Insights

2016: Largest Number of Securities Class Actions Filed in a Decade [Report]

February 14, 2017

Management Liability/D&O

The D&O litigation landscape in 2016 was a tough one.

D&O Databox Report ButtonHere at Woodruff Sawyer, we look closely at securities class action suits when analyzing D&O-related litigation. In our analysis of these types of lawsuits, we look specifically at claims brought pursuant to the ’33 and ’34 acts after a stock price drop–a high-severity risk faced by directors and officers.

In Woodruff Sawyer’s latest analysis of securities class actions filed in federal court, we found a record-breaking 195 cases filed last year—a high predicted in our 2016 mid-year report. This is, in fact, a 10-year high, up approximately 9 percent from 2015.

Get instant access to the “D&O Databox Flash Report” for 2016 right now, click here. Read on for more details …

 

Federal Class Action Lawsuits 2016

The culprit? One strong driver was IPO activity. IPO companies are particularly exposed to securities class actions as they transition from private to public for a number of reasons.

Approximately 20 percent of the total number of companies that went public in the past decade had been sued. Ninety percent of these companies were sued within the first five years of going public.

When Suits Were Filed

It’s worth mentioning that 12 percent of these class actions were Section 11 cases against IPO companies filed in California state courts—something I’ve written about before in this blog.

A large number of the 2016 cohort of companies faced with a securities class action suit in 2016 are in the biotechnology/life sciences sector. Over the past 10 years, companies in this sector have averaged about 15 percent of all suits filed in any year. However, in 2016 they made up 24 percent of the population—a striking increase.

A surprise in the cohort of 2016 was the number of companies sued that have a market capitalization of over $10 billion.

We had actually seen a dip in suits against companies of this size in 2013, 2014 and 2015. However, in 2016, the plaintiff’s bar refocused on these large companies. They made up almost one-fourth of all filings (22%).

Market Cap of Companies Sued

suits over $10B

You can get more insights into the 2016 class action landscape by clicking here to get instant access to the “D&O Databox Flash Report” for 2016:

  • Class action activity by industry
  • Market cap size of companies sued
  • Class action activity of foreign-based companies
  • Settlement values, including companies and cases
  • Cases awaiting resolution in 2017
  • Average time to settlement
  • Dismissal rates
  • M&A activity
  • More IPO lawsuit details

 

Was this post helpful?

See all articles by Priya Cherian Huskins, Esq.

All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn

Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn