Risk & Compliance

Class Action Filings, Market Cap Losses Stay Low

2015 is on course to tie for the fifth-lowest number of class action filings in the past 19 years, a new report says.
Matthew HellerSeptember 21, 2015
Class Action Filings, Market Cap Losses Stay Low

Filings of federal class-action securities lawsuits fell 8% in the first half of 2015, while alleged market capitalization losses remained at historically low levels, according to a recent report.

The number of new filings totaled 85, seven fewer than in the last six months of 2014 and 10% below the historical semiannual average of 94 filings from 1997 to 2014, according to the report by Cornerstone Research and Stanford University Law School. About one-quarter of the filings involved foreign companies.

Total dollar disclosure loss (DDL) increased 26% from the second half of 2014 but was still 43% less than the historical average, while aggregate maximum dollar loss (MDL) declined 15%.and was 65% lower than the historical average.

“Securities class actions continue to percolate at a relatively low level, whether measured by the number of cases filed or the dollar amounts at stake,” Joseph Grundfest, director of Stanford Law School’s Securities Class Action Clearinghouse, said in a statement.

As to why, he explained, “Some observers point to high stock price valuations and the lack of volatility in equity markets. Others point to the fact that many of the major accounting scandals now appear to be happening abroad. A combination of both factors could well be at work.”

Mega filings — those with a DDL of at least $5 billion or an MDL of at least $10 billion — remained relatively rare, accounting for a smaller fraction of the annual DDL and MDL indices than in all prior years since 1998.

If filings continue at the same pace for the remainder of the year, it will be the seventh consecutive year with average or below-average activity, and 2015 would tie for the fifth-lowest number of filings in the past 19 years, according to the report.