The number of class action securities fraud suits filed in federal court surged to a record high in the first half of 2017, according to a report released on July 25, hitting the highest level in two decades as both traditional filings and merger and acquisition litigation continued to increase. The semiannual report released by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse found that 226 securities fraud class actions were filed in federal courts in the first six months of this year, the highest number of filings for any half year since the Clearinghouse began tracking the data in 1997.
The report said that if the filings continue at the same pace for the second half of the year, reaching 452 cases total, 2017 will see the highest level of securities fraud filings in 21 years.
The Cornerstone report does suggest that some of the new filings are for lower values than in previous years. The report measures cases by what it calls “Disclosure Dollar Loss,” a metric of the difference between a Defendant’s market capitalization on the trading day before the end of the class period and the trading day immediately after the end of the class period, to estimate the impact of information revealed at the end of the period. Although the total disclosure dollar loss increased from the second half of 2016 to the first half of 2017, the median loss was 26 percent lower over the same period while the average loss declined by 15 percent. Another metric, the “Maximum Dollar Loss,” measures the change in market cap between the trading day with the highest capitalization during the class period and the day immediately after the end of the period; the median MDL was 64 percent lower in the first half of 2017 compared to the latter half of 2016.
Filings against companies headquartered outside of the U.S. also rose in the first part of 2017, according to the report, which found suits against European-based companies in particular jumped 83 percent from the second half of 2016.
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