Leveraging Court Data for Wealth Management
Guest Post by Josh Blandi, CEO and Co-Founder of UniCourt
If data is the fuel for innovation in finance, then court data is the rocket fuel for investment firms seeking a competitive advantage in the market.
With access to real-time data from countless courts across the country, investment firms can make key decisions before the rest of the market becomes aware of such litigation or its outcomes.
In this article, we will provide a high-level overview of how to leverage court data for investment decisions. Specifically, we will discuss the importance of using data that is normalized (structured and entity-identified) using artificial intelligence, detail how the use of APIs can provide opportunities to obtain actionable intelligence in real-time, and consider how court data can identify common scenarios affecting company valuations.
Leveraging Court Data on the Trading Floor
Applying court data to investment strategies is not just a theoretical concept: In fact, it is something that investment firms are already doing to gain intelligence in advance of critical inflection points impacting the market price of companies.
Notably, traders are tasked with constantly staying ahead of the market so they can make decisions expeditiously. One key factor to consider in valuing major corporations is high-profile litigation. For instance, in a recent case, the Supreme Court ruled against Apple in a 5-4 opinion, allowing a class of aggrieved iPhone users to pursue an antitrust lawsuit against the tech giant for up charging common applications in its App Store. The negative press from the ruling contributed to a 5.8% loss in Apple’s stock priceworth tens of billions of dollars.
On the flip side, in 2012, Apple won a patent infringement suit against Samsung, and its stock price immediately shot up, solidifying its status in the market. While litigation involving a company does not guarantee fluctuation in stock values (this largely depends on other variables, like the company’s overall financial health and other market factors), it nonetheless provides valuable intelligence for firms seeking to stay ahead of the curve.
The Source of Your Court Data Matters
When it comes to collecting data that will help financial experts make timely decisions, it is critical for the data to be normalized. Normalization is a process that identifies the entity behind various surface forms that exist in raw court data text. Without normalization, it’s impossible to provide correct data on the real-world entities decision makers are interested in.
Consider, for instance, when a company name is misspelled in a filing, or if a party uses one of the many variations of that entity’s title (e.g., Bank of America vs. BOA; or Wells Fargo vs. Wells, WF, or even the old title Wachovia). If the data is not normalized, you may entirely miss a key filing involving that entity or its subsidiary.
While it is true that parties can use public sources of data to access most court records, there are hundreds of federal courthouses and thousands of state courthouses nationwide, each managing scores of cases filed daily. Just developing and maintaining the infrastructure necessary to pull data from thousands of sources is likely impractical for most operations, not to mention the ongoing need to normalize the data to ensure game changing cases do not slip by unnoticed.
Maximizing Real-Time Court Data Access through APIs
Because markets move rapidly, having advanced knowledge of when a court ruling comes down before it’s reported in the Wall Street Journal or Bloomberg can make or break key trading decisions.
Plugging into APIs to gain real-time access to relevant data eliminates the need to manually access government databases to look for case updates. APIs also allow companies to obtain bulk data from as many or as few sources as desired. In other words, they can drink from the proverbial fire hose to glean as much data as possible or target specific companies or jurisdictions of interest.
Moreover, APIs can plug right into internal proprietary trading platforms, providing traders with alerts to make key decisions when triggering events impact a company’s valuation. Taken a step further, APIs can be used to create automated process flows for self-executed trading, so if a certain event occurs that either negatively or positively impacts a company’s stock price, shares can be sold or purchased in real-time without human intervention.
Common Scenarios Impacting Company Valuations
There is a bevy of factors that can affect a company’s valuation, especially when it comes to contentious litigation involving a corporation or its officers – and it is vital for those on the financial side to understand the variety of unpleasant scenarios that may damage a company’s overall value.
For instance, consider a class action suit filed against a company that an investment firm has a sizeable stake in. By having real-time access to court data, the firm can set up alerts and receive a notification as soon as a class is certified in the case (a key hurdle that litigants must pass in order to have standing to pursue their lawsuit), and then dodge a likely crippling decline in the company’s value.
Imagine another unfortunately common scenario, where a growing pharmaceutical company is sued for product liability based on claims against its most lucrative drug. Investment firms can get notified of the lawsuit before the company has even been served, and avoid the resulting fallout from a potentially bankrupting lawsuit. Or consider a financial institution charged by the SEC with insider trading, facing criminal penalties that will stop it in its tracks. Knowing the potential impact of impending litigation can help investment firms take the steps necessary to inoculate resulting losses.
The use of court data to enhance financial decision making isn’t just an aspirational goal. It’s already happening, and it’s only a matter of time before leveraging court data becomes industry standard for investment firms and hedge funds. The technology is widely available, it’s unquestionably affordable in comparison to colossal savings and gains, and helps firms keep their fingers on the pulse of what’s happening in the industry.
About the author:
Josh Blandi is the CEO and Co-Founder of UniCourt a SaaS offering using machine learning to disrupt the way court records are organised, accessed, and used. UniCourt is a leader in making court records more accessible and useful. We help our clients tap into the mountain of court data generated everyday for legal analytics, business intelligence and development, background checks, case research, and many other innovative uses.