The number of U.S. securities class actions filed in the first half of 2022 rose slightly, but the market cap losses covered by these cases has jumped to record levels, according to new data from Cornerstone Research.
In a new report, the firm said that first half class action filing activity edged up to 110 cases from 107 in the second half of 2021, but its market cap loss metrics jumped to historic levels amid heightened market volatility.
These metrics aren’t indicators of potential legal damages. They estimate the impact of all the information revealed during the period covered by a proposed class action — including information unrelated to litigation, such as rising interest rates and other market-wide factors.
Nevertheless, the report said that the “disclosure dollar loss” (DDL) and “maximum dollar loss” (MDL) metrics related to class actions more than doubled in the first half.
The DDL measures the market cap loss between the day immediately before and the day immediately after the end of the period covered by the class action. The MDL measures the loss in an issuer’s market cap from its peak during the period covered by the class action to the day after the class period ended.
In the first half, the DDL reached US$482 billion, up from US$210 billion in the second half of 2021, and the MDL jumped to US$1.57 trillion from US$630 million.
According to the report, the MDL for the first half of 2022 was more than triple the historic semiannual average (1997 to 2021), and the DDL was well ahead of the previous record of US$280 billion in the first half of 2000.
The large increase in losses comes amid a sharp increase in so-called “mega” loss filings — DDLs of at least US$5 billion and MDLs of over US$10 billion — the report noted.
Among federal court filings in the first half, the report noted that cases involving special purpose acquisition companies (SPACs), crypto, and Covid-19-related cases were all elevated and on pace to exceed last year’s totals.
Cases involving opioids, cannabis and cybersecurity failures, which were previously popular, have all declined this year.
The crypto-related class actions include lawsuits against crypto trading platforms, miners and coin issuers, it said.
Class actions against non-U.S. companies were down this year, the report also said. Canadian companies accounted for four of the 18 non-U.S. filings in the first half.
Filings involving foreign firms are on track to reach the historic average of about 33 per year, and well below the record 74 cases brought in 2020, the report noted.