US lawsuit culture blamed for IPO reluctance

The world’s biggest corporates are ruling out
New York as a possible
listing destination due to fears of damaging securities lawsuits.

A report from
showed that of the top 15 corporate listings this year, only one company decided
to float on a New York exchange.

In 2006, non-American companies paid out $2.4bn (£1.21bn) to settle
securities lawsuits an increase of 85% on the previous year,
The Times reported.
PwC’s figures showed that despite a downturn in the number of lawsuits filed
this year, companies are frequently paying out more than $100m to settle cases.

PwC forensic services partner Andrew Gordon said that the cost of defending
class action lawsuits was prohibitively high for prospective entrants to US
capital markets.

‘They may have no merit but there is the cost of defending them. Then, once a
lawsuit has got over its initial hurdle not being dismissed at first hearing –
there is an incentive to settle,’ Gordon told The Times.  

Further reading:

London’s IPO fundraising outstrips New
York’s by 50%

London a top destination for IPOs 

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