U.S. Corporate Exposure to Alleged Violations of the Securities Exchange Act Amounts to $68.4 billion in 3Q 2019
Oct 10, 2019, 10:10 ET
BETHESDA, Md., Oct. 10, 2019 /PRNewswire/ -- Aggregate exposure of U.S. public corporations to securities class action (SCA) lawsuits that allege violations of the federal securities laws under Section 10(b) and 20(a) of the Exchange Act amounted to $68.4 billion during 3Q of 2019. Cumulative SCA Exchange Act exposure for 2019 amounts to $270.1 billion. According to a report released today by SAR, the Rule 10b-5 litigation rate against U.S. corporations listed on U.S. exchanges has remained steady throughout 2019. The report – SAR Securities Exchange Act Class Action Litigation Exposure Report – 3Q 2019 – indicates that SCA Exchange Act exposure of 43 defendant corporations is 22 basis points, or about one quarter of the aggregate market capitalization of all U.S. corporations listed on U.S. exchanges.
"Technology and industrial companies suffered the greatest amount of alleged shareholder losses – about $41 billion – more than half of total exposure accounted for during the third quarter." said Nessim Mezrahi, CEO of SAR.
The 3Q'19 report presents the following key observations in the securities class action arena:
- 43 U.S. listed corporations were sued for alleged violations of the federal securities laws under Section 10(b) and 20(a) of the Securities Exchange Act of 1934. Based on the allegations presented in the first filed SCA complaint against each defendant corporation during the third quarter, aggregate market capitalization losses amount to approximately $68.4 billion.
- Aggregate U.S. corporate exposure to SCAs that allege violations of the Exchange Act amounts to 21.6 basis points of total market capitalization of U.S. corporations listed on U.S. exchanges during 3Q'19 – a decrease of 21 basis points relative to 2Q'19. The aggregate 3Q'19 U.S. Rule 10b-5 litigation rate is 1.16%.
- 20% of alleged corrective disclosures that claim to rectify alleged misstatements or omissions by directors and officers exhibit an absence of price impact and do not surpass a statistical threshold associated with heightened pleading standards of loss causation – an increase of 8.24 percentage points relative to 2Q'19.
- 13 U.S. large cap corporations were sued for alleged violations of Rule 10b-5. This is an increase of 4 SCAs filed against large caps during 3Q'19. Large cap corporate exposure to Exchange Act claims was $56.1 billion during 3Q'19 – a decrease of $69.3 billion in market capitalization losses, or 55% from 2Q'19. The large cap 3Q'19 U.S. Rule 10b-5 litigation rate is 1.43%.
- 13 U.S. mid cap corporations were sued for alleged violations of Rule 10b-5. Mid cap corporate exposure to Exchange Act claims was $6.9 billion during 3Q'19 – an increase of $1.1 billion in market capitalization losses, or 18.6% from 2Q'19. The mid cap 3Q'19 U.S. Rule 10b-5 litigation rate is 2.02%.
- 17 U.S. small cap corporations were sued for alleged violations of Rule 10b-5. Small cap corporate exposure to Exchange Act claims was $5.4 billion – an increase of $1.5 billion in market capitalization losses, or 38% from 2Q'19. The small cap 3Q'19 U.S. Rule 10b-5 litigation rate is 0.79%.
For more information, please visit: www.sarlit.com
SOURCE SAR, LLC
