An IPO Pitfall: Patent Lawsuits
48 Pages Posted: 12 Nov 2019
Date Written: October 30, 2019
I document a previously unexplored substantial cost of an initial public offering (IPO): patent lawsuits. I find that firms become targets of excessive patent lawsuits shortly before IPO completions, and the litigation intensity persists after firms become public. However, firms that withdraw their IPO filings do not experience an increase after the withdrawal date. Unlike IPOs, seasoned equity offerings (SEO) do not yield an increase in lawsuits. Overall, these results show that going public makes firms vulnerable to costly lawsuits. Moreover, the percentage of IPO firms affected from patent lawsuits has been perilously soaring in the last two decades.
Keywords: IPO, Patents, Patent Lawsuits
JEL Classification: G34, O32, K10
Suggested Citation: Suggested Citation