July 30, 2010

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2010 midyear reports on securities class action filings. The different methodologies employed by the two organizations have led to different numbers, but the trendlines are the same.

The findings for the first half of 2010 include:

(1) Filings have declined, with a decrease in credit crisis cases being one of the key factors. NERA counts 101 filings (for an annualized total of 202 filings, down from 221 filings in 2009) and Cornerstone counts 71 filings (for an annualized total of 142 filings, down from 168 filings in 2009). For some insight into why NERA has a larger total, see footnote 5 in its report.

(2) The lag time between the end of the class period and the filing date has decreased significantly as compared to the second half of 2009. Cornerstone finds that the median lag time was 25 days, as compared to 112 days in the previous period. NERA finds that the average lag time was 231 days, as compared to 272 days in the previous period. Both organizations conclude that this may be the result of the plaintiffs' bar, having focused in recent years on credit crisis cases, clearing out a backlog of older matters in the second half of 2009 after credit crisis cases began to decline.

(3) NERA also examined the mid-year settlement trends. Notably, the median settlement value was $11.8 million, exceeding 2009’s value of $9 million by almost one-third. The report concludes that this may be driven by a substantial increase in median investor losses - a variable that correlates strongly with settlement size.

The NERA report can be found here. The Cornerstone/Stanford report can be found here.

Quote of note (Professor Grundfest - Stanford): “The securities fraud litigation wave stimulated by the credit crisis now appears to be history. We have an inventory of cases waiting to be dismissed, settled, or tried, but to borrow a phrase from the current Gulf oil spill crisis, it seems that this flow has largely been capped.”

Posted by Lyle Roberts at July 30, 2010 9:53 PM | TrackBack
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