Directors & Officers Face Increased Post-IPO Securities Litigation

To date, the record number of initial public offerings (IPOs) this year has eclipsed that of 2020 — and the year isn’t over yet. While an IPO offers several financial benefits to a company, the change in structure also creates new risk exposures, including liabilities that can impact a company’s executives, directors and officers.

Did you know that the risk for securities litigation claims is significantly higher for newly public companies in their first three years after going public?

Common post-IPO securities litigation claim triggers that can lead to lawsuits against the company (and its directors and officers) include:

  • Alleged mismanagement/misrepresentation in the prospectus that caused stock to underperform after listing.
  • Earnings that failed to meet estimated projections.
  • Failing to present proper disclosures.
  • An investigation by regulators into corporate conduct.
  • Products that didn’t perform as expected.
  • Complaints filed by informants.

Although IPOs are a more popular method for a company to raise capital, some private companies elect to go with a direct listing. The website Investopedia defines direct listings (also known as direct placement or direct public offerings) as a process in which a company sells shares directly to the public without assistance from intermediaries. Using this method, no new shares are created and only existing, outstanding shares are sold, with no involvement from underwriters.

For a direct listing, there is no guarantee that shares will sell, no safety for long-term investors and no defense by large shareholders against potential volatility in share prices. Common post-securities litigation risks for company executives and directors and officers in a direct listing situation can include:

  • Post-listing stock price volatility.
  • Misstatements by selling shareholders.  
  • Increased potential for errors, omissions and misrepresentation.
  • Plaintiff arguments stating that the direct listing route was not in the best interest of investors.

Whether stock is being offered to the public through an IPO or a direct listing, both methods are governed by federal securities laws, particularly the Securities Act of 1933 — a strict liability standard for companies. As a result, a company and its directors, as well as those company officers who signed the registration statement, are subject to primary liability claims in connection with direct listings under Section 11 of the 1933 act. 


A D&O insurance policy is vital to mitigating IPO-related claim events preceding the transaction date, as well as after the sale. If you are a private company planning to go public, the experts at Oakwood D&O can help you mitigate liability risks with the right D&O insurance policy.

Selling your D&O book of business?

Are you a company or broker with a quality book of D&O business that you are planning to sell? Currently, Oakwood D&O is expanding its book and market reach by acquiring D&O business accounts. With proper due diligence and favorable agency terms, we can ensure a smooth transfer of business when you’re ready to move forward.

Get in touch – email Eli Solomon, CEO, at or call (323) 686-7519.

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