(1) The average settlement value, excluding the Enron and WorldCom settlements, increased dramatically to $71.1 million in 2005. (Note that there is a significant discrepancy between PwC and NERA on this point, with NERA reporting a much lower number.)
(2) The number of filings was down significantly last year (from 203 cases to 168 cases), but PwC finds that a "seesaw pattern has occurred somewhat regularly during the period from 1996 through 2005, and it is likely that 2005's drop in filings of private securities litigation cases is only a respite."
(3) For the first time since 1996, the number of cases alleging accounting violations dropped below 50%. PwC suggests that two factors may be at work: (a) improved internal accounting and financial reporting controls; and (b) the continued growth of "product-efficacy" cases, especially against pharmaceutical and healthcare companies, which made up 10% of all cases in 2005.
(4) The study finds little correlation between financial restatements and filings, noting that "many restatements do not result in significant stock-price drops." (For more on this topic, see this recent post.)Posted by Lyle Roberts at May 2, 2006 7:58 PM | TrackBack