitive information” during a shutdown, making this workaround more palatable.
In other words, there is still the kind of scrutiny that comes after retail investors have already bought a company’s stock. . . While not a good thing, you’ll probably be surprised to learn that investor protection works better after money changes hands.
Companies remain legally responsible for disclosure, and the SEC can later require amendments.
