Securities Class Action Filings Continue at Historic Pace through…

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Plaintiffs filed 204 new federal securities class actions during the first half of 2018, continuing an accelerated filing pace that has lasted two years. According to a new report released today by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse, more than 750 federal securities class actions have been filed since midyear 2016—the most prolific 24-month period since the Private Securities Litigation Reform Act of 1995 (PSLRA) was enacted.

The report, Securities Class Action Filings—2018 Midyear Assessment, also shows 111 “core” filings—those without M&A claims—up from 87 in the second half of 2017. Average case size, as measured by market capitalization losses, increased substantially. These losses—at levels not seen since 2002—were driven by several mega filings (cases with a dollar loss of at least $5 billion).

“Despite the relatively stable markets, filing activity remains strong,” said Sasha Aganin, a vice president at Cornerstone Research and one of the report’s authors. “The record number of filings last year was primarily due to medium and smaller size cases, while in the first half of 2018 cases tend to be larger—we are seeing a return of mega filings and relatively fewer small cases.”

Core filings related to initial coin offerings (ICOs) or tied to cryptocurrencies continued into 2018. There were five such filings in the final months of 2017 and seven in the first half of 2018.

“Class action securities fraud litigation continues to affect a large percentage of publicly traded firms,” observed Stanford Law School Professor Joseph A. Grundfest, a former commissioner of the U.S. Securities and Exchange Commission. “If the trends observed in the first half of the year continue to year-end, approximately 8.5 percent of all companies listed on the NYSE and NASDAQ markets will have been sued in these cases.”

Key Trends

  •     Disclosure Dollar Loss Index®: Aggregate disclosure dollar losses (DDL) rose to $157 billion, 162 percent above the historical semiannual average of $60 billion. The median DDL per filing was at a record high.
  •     Maximum Dollar Loss Index®: Aggregate maximum dollar losses (MDL) increased to $643 billion—its highest semiannual level since the second half of 2002.
  •     Mega filings: Nine mega filings made up 69 percent of DDL, and 11 mega filings made up 75 percent of MDL. Mega filings are those with a DDL of at least $5 billion or an MDL of at least $10 billion.
  •     Non-U.S. companies: The percentage of core filings against non-U.S. issuers fell slightly to 22 percent of all core filings, after increasing in every year since 2013.
  •     Industry: Core filings in the Communications sector increased from six in the second half of 2017 to 17, driven by nine core filings against Internet companies.
  •     Circuit: The Ninth Circuit saw the most core filings—42 in the first half of 2018, up from 13 in the second half of 2017.
  •     State Section 11 and Section 12 cases: Five class actions alleging violations of Section 11 and/or Section 12 were filed in California state courts in the first half of 2018. In March 2018, the U.S. Supreme Court issued a unanimous opinion in Cyan Inc. v. Beaver County Employees Retirement Fund, allowing plaintiffs to assert these claims in state court.

About Cornerstone Research

Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. Named one of the Best Workplaces by Inc. Magazine, the firm has 700 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.

Please visit Cornerstone Research’s website for more information about the firm’s capabilities in economic and financial consulting and expert testimony.
Twitter at @Cornerstone_Res

About the Stanford Law School Securities Class Action Clearinghouse

The Securities Class Action Clearinghouse (SCAC) is an authoritative source of data and analysis on the financial and economic characteristics of federal securities fraud class action litigation. The SCAC maintains a database of more than 5,000 federal securities class action lawsuits filed since passage of the Private Securities Litigation Reform Act of 1995. The database also contains copies of complaints, briefs, filings, and other litigation-related materials filed in these cases.

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