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IPOs are back

WGA client, Ironwood Pharmaceuticals, completed their initial public offering of stock earlier this week.  Ironwood sold 16.7 million shares at $11.25 per share.  They ended up their first day of trading up by more than 3%.  The gross proceeds of over $187 MM were the most raised by a biotechnology R & D company since 2002.  Their post-IPO market capitalization is over $1B.

One significant new expense for a company going public is the greatly heightened cost of Directors & Officers Liability Insurance. This is due to the increase in risk exposures arising out of a plethora of new shareholders.  Securities litigation, in particular, becomes much more likely for publicly-traded companies. 

Market conditions for Directors & Officers Liability Insurance continue to improve for buyers of insurance either at the IPO stage or at subsequent renewals.  Continued expansion of the supply of insurers is leaving buyers with more leverage in coverage negotiations.  But, three years of drastic rate cuts likely pave a path to a change in this market in the not too distant future.

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