Just over 5% of S&P 500 companies were defendants in federal securities class actions filed in 2010, but those companies named as defendants accounted for 11.4% of the S&P 500’s market capitalization, according to a report Thursday from Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research.
The 5.4% in 2010 is more than the 4.8% S&P 500 companies, accounting for 8.6% of the index’s market cap, that were defendants in 2009 but a drop from an annual average of 6.5%, accounting for 11.8% of the market cap, between 2000 and 2009, according to the report, “Securities Class Action Filings: 2010 Year in Review.”
In terms of cumulative litigation exposure, at the end of 2010, all S&P 500 companies as of year-end 1999 had a 49.9% chance of being subject to at least one federal securities class action in the following 11 years, the report said. That percentage dropped to 47.3% at the end of 2009 for the 10 years starting in 2000.
Among all companies publicly traded in U.S. markets, federal court securities class-action filings in 2010 totaled 176, up 4.7% from 2009 but 9.7% below the annual average of 195 filings between 1997 and 2009, the report said.
Filings totaled 104 in the second half of last year, rising from 72 in the first six months of 2010.
Filings related to the credit crisis fell in 2010 to 13, a 76.4% decrease from 2009 and an 87% decrease from 2008.
“As the wave of credit-crisis filings subsided, filings in the financial sector decreased, as financial companies were defendants in 24.4% of 2010 filings compared with 47% in 2009,” the 39-page report said.