The number of securities class-action filings and the average case size increased in the first half of 2018, according to a Cornerstone Research report released Wednesday.
Plaintiffs filed 204 new federal securities class actions, which combined with the previous 18-month figures, add up to 750 actions that represent the most prolific 24-month period since enactment of the Private Securities Litigation Reform Act of 1995, aimed at shifting control to investors with the largest losses, researchers at Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse found.
The 204 class actions are up from 189 in the second half of 2017.
One difference over the first six months of 2018 was a return of mega filings, instead of smaller cases in 2017.
Core filings — those alleging stock price drops without merger and acquisition claims — rose to 111 from 87 in the second half of 2017. "We see persistently high volumes," Sasha Aganin, Cornerstone Research vice president and a report co-author, said in an interview.
Average case size, as measured by market capitalization losses, rose to levels not seen since 2002, driven by mega filings involving a dollar loss of at least $5 billion. Nine mega filings in the first half of 2018 made up 69% of all disclosure dollar losses, compared to 36% in the first half of 2017. Those nine mega cases were more than three times higher than the historical semiannual average. The previous year saw an unusual prevalence of midsize cases, which could indicate more market volatility, Mr. Aganin said. "We have seen a very long bull market, and stock indices have not been very volatile, but my suspicion is volatility might be picking up."
Alleged dollar losses related to disclosure issues rose to an aggregate $157 billion, 162% higher than the historical semiannual average of $60 billion. Alleged losses totaled $59 billion in the last half of 2017.
Other trends noted so far in 2018 were a slight drop in the percentage of core filings against non-U.S. issuers, which fell slightly to 22%, and an increase of filings in the communications sector, particularly internet companies, which increased to 17 from six in the second half of 2017.
"If the trends observed in the first half of the year continue to year-end, approximately 8.5% of all companies listed on the NYSE and Nasdaq markets will have been sued in these cases," Stanford Law School Professor Joseph A. Grundfest said in a news release.
The report is available on the Cornerstone Research website.