BETHESDA, Md., Jan. 10,
2025 /PRNewswire/ -- SAR, a data analytics company
specialized in the securities litigation risk of U.S. public
companies, today published the Securities Class Action Rule
10b-5 Exposure Report for 4Q
2024. According to the report, securities litigation exposure
of public company defendants that trade in the NYSE and NASDAQ
peaked during the fourth quarter of 2024, when records were set
across the buoyant U.S. equity markets. During the bullish market
conditions of 2024, shareholders claimed approx. $665.2 billion in market capitalization losses
due to alleged violations of Rule 10b-5 – the most in the last five years.
Rule 10b-5
settlements increased over 20% in 2024 relative to the last 6
years.
According to the report, global quarterly Rule 10b-5 securities litigation exposure in 2024 was
17% greater than the average of 2023. Actual monetary settlements
with investor plaintiffs last year were, on average, 23% greater
than during the last six years.
SAR data and analysis indicate that the litigation exposure of
U.S. public company defendants amounts to approximately
$380.3 billion in 2H 2024.
Shareholders claimed approximately $4.0
billion in market capitalization losses per securities class
action filing, and approximately $2.0
billion per allegedly
fraud-related stock drop in 2H 2024. The former metric
increased by 32.1%, and the latter by 15.4% during the second half
of 2024.
"Our data and analyses indicate that securities litigation
exposure against U.S. public companies peaked in the fourth quarter
of last year. This peak may be short-lived with an expected
increase in volatility and new headwinds for U.S. equities
given greater shareholder scrutiny of corporate disclosures. With
average Rule 10b-5 settlements over
20% greater in 2024 than during the last six years, litigation
activity is expected to increase in 2025," said
Anthony Kabanek, EVP of SAR.
According to the report, in 2023 and 2024 investor plaintiffs
claimed $13.6 billion and
$20.5 billion, respectively, in
private Rule 10b-5
securities-fraud class actions that relied on
short-seller research.
Key takeaways:
- 86 U.S. issuers were sued for alleged violations
of Rule 10b-5 during 2H 2024. Based
on allegations presented in the first-filed class action complaint
against each defendant issuer, U.S. SCA Rule 10b-5 Exposure amounts to $259.4 billion. U.S. SCA Rule 10b-5 Exposure decreased -5.4% relative to 1H
2024.
- U.S. SCA Rule 10b-5
Exposure peaked in the 2nd and 3rd
quarters, followed by a decline to trend in the 4th
quarter of 2024.
- 9 Non-U.S. issuers were sued for alleged
violations of Rule 10b-5 during 2H
2024. Based on allegations presented in the first-filed class
action complaint against each defendant issuer, ADR SCA Rule
10b-5 Exposure amounts to
$120.9 billion. ADR SCA Rule
10b-5 Exposure increased by 11.3x
relative to 1H 2024.
- An anomalously high 4th quarter exposure among
Non-U.S. issuers contributed to a remarkably volatile year for
ADR SCA Rule 10b-5 Exposure.
- Rule 10b-5 private
securities-fraud filing frequency and potential loss
severity need not move in tandem. Global exposure increased by
approximately 34% in the 2H 2024 relative to 1H 2024, while filing
frequency remained relatively stable.
- 38 U.S. Large Caps were sued for alleged
violations of Rule 10b-5 in 2H 2024,
the same observed frequency as 1H 2024. The U.S. Large Cap SCA
Rule 10b-5 Exposure amounts to
$233.7 billion, a decrease of 10.1%
relative to 1H 2024.
- 22 U.S. Mid Caps were sued for alleged violations
of Rule 10b-5 In 2H 2024. The U.S.
Mid Cap SCA Rule 10b-5 Exposure
amounts to $19.8 billion, more than 3
times the amount in 1H 2024.
- 26 U.S. Small Caps were sued for alleged
violations of Rule 10b-5. The U.S.
Small Cap SCA Rule 10b-5 Exposure
amounts to $5.9 billion, a decrease
of 33% relative to 1H 2024.
- 9 Non-U.S. issuers that trade via ADRs in the U.S. public
markets were sued for alleged violations of Rule
10b-5. The ADR SCA Rule
10b-5 Exposure increased by over
11.3x to ~$121 billion, relative to
1H 2024.
Media contact: info@sarlit.com
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SOURCE SAR
