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Fiscal Cliff Halts IPO Market

Ian Wyatt

Thirty companies went public on U.S. exchanges from September 19 through November 1. Since then, a hurricane, an election and escalating fear over the impending fiscal cliff have brought the IPO market to a screeching halt.

Not a single IPO has priced in the last two weeks during what is typically one of the busiest months on the calendar for the IPO market. November was one of the three busiest IPO months in each of the last three years.

Hurricane Sandy was the first impediment. Three companies postponed their IPOs last week after being delayed by issues stemming from the devastating storm that rocked the East Coast on October 29.

Then came the election last Tuesday, which always puts a hold on investment activity – in the IPO market and otherwise – as investors wait to find out which direction the country is headed over the next four years.

Now that the election is settled, investor uncertainty has been replaced by fear. President Obama’s re-election increases the likelihood that his Budget Control Act will go into effect as scheduled on January 1.

For those who don’t know, the Budget Control Act would increase taxes and hike government spending cuts considerably. Some economists predict it will send us into another recession – hence the “fiscal cliff” moniker.

Clearly those fiscal cliff fears have seeped into the IPO market. That could change quickly, though. According to Renaissance Capital, six IPOs are set to price in the coming days. Four are expected to price this week.

Soon enough, the IPO market will regain some of its October momentum.