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Posts Tagged ‘IPO’

B Corps pose new risk for directors and officers

November 24, 2014 Leave a comment

profit_environmentA company’s board of directors and officers hold many distinct roles and responsibilities, from setting corporate policies to investment and asset management. Their duties to both shareholders and employees mean these individuals must continually work to balance the interests of various stakeholders, thereby increasing their exposure to liability and legal claims. Defense against these risks is a challenge in and of itself, but what happens when there is an additional social benefit cause to uphold as well? The directors and officers of benefit corporations (B Corps) must simultaneously balance profit goals alongside a specific social or environmental cause that the company seeks to support. Doing so can become problematic, especially with multiple leaders at the table vying for decision-making power. Read more…

Section 11 claims are on the rise

April 22, 2014 Leave a comment

court22013 was a big year for IPO’s, and 2014 looks to be even busier.  From an initial boost for smaller companies from the JOBS Act to the more recent boom in tech, e-commerce and telecom company filings, IPO activity in the U.S. has reached its highest since 2013. But as more companies go public, the courts are not far behind. Along with the increase in IPO’s has come a similar rise in securities class action suits alleging misrepresentation in IPO companies’ offering documents. More notably, cases filed under Section 11 allegations have become an attractive option for plaintiffs looking to obtain class certification without being dependent on the “fraud on the market” theory.

Section 11 holds Issuers of securities liable for registration statements containing false statements of a material fact or those that omit a material fact. According to the rule, a purchaser of a security may bring suit against a company under Section 11 even if they bought shares on the secondary market, Read more…

Halliburton and IPO Claims

ipoIt happens more than 200 times per year: a publicly traded company discloses an adverse development, its stock price drops, and it — and its directors and officers — are hit with a class action lawsuit by shareholders who allege that they bought the company’s stock based on material misrepresentations and are entitled to financial compensation for the decreased value of their shares once the truth came out. These lawsuits can drag on for years, are expensive to defend even in victory, and can lead to expensive settlements.

In the closely watched Halliburton case, the Supreme Court is reconsidering an earlier holding that made many shareholder class action lawsuits feasible. The Halliburton case involves class action claims brought pursuant to SEC Rule 10b-5, promulgated pursuant to Section 10(b) of the Securities Exchange Act of 1934, as amended. A core element of a 10b-5 claim is that each plaintiff had to rely on the supposed misrepresentation. Plaintiffs’ lawyers have to demonstrate this reliance in the early stages of the lawsuit, as one of the conditions for certification of a plaintiff class. If plaintiffs’ lawyers had to show that each and every plaintiff actually relied on the alleged misrepresentations, broad class actions under Rule 10b-5 would be nearly impossible to pursue. Read more…

WGA announces the Top Ten Risk Management issues for 2014

January 31, 2014 Leave a comment

riskTop10What will be the risk management stories in 2014? Risk managers and insurers are well underway preparing to mitigate new and emerging industry trends and challenges. We take a look at some of the biggest issues facing companies over the coming year and what we think will pose a threat to their business:

  1. Social Media Risk: New areas of risk continue to come to light each day, from securities litigation risk for CEO’s tweets to Facebook boycotts of Snapchat videos. With each new social media platform comes a host of risk issues.
  2. Digital Currencies: As Bitcoin filters into conversation and acceptance, its risks multiply.
  3. Biometric Risks: It’s not just about IRS scans and fingerprint security for an iPhone – biometrics will be built into many electronics in the coming year and will generate new risks. Read more…

All eyes on IPO activity as JOBS Act’s crowdfunding measure gets SEC approval

September 3, 2013 Leave a comment

crowdfundingOn July 10th, the SEC voted in favor of Title II of the JOBS Act (also known as the crowdfunding provision), lifting a ban on general solicitation or general advertising for securities offerings, giving small companies greater access to capital and investors. The final ruling amends Rule 506 of Regulation D of the Securities Act to permit issuers to use general solicitation to offer securities, so long as they take the reasonable steps to verify that purchasers Accredited Investors, and that all purchasers of the securities qualify as accredited investors under Rule 501. Industry experts say all companies must also complete a more comprehensive filing process with the SEC prior to doing any solicitation.

While Title II was expected to be completed within 90 days following passage of the JOBS Act in April 2012, the SEC asked for comments and feedback about the provision for over a year before finalizing the ruling. Questions remain as to whether the delay may have hurt the overall success Read more…

The JOBS Act in 2013: What’s really driving the IPO Market?

jobs actCongress passed the Jumpstart Our Business Act (JOBS Act) in April 2012 with the hope that it would accelerate the IPO market for emerging growth companies (EGCs), which would in turn create job growth and help revive the economy. Initially slow to deliver, the Act has inspired a great deal of speculation. Recent market trends, however, point to a clear upswing in IPO activity, with a significant increase in the second quarter of 2013.

According to data from IPO Watch, IPO listings jumped 82 percent (from 34 to 62) during the second quarter of 2013 compared to the first quarter of the year. Analysts say the increase has been bolstered by a growing number of growth-related industry sectors like biotech firms, which outpaced all other industry groups in the number of IPOs filed and the amount of capital raised in second quarter of 2013. Other leading industry sectors entering the IPO pipeline include financial services, technology and healthcare services.  Read more…

Going abroad may be the best option for capital, but make sure your D&O is global

Three years after the financial crisis began, the U.S. capital markets continue to struggle to support many small companies and has forced some to turn to investors overseas in order to go public. A New York Times article earlier this month featured the story of Reva Medical, a medical device company who was denied a chance to list their stock here in the U.S., but found ready buyers of their shares in foreign markets. And they are not the only ones, there is a growing number of companies who are choosing foreign exchanges – 10 in 2010.

The Alternative Investment Market (AIM), part of the London Stock Exchange meant for small company listings, is popular destination for some American companies to go public, along with the Australian Securities Exchange. Read more…