(Updates October 7 story with Magnum listing delay and story

link)

By Manya Saini

Oct 21 (Reuters) - Companies looking to sidestep

disruptions to their initial public offerings caused by the U.S.

government shutdown can tap a provision that allows them to

press ahead with their listing plans without the need for

regulatory approvals.

Biotech startup MapLight became the first company to file

for a listing under the provision earlier in October. Other

firms, however, are delaying listings, including Unilever's

Magnum ice cream unit, which cited the impact of the shutdown.

The U.S. market regulator has halted IPO reviews due to the

three-week shutdown.

WHAT HAPPENS TO THE SEC DURING A GOVERNMENT SHUTDOWN?

According to its contingency plan, the U.S. Securities and

Exchange Commission has furloughed over 90% of its staff,

retaining around 390 employees to handle critical enforcement

actions and market monitoring.

The agency, which oversees the public markets, will not

process IPO filings during the shutdown, a move analysts say

could stall momentum in a market recovering from a years-long

slump.

WHAT IS THE 20-DAY REGISTRATION RULE FOR IPOS?

While companies typically wait for the SEC's approval before

launching their IPOs, the rules provide a mechanism that allows

issuers to declare their own registrations "effective".

Issuers are required to set their IPO price 20 days before

the listing, instead of finalizing it the night before, as is

customary.

During the 2018 U.S. government shutdown, which lasted 35

days during President Donald Trump's first term in office,

several issuers attempted this option, including biotechnology

firm Gossamer Bio and energy company New Fortress Energy.

It was also a popular option among so-called special purpose

acquisition companies.

SPACs raise money through an IPO to fund future

acquisitions. At the time of listing, they are blank-check

companies with no existing operations or assets. Their valuation

is tied entirely to the cash raised, which allows them to set an

IPO price in advance without deterring investors.

WHAT ARE THE RISKS FOR ISSUERS AND INVESTORS?

While the 20-day rule provides a way for companies to go

public during a shutdown, bypassing the SEC review carries risks

for both issuers and investors.

Without the agency's oversight, registration statements are

more prone to errors or missing disclosures, which could expose

companies to legal action or investor complaints after listing.

Companies may face greater scrutiny from investors, who

often rely on the SEC's review to verify the accuracy and

completeness of disclosures. To reduce that risk, many issuers

work closely with legal and financial advisers to carry out

detailed internal reviews of their filings.

Skipping regulatory reviews can also alienate investors, who

may view the lack of regulatory vetting as a sign of higher risk

or insufficient transparency.

"Bypassing regulatory review heightens the risk of

overlooked disclosures or filing errors, leaving both issuers

and investors more vulnerable to legal trouble and unpleasant

surprises after launch," said Troy Hooper, co-head of equity

capital markets, Americas, at Mergermarket.

"Many investors view SEC scrutiny as essential to

maintaining trust. Without it, issuers may face skepticism and

weaker valuations."

WILL MORE COMPANIES TAKE THIS ROUTE?

Analysts say companies could rely on the 20-day registration

rule if the shutdown looks set to drag on amid the ongoing

deadlock in Congress.

"Biotech companies are prime candidates for this

unconventional but valid way to go public during a shutdown as

their high cash-burn rates often create an urgent need for

funding," said Lukas Muehlbauer, research analyst at IPO

research firm IPOX.

Some firms may also withdraw IPO filings and seek capital in

private markets while waiting for the SEC to resume reviews.

(Reporting by Manya Saini in Bengaluru; Editing by Anil D'Silva

and Joe Bavier)