IPOs experienced a banner year in 2013. There were 84 VC-backed IPOs last year, which is more than any year since the dot-com bubble, while on the PE side, there were 58, the most since 2006. But with all the upside to initial public offerings of previously private companies comes some risk.
Crystal & Company, an insurance and risk management firm, expanded on this topic in a guest article on the PitchBook Blog. Below is an excerpt.
“Once a company elects to undergo the IPO process, new and material risk exposures arise. The chance of being named as a defendant in a securities class action claim is more common within three years of the initial offering date. Class actions typically settle in the eight-figure range exclusive of costly legal fees. Directors and officers liability (D&O) insurance policies are the most common vehicle to transfer executive liability risk. The proper engagement of a specialized management liability insurance broker is critical to ensure that a comprehensive risk transfer product is in place to respond to the additional exposures associated with an IPO.”