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Not necessarily, depending on how many shares you own. Typically shareholder lawsuits are brought by minority shareholders (or, as you say it’s pointless) seek
by lazide 2y ago
Not necessarily, depending on how many shares you own.
Typically shareholder lawsuits are brought by minority shareholders (or, as you say it’s pointless) seeking to get paid to compensate for some malfeasance they feel was being perpetrated against them by the majority shareholders (and management, as their agents).
- idopmstuff 2y ago> Typically shareholder lawsuits are brought by minority shareholders I don't know if this is true - I just asked Claude and it said the type of lawsuits I described are significantly more common, at least among suits against public companies. But regardless of relative frequency, you say it's pointless, so why does it happen? (The answer seems clearly to be because the lawyers want it to happen, but still seems like it's a very inefficient process for most shareholders.)
- doe_eyes 2y agoI think that's basically the answer. In many cases, the process is initiated by lawyers looking for litigants. It's a big payday for the law firm and peanuts-out-of-your-own-pocket for actual shareholders.
- nequo 2y agoI think what parent meant is that the lawsuit is not pointless if and only if it is brought by a minority shareholder. Minority shareholders don’t control the cash held by the company so they need to sue to get access to it.
- kmoser 2y agoA majority shareholder might still decide to sue, hoping that any short-term loss would be offset by long-term gains if the lawsuit served to dissuade future malfeasance on the company's part.
- lazide 2y agoA majority shareholder controls the company. Wouldn’t they be better served by actually just doing their job? As far as to dissuade future malfeasance? They already have all the control and power.
- kmoser 2y agoMany shareholders aren't in the business of managing a company directly. They simply want to invest in companies that are run well. Just because they have the power doesn't mean they know how to wield it correctly, let alone want to be the person to do so.
- lazide 2y agoYou might want to read my comments again. If they are the majority shareholder, suing the company they are the majority shareholder in for some tort has about as much point as suing themselves for punching themselves in the face. They could literally just do a board consent to pay themselves directly instead if they wanted to. Or direct their management to do it, since they can literally fire that management otherwise (minor edge cases of bylaws withstanding). A minority shareholder potentially has a lot of reasons to do a shareholder lawsuit though, especially in a privately held company where they can’t easily sell their shares. They might be getting drug along on all sorts of silly wasteful misadventures, for instance, and have no control or way to get out.