The IPO market for the first half of 2017 saw 77 companies raise 0.5B in proceeds. The secondary market was 2B in volume for the same period, and on track toward 0B in volume for the year.

Given the increase and strategic importance of this market, the ABD Team sponsored a panel discussion on “Secondary Markets for Privately Held Venture Backed Companies” last week, alongside Columbia Pacific and Nasdaq Private Market. The panelists shared perspectives from a variety of interests including a seller, buyers, legal, company and platform to ensure a comprehensive discussion of this dynamic and complex market.

Facebook was the leading face to the secondary market. It had rapid revenue growth, serial and unprecedented capital raises at attractive prices, and sought to defer its IPO. In tandem with a large supply of other late stage privately held companies, there came to be a more organized and established market between shareholders who wanted to sell their shares in those private companies, and buyers seeking stakes in later stage private companies but at much smaller investments than required during venture fund financing rounds directly from the company. Buyers started out as venture funds, but have now evolved to include family offices, high net worth individuals and even the company buying back shares.

The motivations to liquidate are the same from founder shareholders, employee shareholders to investor shareholders. The motivation is now highly accentuated with a longer time to liquidate via IPO (now averaging over 8 years from seed funding) and the sheer number of highly valued private companies (267 unicorn companies valued at 20B). The result of all this is a robust secondary market!

Noteworthy is that funding in the emerging ICO (initial coin offering) market has exceeded early stage VC funding this year. However, funding to date has been concentrated to blockchain and socially beneficial companies. As a wider ecosystem for ICOs is built, the longer-term impact on the secondary market will be played out.

Some of the key discussion topics that the secondary market panel covered:

Lessons learned from Facebook, Twitter, Uber, Palantir, and Airbnb

Scope of restrictions on employee sales in secondary market impact morale and retention

Multiple 409A traps and tax implications for the unadvised, for both company and employee

Venture funds, who have representation at the Board of Director, and are buyers or sellers on the secondary market can create insider trading liability for the fund and the company

The quantity and quality of company information disclosure, even when it is a third-party purchase, can create securities liability

Due to the complexities arising out of secondary market trading, expert advice from qualified professionals is important in obtaining an understanding and guidance on the issues. The professionals should include legal counsel, financial advisors, and insurance professionals skilled in D&O insurance.

For additional information, and a discussion of your D&O policy, please contact your ABD broker or contact us at hello@theabdteam.com

The IPO market for the first half of 2017 saw 77 companies raise 0.5B in proceeds. The secondary market was 2B in volume for the same period, and on track toward 0B in volume for the year. Given the increase and strategic importance of this market, the ABD Team sponsored a panel discussion on “Secondary […]

Taking Stock of Trading Stock and Trends in Private Companies

Three hurricanes came to town and altered lives, property and businesses. Hurricanes Harvey, Irma and Maria blew out an estimated 20 billion to 90 billion of insurance losses according to analysts.

To throw salt on the wound, the fires in Napa Valley and Sonoma County are being modeled by Moody’s at about a billion loss.

Prior to the hurricanes, 2017 premium revenue was lower and losses were trending higher. The hurricanes accelerated things.

Earnings of insurance companies and reinsurance companies will be severely impacted. Surplus accrued over the last 5 years will be tapped. Investment yields were low due to the interest rate environment, and now will be more limited with a depleted surplus base.

Insureds in affected areas could see double digit insurance premium increases, on par with the 10 percent increases post-2005 hurricane.

Certain insurance and reinsurance companies who had a concentration of risk in those areas may even need to raise new capital. Insureds of those companies may see premium increases over a longer period than one or two renewal cycles.

You should consult with your broker on possible rate impact on your program and discuss strategies to mitigate increases.

Despite all this, sector analysts are not expecting wholesale larger premium spikes nor sustained premium increases. Why? Competition was already vibrant and should continue. Where premiums become opportunistic, new insurance investments will mobilize capital to start competition.

I liken it to my experience of buying an air mask in San Francisco last week when the air quality was waffling between yellow and red alerts from the wine country wildfires. The store owner was charging .99, for a mask which normally sells for .99. This week, it is selling at .99. No doubt, short lived pricing that will likely decline again next week.

For additional information, and a discussion of the specific impact on your upcoming property and casualty renewal, please contact your Newfront broker.

Three hurricanes came to town and altered lives, property and businesses. Hurricanes Harvey, Irma and Maria blew out an estimated 20 billion to 90 billion of insurance losses according to analysts. 

Fire, Wind and Water - Now What and At What Premium Cost?

Early this month, the House of Representatives passed the Financial Choice Act of 2017 (the “FCA”). This bill extensively amends the Dodd Frank Act that was enacted in 2010 after the financial crisis. It now goes to the Senate, where more debate and publicity will likely occur. The most significant change proposed in the FCA which would impact companies, is curbing of the SEC’s powers.

The FCA would essentially eliminate the ability of the SEC to use its own administrative courts to try corporate and individual defendants, rather than federal courts. The SEC had of late, been trying civil actions through administrative proceedings. And given the home court advantage with their own judges, it was not surprising the SEC had a 90% win rate.

The FCA would also eliminate the SEC’s power to bar individuals from serving as a director or officer of any public company.  The proposed FCA also eliminates the Chevron doctrine. That doctrine, first set out by the United States Supreme Court in a case between Chevron and the EPA, provides the basis for courts to defer to an agency’s interpretation of the laws they administer. Therefore, in any ambiguity of securities laws or rules issued by the SEC, the SEC’s interpretation will not be given deference should this part of the FCA become law.

