The Impact of Lawsuits on Stock Prices

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Working on the stock market is like riding a rollercoaster each day. One moment you’re at the top of the world, the next you dive headfirst to the ground. And the process repeats itself a couple of times by the end of each day. 

The ride is stressful enough without unexpected outside factors. But sometimes the news arrives that a particular company is engaging in a court fight. But what does that mean for the stock prices?

Keeping it Quiet 

Most companies are not bragging about pending lawsuits. They are aware of the negative implications accompanying these cases. Most stockholders are not aware that a company is in the middle of a legal dispute because they tend to be left out from the financial reports.

These practices are a double-edged sword for companies. If the court dispute is of low-profile nature, the chances are high that it ends unnoticed. But if the media catches on, the companies can suffer severe consequences…regarding their stock. 

Public Backlash 

One crucial factor when evaluating stock prices is the image of the company. If the world decides to avoid their products, this will harm the financial future of the business. No one wants to lose money. Therefore the stock prices of the company will sink. 

If an employee from a Calgary based company, for example, got hurt in the workplace, the whole lawsuit might go unnoticed by the public eye. But if the people develop an interest in this case involving a personal injury lawyer Calgary might lose confidence in the company. This will cause their stock prices to fall. 

The Aftermath 

Winning a lawsuit brings confidence to the company brand. They proved their stability and that they’re capable of handling issues. Prices rise with every win, especially in high-profile court cases. A win scares off other potential lawsuits because no one wants to mess with the big fishes. 

Following this logic, we conclude that a loss leads to falling stock prices. However, that is not necessarily true. If the public did not follow the case, negative consequences are almost non-existent. Regarding the stock prices, that is.

The Stock Market and the Court 

Being a stockbroker is a demanding profession. Adding lawsuits to the prediction does not make the job any easier.    

In most cases, companies try to hide it if they are involved in any legal disputes. If a brand is associated with the court, most people will lose trust in them. This has negative implications on the financial future of the establishment and their stance in the stock market. 

Media attention is the worst-case scenario for a corporate court case. No one wants to get involved in court businesses; thus, stock prices lose on their value. 

Winning a lawsuit confirms the stability of a corporation. Thus their value increases. Losing, however, can mean nothing for the stock market. If the case is low-profile and not important for the position of the company in the market, the stock value won’t suffer.

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