After a strong second half of 2013, the volume of securities class action cases has dipped once again in 2014. And a steady, shrinking stock market could be to blame.
Cornerstone Research and Stanford Law School released their 2014 midyear assessment of securities class action filings on August 5, finding that plaintiffs have filed 78 new federal class-action securities cases in the first half of 2014. This figure is in line with the 75 cases filed in the first half of 2013, but it is down from the 91 cases filed in the second half of 2013 and the 95 case semiannual average between 1997 to 2013.
The researchers say that the numbers could be due to two things: a steady market, and a decrease in listed companies. As the market has stabilized following the financial crisis, most companies saw their shares rise during the first six months of the year. This, Cornerstone says, leads to fewer securities class action cases.
“When the market starts getting more volatile, we start seeing more cases filed,” said report author John Gould to the New York Times.
Another reason could be fewer companies available to file these suits against. Between 1998 and 2014, both the New York Stock Exchange and the Nasdaq have lost a combined 46 percent of listed companies. This helps explain the drop in securities class actions from the 242 cases filed in 1998 alone.
The report also found that companies are losing fewer dollars thanks to these suits. The total disclosure dollar loss as a result of these 78 suits comes in at $30 billion, far below the semiannual average of $62 billion. In addition, the maximum dollar loss sits at $93 billion, the lowest semiannual average in 16 years.
And these businesses aren’t just being sued in New York and California. According to Cornerstone and Stanford, filing activity was less concentrated in the 2nd and 9th Circuits during the first half of 2014. However, in the 6th, 8th and 10th Circuits, filings have already equaled or surpassed the total filings for the full 2013 year.