January 21, 2011

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2010 annual 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 2010 include:

(1) Filings are up slightly, with a decrease in credit-crisis filings being offset by an increase in regular filings (including a sharp uptick in M&A-related filings). NERA counts 239 filings (estimated total and up from 220 filings in 2009) and Cornerstone counts 176 filings (up from 168 filings in 2009). For some insight on why NERA has a larger total, see footnote 3 of the NERA report, which discusses its counting methodology.

(2) NERA found that the median settlement value was $11.1 million in 2010, over 30% higher than the 2009 median settlement value and the first time ever that the median has exceeded $10 million. Excluding outlier cases, the average settlement value was $42 million, in line with last year's record high.

(3) Cornerstone examined the litigation exposure following initial public offerings (IPOs). The report concludes that the highest risk is in the first few years after an IPO, when the company's stock price continues to be volatile. Indeed, a newly-public company has a 10 percent of being subject to a securities class action in the first three years after its IPO.

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

Quote of note (John Gould - Cornerstone): “With the wave of credit-crisis filings behind us, the industry focus for class action filings shifted to Health Care, where more than one out of every seven S&P 500 companies was involved in a class action.”

Posted by Lyle Roberts at January 21, 2011 10:09 PM | TrackBack
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