Does a lawsuit that's still pending drag my asking price down even if I expect to win it?

Yes, generally, regardless of how confident you are in the outcome, because a buyer is being asked to take on uncertainty they didn't create and can't control. Even a claim you expect to win ties up management time, carries legal costs, and creates a range of possible outcomes a buyer has to account for, and that uncertainty typically gets reflected in the price, in an indemnity or holdback, or in the deal simply taking longer to close while the matter plays out.

The nuance is that how the litigation is handled in the deal often matters more than its existence alone. A pending claim can sometimes be carved out of the sale entirely, with you as the seller retaining responsibility for it and its outcome, or resolved through an indemnity that protects the buyer if it turns out worse than expected, rather than being reflected as a straight discount to the price.

Disclosing pending litigation honestly and early, rather than hoping it doesn't come up, is essential regardless of how the claim is ultimately handled, since it will surface during due diligence either way. A business lawyer can help you think through how to structure the sale around it.