The mid-year numbers are in on securities class action filings and settlements. This week saw the publication of 2008 Trends: Subprime and Auction-Rate Cases Continue to Drive Filings, and Large Settlements Keep Averages High from NERA Economic Consulting and 2008 Mid-Year Assessment from Cornerstone Research.
(1) The reports agree that filings are on the upswing, although they differ on the exact number. Cornerstone finds that there were 110 filings in the first half of 2008, while NERA finds that there were 139 filings in the first half of 2008. Both reports agree that around half of the total filings were related to subprime mortgage/credit crunch problems. On an annualized basis (using either report’s total), the number of filings will be up significantly as compared to the past three years.
(2) Overall market volatility is an additional factor driving the increase in filings. NERA reports that nearly one-third of companies whose stock fell by 40% or more in a single day, net-of-market, were confronted with a federal filing within three months.
(3) The market capitalization losses associated with the subprime mortgage/credit crunch filings are significantly higher than usual. NERA concludes that although the average settlement value in the first half of 2008 remained constant at around $30 million, that number is likely to rise as more recent filings reach settlement.