Startup Litigation and Secondary Markets

Boardroom Governance Newsletter #52 | May 9, 2024

I frequently write about startup litigation matters, so this new paper “Unicorn Shareholder Suits” by Professor Verity Winship (University of Illinois College of Law) caught my attention:¹

“Shareholder litigation has been a central way to address fraud in large companies, but almost all available information and analysis is about suits against public companies. This Article reports the results of a much-needed study of shareholder litigation against large private companies, identifying shareholder lawsuits brought from 2015 to 2020 against private companies identified as unicorns as of 2016.”

“The findings dramatically differ from shareholder litigation on the public side, with many fewer suits and no obvious substitute for the federal securities class actions that are typical public-company shareholder suits.”

“The Article analyzes the procedural reasons for the dearth of unicorn shareholder litigation, drawing on characteristics peculiar to private companies: the absence of a market pr…