Yup, I”m sure they are going to happen once companies go public. Some of those purchasers of shares in the secondary markets are going to lose money. Not sure which companies this will happen, but it’s gonna. Dan Primack sums it up nicely from today’s Fortune Term Sheet email.
At some point, the secondary markets are going to produce a large number of lawsuits, possibly class-action ones. Imagine one of the heavily-traded companies goes public at 30% lower than where it traded on the secondary market. And imagine the secondary market sellers were insiders. The buyers may well sue, arguing that the sellers should have known the shares were overvalued (remember, buyers almost never know the actual company financials). I don’t think these suits will – or should be – successful (anyone buying without the data should know they’re flying blind), but lawyers will line up to bring them. Very rich target, plus some wealthy plaintiffs (by definition)…
May 31st, 2011 at 12:21 pm
[...] post today by Mark Boslet of PEhub on secondary markets and lawsuits. Specifically, can private companies take steps to shield themselves from lawsuits by disclosing [...]
October 27th, 2011 at 2:35 pm
[...] was getting in the private stock markets. This is going to test my thesis that there will be lawsuits after the secondary markets companies start going public for less than they were “worth” [...]