What potential financial liabilities could arise from the investigation and how might they affect LivePerson's valuation?

Potential liabilities

The shareholder‑led probe could uncover breaches of fiduciary duty that expose LivePerson’s board to civil claims for losses suffered by shareholders. In a typical “breach‑of‑fiduciary‑duty” case, the exposed directors may be held liable for:

• Compensatory damages – a multiple of the company’s recent net losses (LivePerson posted a $42 mm net loss in the most recent quarter) or even a percentage of market cap if the alleged misconduct materially inflated the share price.
• Restitution / disgorgement – any illicit cash flow that was transferred to insiders or related parties would have to be returned, directly reducing cash on hand and widening the cash‑burn rate.
• Legal and administrative costs – outside counsel, settlement or court expenses could add $10‑$20 mm in the next 12‑24 months.
• Potential SEC or state‑level penalties – these can top 0.5 % of annual revenue, which for LivePerson (~$550 mm revenue) translates to a $2‑$3 mm fine, but the reputational hit can magnify the cost of capital.

All of these out‑of‑pocket items would be booked as non‑operating expenses in the upcoming earnings releases, compressing profitability and tightening operating cash‑flow coverage. Assuming the worst‑case scenario—$50‑$70 mm in cumulative liabilities—the company’s net cash position would shrink from the current ~$150 mm to roughly $80‑$100 mm, raising the cash‑burn ratio from ~2.5 x to >4 x and tightening its balance sheet.

Impact on valuation

Fundamentally, a $60 mm liability hit would slash LivePerson’s enterprise value (EV) by roughly 5‑6 % (current EV ≈ $1.2 bn). Discounted cash‑flow (DCF) models that rely on a 10‑year cash‑flow projection would see the terminal value cut by about $150‑$200 mm, forcing a valuation discount of 10‑12 % relative to peers (e.g., Salesforce, Twilio). The added risk premium would push the implied cost of equity from ~9.5 % to 11‑12 %, further suppressing the price target.

From a market‑technical perspective, the share has already broken its 20‑day moving average and is testing the $20‑$22 support zone that coincides with the 38.2 % Fibonacci retracement from the recent rally. The negative sentiment score (‑70) and a surge in short‑interest (now > 15 %) suggest heightened downside pressure. If the investigation yields a material liability, the stock could breach $18‑$19, triggering stop‑losses for many short‑coverors and prompting a short‑squeeze. Conversely, a clean‑bill outcome would likely reclaim the $22‑$24 range, providing a short‑bias entry with a $22 resistance as a upside target.

Actionable insight

- Short bias: If you anticipate a liability in the $50‑$70 mm band, target a near‑term entry around $20 with a stop at $22.5.

- Long bias: If you believe the board will be cleared or the exposure will be minimal (<$15 mm), consider a buy near the $22 support, aiming for $25‑$27 on the next upside move, still keeping a protective stop at $20.

Overall, the investigation adds a valuation drag of roughly 10 % and introduces a binary catalyst that can swing LivePerson’s price sharply in either direction over the next 6‑12 weeks. Position sizes should reflect that heightened event‑risk.