NYSE hit by high rates of litigation
July 2007
The number of floats on the New York Stock Exchange fell for the second year running in the first six months of 2007. Data released by Thomson Financial showed that the value of floats dropped to just over $10bn, only slightly more than the NASDAQ and only $3bn more than AIM.
Rise in lawsuits
The surprise news was partly blamed on an eighty-five percent rise in payouts following lawsuits compared to the same period in 2006, with non-American companies paying out $2.4bn to settle US securities lawsuits for the six month period. This has lead to companies looking for markets based in countries with a less litigious culture with the London markets being the main beneficiary. The news is expected to lead to a growth in the demand for legal expenses insurance, as companies intending to list on the US markets look for ways to safeguard against the potentially ruinous costs of litigation.
Increased demand for insurance
One area seeing significant growth is intangible asset insurance. The rise in lawsuits, combined with a greater understanding of the value of intangible assets for any company looking to float, has lead to a demand for products to protect investors from the potential risks associated with an intangible assets portfolio. This is especially true for high-profile floats, as potential claimants, even those with a weak case, may be tempted to begin an action in the hope that the company will settle.
Need to protect intangible assets
Ian Lewis, Chief Executive of market leading intangible asset protection solutions provider SAMAIN Underwriting Agencies, said that companies concerned about their exposure to intangible asset risks should consider insurance as a standard part of their business, and this becomes significantly more important when considering a float. He stated that "For a company holding intangible assets, the need to protect these is paramount, both for the company and potential investors. The ability to safeguard the company against future litigation costs not only reassures investors, but may well make the company more attractive to invest in. Intellectual property insurance provides an ideal solution and we expect to see this market continue to grow strongly."