Securities Litigation Risk for U.S. Public Companies Increased by $1 Trillion as of 4Q'24

BETHESDA, Md., Jan. 31, 2025 /PRNewswire/ -- SAR, a data analytics company specialized in the securities litigation risk of U.S. public companies, today published the U.S. Securities Litigation Risk Report ? January 2025. As of Dec. 2024, corporate disclosures based on public statements and filings made with the Securities and Exchange Commission ("SEC") that had a material impact on stock price of companies listed in the NYSE or NASDAQ, increased in both frequency and severity by 6.0% and 7.0%, respectively, relative to the two-year period ending in Sept. 2024.

According to the report, SAR identified 10,536 high-risk adverse corporate events, from a population of 4,605 U.S. public companies, as of the two-year period ending Dec. 31, 2024, by uniformly applying a single-firm event study analyses to test stock price reaction on corporate disclosures disseminated via public statements and filings with the SEC. 

The market capitalization losses related to high-risk adverse corporate events, amount to approximately $10 trillion, an increase of $1.1 trillion relative to the two-year period ending Sept. 2024. The Information Technology sector topped the charts with $2.8 trillion, followed by Consumer Discretionary and Health Care, with $1.6 and $1.4 trillion, respectively.

"The frequency and severity of adverse corporate events are the dominant drivers that foment securities litigation risks for directors and officers of U.S. public companies. As of the fourth quarter, issuers now face an increase of about $1 trillion in market capitalization losses linked to high-risk adverse corporate events that materially impacted stock price during the preceding two years. The securities plaintiffs' bar will take advantage of increasing complexity around risk factor disclosures after the Supreme Court punted on the high-severity securities class action against Meta last quarter. As a result, the securities litigation risks for issuers will be greater in 2025," said Nessim Mezrahi, Co-Founder and CEO of SAR.

Key Takeaways:

The securities litigation risk footprint of the Information Technology sector exhibited the greatest change during the last quarter of 2024, followed by Communication Services and Financials. SAR quantifies the securities litigation risk footprint based on the economic impact of adverse corporate events, together with the change in market capitalization of constituent companies within each of the eleven industry sectors, based on the Global Industry Classification Standard (GICS).

As of Dec. 2024, the sector with the highest market capitalization losses as percentage of the sector-specific market capitalization is Consumer Discretionary at 19.18%, followed by Health Care and Industrials, with 19.15% and 17.63%, respectively.

Information Technology companies faced the greatest market capitalization losses per high-risk adverse corporate event, amounting to $1.73 billion, followed by Communication Services and Consumer Discretionary with $1.59 and $1.2 billion, respectively.

The sector with the highest median SAR Risk Score is Health Care with a median score of 29.11%, followed by Information Technology and Consumer Discretionary with 25.44% and 24.21%, respectively.

This independent, semi-annual U.S. equity research report presents an appendix with the median SAR Risk Scores across all GICS groups, industries, and sub-industries. The SAR Platform provides users with the near real-time securities litigation risk footprint, with full transparency at the corporate disclosure level, for public companies that trade in the NYSE and NASDAQ.

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SOURCE SAR