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.”

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