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E-MailJohn Gould is senior vice president at Cornerstone Research. This post discusses a Cornerstone Research report by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse, titled “Securities Class Action Filings—2014 Year in Review,” available here.
Number and Size of Filings
- Plaintiffs filed 170 new federal class action securities cases (filings) in 2014—four more than in 2013. The number of 2014 filings was 10 percent below the historical average of 189 filings observed annually between 1997 and 2013.
- The total Maximum Dollar Loss (MDL) of filings in 2014 was $215 billion, or 66 percent below the historical annual average of $630 billion. MDL was at its lowest level since 1997.
While the number of filings remained essentially flat, measured by dollar losses decreased dramatically.
- The total Disclosure Dollar Loss (DDL) decreased substantially in 2014, falling to its lowest level since 2006. Total DDL was $57 billion in 2014, 54 percent below the historical average of $124 billion.
- For the first time since 1997, there were no mega DDL filings—filings with a DDL of at least $5 billion. Only two mega MDL filings—filings with an MDL of at least $10 billion—occurred in 2014, both of which related to oil and gas companies.
Other Measures of Litigation Intensity
- Looking at the full universe of U.S. exchange-listed companies, 3.6 percent were subject to filings in 2014, an increase from 3.4 percent in 2013.
- Companies in the S&P 500 were less likely to be targeted by a securities class action in 2014 than in any year measured (2000 through 2014).
- Of the S&P 500 companies, those with the largest market capitalizations were less likely than smaller firms to be the subject of a class action filing—a departure from historical experience.
| Average (1997-2013) | 2013 | 2014 | |
| Class Action Filings | 189 | 166 | 170 |
| Disclosure Dollar Loss ($ Billions) | $124 | $104 | $57 |
| Maximum Dollar Loss ($ Billions) | $630 | $279 | $215 |
Key Trends
- IPO activity continued the upward trajectory that has followed the nadir of offerings in 2008 (with potential implications for future litigation).
Filings have increasingly targeted firms in the biotechnology and pharmaceutical industries.
- The percentage of filings against foreign issuers increased in 2014 for the first time in three years.
- Filings against companies in the Consumer Non-Cyclical sector—which includes biotechnology and pharmaceutical firms—increased markedly in 2014.
- Filings against energy companies gained prominence in the fourth quarter of 2014 as oil and gas prices declined.
- Collectively, filings in the Second and Ninth Circuits in 2014 were more consistent with historical averages compared with the number filed last year, although total MDL and DDL declined considerably relative to historical averages. Filings in the Third Circuit increased to the highest level since 2004.
The complete publication is available here.
