Cornerstone Research has issued an interesting report on opt-outs in securities class action settlements (i.e., when a putative class member chooses not to participate in the settlement and may consider bringing its own direct action against the defendants). A few highlights from the results:
(1) The percentage of securities class action settlements with at least one opt-out has been steadily increasing, although it remains relatively small. The report concludes that from 1996 to 2005 the rate of opt-outs was 2.9%. From 2006 to 2018 the rate increased to 5.8%, and then has jumped from 2019 to H1 2022 to 11.5%.
(2) Opt-outs are more common in large securities class action settlements. The report determines that for the 2019 to H1 2022 period, opt-outs occurred in 29% of all settlements above $20 million and 62.5% of all settlements above $100 million.
(3) If institutional investors choose to opt-out, they are likely to bring their own direct actions. The report finds that from 2019 to H1 2022, there were 11 securities class action settlements where institutional investors chose to opt out (out of 287 total settlements) and in 10 of those instances at least one direct action was brought.
The 10b-5 Daily 