May 2, 2006

2005 PWC Securities Litigation Study

Hard on the heels of the NERA study, PricewaterhouseCoopers has released its own review (free regist. req'd) of the year in securities class actions. A few highlights:

(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
Email this entry to:

Your email address:

Message (optional):