Ironically, the United States Supreme Court may weigh in on the Chevron doctrine before Congress acts through FCA legislation. The newest member of the Court, Neil Gorsuch, was critical of the Chevron deference to agencies while he was an appellate judge. Justice Gorsuch has hinted its “days may be numbered” in the very last ruling of the Supreme Court’s term in Matthis v. Shulkin.

What is the impact to companies and their D&O insurance? It would appear risk to companies would decrease with a less powered agency, and D&O pricing should come down.  

Surprisingly, ratings of companies will likely not be impacted as D&O insurance companies price primarily on likelihood of a suit by shareholders, employees, and whistle-blowers. There are two reasons for that rationale. First, data for those kinds of suits are more readily available. Second, the cost to defend and settle a shareholder suit, is generally greater than costs relating to an SEC action.

Note that the defense of a parallel SEC investigation attendant to a shareholder suit depletes a company’s D&O insurance much quicker.

While the SEC’s broader enforcement powers may be hampered by Congress or the Supreme Court, it is likely to focus keenly on prosecuting non-controversial cases, such as insider trading and fraud tipped by whistle-blowers. (Regarding insider trading and whistle-blowers, we discussed this at a recent Women’s General Counsel Network event. Click here for more information.) Differences in D&O policy terms can impact the funding of defense costs, and even whether the D&O policy can be nullified. In addition to having a skilled broker position a company’s risk with D&O insurers to achieve cost efficiencies, it is just as important to have a skilled broker negotiate terms to maximize insurance protection for directors and officers at a time when these individuals need it the most.


Early this month, the House of Representatives passed the Financial Choice Act of 2017 (the “FCA”). This bill extensively amends the Dodd Frank Act that was enacted in 2010 after the financial crisis. It now goes to the Senate, where more debate and publicity will likely occur.

FCA Changes at the SEC, and Impact to Ds&Os

The ABD Team recently hosted The Women’s General Counsel Network (“WGCN”), to discuss the Trump’s Administration effect on companies. The WGCN is an invitation-only group dedicated to supporting its high-achieving members through a peer network.

The WGCN sought to understand Trump Administration changes currently in the pipeline from a health care perspective and a director and officer liability perspective, and their effect on a general counsel’s and company’s interaction with an insurance broker. This brief summary covers the D&O perspective.

Strong bias in favor of corporations and big business are most people’s initial impression of the next four years under Trump. Trump critics think it will be a free hall pass. This impression is based on Trump himself, and Trump’s appointments of persons who have strong ties to, or are on record of being sympathetic to those business, including Neil Gorsuch as the newest Justice to the U.S. Supreme Court, Jeff Sessions as Attorney General, and Jay Clayton as Chairman of the Securities and Exchange Commission. The impressions are founded. For example, Justice Gorsuch wrote a white paper as well as authored an amicus brief for the U.S. Chamber of Commerce while in private practice, where he suggested reform of securities litigation practices to include a stricter proof by plaintiff for damages, and lowering plaintiff fee awards, as ways to discourage meritless class action suits.

Our message to WGCN and to directors and officers, is to look beyond first impressions. While corporate accountability may decrease, individual accountability is likely to rise under the Trump Administration. Trump and his lieutenants could seek to bypass the corporate entity and hold business leaders and gatekeepers accountable for their bad actions. For example, Jeff Sessions has expressed his skepticism whether deferred prosecution agreements are effective against corporations as compared to prosecution of individuals. We have engaged in discussions with senior representatives of the SEC and U.S. Attorneys’ Office. Their statements indicate support for our belief that government agencies will focus keenly on prosecuting non-controversial cases, such as insider trading, fraud tipped by whistle-blowers, and illegal payments under the Foreign Corrupt Practices Act. These kinds of violations are things that folks on Main Street can easily understand as an unfair and illegal opportunities seized on by directors, officers and gatekeepers of corporations.

Protection of directors and officers through strong indemnification agreements and a broad D&O insurance policy, is pivotal when individuals are the focus of an SEC or Department of Justice investigation. Differences in D&O policy terms can greatly impact the funding of defense costs, and even whether or not the D&O policy can be nullified.

We invite you to contact us with any questions or comments about your D&O policy. For more information, please contact us.

The ABD Team recently hosted The Women’s General Counsel Network (“WGCN”), to discuss the Trump’s Administration effect on companies. The WGCN is an invitation-only group dedicated to supporting its high-achieving members through a peer network. The WGCN sought to understand Trump Administration changes currently in the pipeline from a health care perspective and a director […]

Trump and Lieutenants, Their Impact to Directors and Officers

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Taking Stock of Trading Stock and Trends in Private Companies

Fire, Wind and Water - Now What and At What Premium Cost?

FCA Changes at the SEC, and Impact to Ds&Os

Trump and Lieutenants, Their Impact to Directors and Officers

Newfront for Businesses

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.css-13o7eu2{display:block;}Taking Stock of Trading Stock and Trends in Private Companies

Fire, Wind and Water - Now What and At What Premium Cost?

FCA Changes at the SEC, and Impact to Ds&Os

Trump and Lieutenants, Their Impact to Directors and Officers

Newfront for Businesses

Newfront for Employee Benefits

Newfront for Private Clients

Blog ‍

Connect ‍
with ‍
us. ‍

Taking Stock of Trading Stock and Trends in Private Companies