NERA: Investor losses on US filings amount to 183 billion

08 February 2016 3 min. read

Aggregate investor losses on all filed cases in the US totalled $183 billion in 2015, a decrease of more than 25% from four years ago, but a marked increase of more than 25% over 2014. The median settlement value increased to $7.2 million from $6.8 million the year previous.

The number of securities class actions filings in the US last year reached heights last seen before the financial crisis. In a recently released report from NERA Economic Consulting, titled ‘Recent Trends in Securities Class Action Litigation: 2015 Full-Year Review’, the consultancy explores the securities litigation landscape in some detail.

federal filings by type 2000 to 2015

Filing type
The study finds that the number of filings has remained relatively stable over the past seven years, with an average of 220 cases filed per year. In 2015 the number of filings increased to 234, closing the gap on 2008 when there were 247 filings. Over the past two decades the number of filings has remained relatively stable in the mid 200s, with 2006 and 2005 showing the lowest number at 132 and 187 respectively.

The type of filings have though changed in recent years. Since 2005 merger objection cases have trended upwards, hitting a high of 70 of the total cases in 2010 and slowly trending down to 43 such cases by 2015. At the same time, the number of cases violating Rule 10b-5, Section 11, or Section 12 decreased considerably in 2009, although they have been trending upwards since 2010 when there were 129 such cases to 182 in 2015.

Aggregate Investor Losses

Losses to investors
The economic consultancy also considers the aggregate amount that investors lost from buying the defendant’s stock rather than investing in the broader market during the alleged class period. Such “investor losses” are seen as a proxy for the relative size of investors’ potential claims, as historically, investor losses have been a powerful predictor of settlement size. In 2015, (potential) shareholder class actions with alleged violations of Rule 10b-5 or Section 11 totalled $183 billion, representing a more than 25% increase over 2014 and a 15% over 2013*. The losses are still down on 2012 when $218 billion in losses were filed, and 2011 when $248 billion in losses were filed. These numbers are still dwarfed by 2008 when $403 billion in losses were filed, while filings in 2007 amounted to $327 billion.

Median Settlement Value, Million

Median settlements
In terms of settlements the numbers vary considerably. The median settlement in 2015 of $7.3 million was close to that of 2014’s $6.7 million. In 2013 the median settlement was somewhat higher at $8.9 million, although still somewhat low compared to the largest settlement year in the past two decades with $12.7 million paid out in 2012. The average settlement came in at $52 million in 2015, highlighting that a few large settlements drove the average up, while many small settlements kept the median stable.

* Some areas of investor losses are excluded from the analysis. For instance, class actions in which only bonds and not common stock are alleged to have been damaged are not included. The largest excluded groups are the IPO laddering cases and the merger objection cases.