S&P 500 companies were named in 10 of 88 federal securities class-action filings in the first six months of 2012, compared to eight of 94 filings in the same period last year, according to a report by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research.
Overall, the 88 federal securities class actions represent a 6% decline from the first half of last year.
For the first six months of 2012, a total of $249 billion of defendant companies' market value was lost from the trading day with the highest market capitalization during the class-action period to the trading day immediately following the end of the class-action period, the report, “Securities Class Action Filings — 2012 Mid-Year Assessment,” said. By contrast, the loss was $256 billion in the first half of last year.
“Looking over the horizon, the LIBOR-litigation industry is clearly a sector to watch for years to come,” Joseph Grundfest, clearinghouse director, said in a joint statement with Cornerstone about the report. “The magnitude of the potential exposures and the complexity of the underlying damages claims will likely generate large amounts of litigation activity in many geographies. Much of that litigation activity will occur away from the U.S. class-action securities fraud sector, but more lawsuits are virtually assured.”
The decline in total filings in the first half of the year was primarily because of a big drop in Chinese reverse-merger filings as well as in merger-and-acquisition filings, the statement said.
In the past six months, CRM filings were down 79% to five and M&A-related filings were down 67% to seven, the report said.
Through a process known as a reverse merger, or reverse takeover, Chinese and other non-U.S. companies gain access to U.S. equity markets “when an existing U.S.-listed shell company acquires a non-listed firm, at which point the target firm's shareholders take control of the combined entity,” according to information in another Stanford report.
