initial public offering laddering claims

Initial public offering laddering claims are claims against corporate directors and officers associated with the manner in which the shares of an initial public offering (IPO) of the corporation's stock were allocated to various parties.

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Such claims allege two types of wrongdoing: (1) receipt of undisclosed commissions, whereby the IPO securities underwriters received greater compensation from investors than was disclosed in the IPO prospectus, rendering the prospectus false and misleading, and (2) illegal tie-in agreements, alleging that underwriters required investors in IPOs to agree, in return for receiving a favorable allocation of shares in the IPO, that the investors would purchase additional shares immediately following the IPO. This would increase demand for the stock and cause a rise in the market price of the stock immediately following the IPO.


Related Terms

The process of selling stock in a corporation for the first time to the general public.