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Many fledgling companies aspire toward completing an IPO. Some succeed, but many others do not. Occasionally when a company falls short of its IPO plan, litigation results, in the form of a “failure to launch” claim. A recent example involving a California-based cannabis company illustrates how these kinds of claims can arise. As discussed below, these possibility for these kinds of claims has insurance implications.
Continue Reading Cannabis Company Hit with “Failure to Launch” Claim

Readers of this blog know that there have been several SPAC-related securities class action lawsuits filed in 2021, with the suits mostly coming in after the de-SPAC transaction has been completed. Even readers who think they get the idea already will want to be sure to take a look at the new SPAC-related lawsuit that came in earlier this week. What makes this one different is that, though the lawsuit names both the SPAC and the SPAC merger target company as defendants, the merger, though announced, has not yet even taken place. And, mind you, this is not your garden variety merger objection lawsuit, it is a full blown 10b-5 class action lawsuit. Interested? Read on.
Continue Reading SPAC and Target Company Hit with Pre-Merger 10b-5 Class Action Suit

On my beat here at The D&O Diary, I cover the liabilities of corporate directors and officers. One objection I frequently hear is that I focus too much public companies and not enough on private companies. The reason I write about public company issues more than private company concerns is that the public company world usually is more eventful. However, every now and then, something comes up involving a privately-held company that reminds all of us that plenty happens in the private company D&O world, too. The most recent example is the shareholder derivative and class action lawsuit filed last week against executives of the electronic cigarette company, Juul Labs. As discussed below, this new lawsuit highlights the exposures that private company directors and officers can face and underscores the fact that even private companies can get hit with shareholder class action lawsuits.
Continue Reading Private Company Directors and Officers Hit with Shareholder Class Action Lawsuit

WeWork may not have been able to complete its once-planned IPO, but even so it now has something that many IPO companies often experience – a shareholder class action lawsuit. On November 4, 2019, a WeWork investor filed a lawsuit in California state court on behalf the company’s minority shareholders as well as on behalf of the company itself. As discussed below, the shareholder complaint makes a number of interesting allegations and raises some interesting issues as well.
Continue Reading WeWork, SoftBank, Neumann Hit with Shareholder Lawsuit

Privately-held companies, on the one hand, and companies whose shares are public traded, on the other hand, face very different liability exposures. Because of these differences in liability exposures, the directors and officers liability insurance available for these types of entities varies – the D&O insurance form available for private companies is quite a bit different from the D&O insurance form available for public companies. A recent law firm memo took a brief look at the differences between the two forms of coverage. There some important additional considerations, that I discuss below.
Continue Reading Thinking About the Differences Between Private Company and Public Company D&O Insurance

It is a point I have made before but it is worth saying again – private companies are not immune from scrutiny under the federal securities laws. In a series of recent enforcement actions – most notably the SEC’s March 2018 enforcement action against Theranos and two of its executives – the SEC has made of point of emphasizing that its regulatory reach extends to private companies. Last week, the SEC announced the resolution of another enforcement action against private company executives. The latest action, involving a failed Silicon Valley start-up, underscores the SEC’s readiness to pursue securities law violations by private company executives.
Continue Reading Say It Again: Private Companies Are Subject to the Federal Securities Laws

Although it is not always appreciated or taken into account, the fact is that executives of private companies can be held liable for statements or other actions made in violation of the federal securities laws. One very recent and high-profile example where this happened involved the SEC enforcement action (and subsequent criminal proceedings) involving the high-profile medical testing company Theranos. Recent SEC and Department of Justice actions involving an Indiana-based company underscores the fact that private companies can draw the attention of federal securities regulator, and that it is not just high profile Silicon Valley firms that are potentially at risk.
Continue Reading Just a Reminder: Private Company Executives Can Be Held Liable Under the Federal Securities Laws

The news late last week that London’s transport authority had stripped ride-hailing firm Uber of its ride-hire license on the grounds that it was “unfit to operate” in the U.K. capital was merely the latest blow to the company, following a string of scandals, probes, and damaging revelations. Now the company – which, despite its enormous size, is still a privately held firm — has been hit with a federal court securities class action lawsuit, the most recent instance where one of the high-flying “unicorn” companies has been hit with a securities fraud lawsuit after a decline in fortune. The new lawsuit has a number of interesting features, discussed below.
Continue Reading Though a Private Company, Uber Hit With Securities Class Action Lawsuit

board roomExecutives at companies whose securities are publicly traded typically don’t need to be persuaded that their company needs D&O insurance. They understand that the exposures public companies face make D&O insurance indispensable. However, the view of some private company managers may be different, particularly for officials at companies whose shares are very closely held. These company officials may believe their company has little risk of getting hit with a D&O lawsuit and as a result conclude that they don’t need D&O insurance. However, the reality is that D&O insurance is an indispensable part of every company’s risk management arsenal, whether or not a company’s shares are listed.
Continue Reading D&O Insurance is Important for Private Companies, Too

deliveryagentWhen private companies are on track toward a planned IPO, much of the focus and attention is on readying the company for the burdens and responsibilities it will face as a public company. Among other things, this also means a focus on the potential liability exposures for the company and its directors and offices once the company goes public. Until the company actually completes its planned offering, however, it is still a private company — albeit one with a heightened set of risk exposures because of the company’s pre-IPO activities. If the planned IPO never happens, the company and its senior officials sometimes face liability claims arising from pre-IPO activities. A recent complaint filed in the Northern District of California against the former directors and officers of a pre-IPO company that ultimately went bankrupt illustrates the kind of claims pre-IPO companies and their executives can face. Pre-IPO companies’ liability exposures have important implications for the companies’ D&O insurance programs, as discussed below.
Continue Reading The Liability Exposures of Directors and Officers of Pre-IPO Companies