Shareholders are getting angrier, or so it seems. Securities class-action lawsuit filings were up 17 percent in the first half of 2016. Between January and June, plaintiffs filed 119 new federal securities class action suits seeking damages over falling stock prices, compared to 102 filings in the second half of 2015 and 87 filings in the first half of 2015, according to a new report by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse. Over the first half of this year, the S&P 500 gained nearly 3 percent.
A boost in mergers and acquisitions–related challenges is fueling the rise of securities lawsuits, the Cornerstone/Stanford report says. During the first half, 24 class actions involved M&A, up 167 percent from the second half of 2015. From 2012 to 2015, the number of these cases ranged from five to nine filings.
“At the current pace, M&A-related filings in federal courts will double the annual numbers we have observed in the last four years,” said Dr. John Gould, a senior vice president of Cornerstone Research.
Gould said a January 2016 Delaware Court decision may increase the likelihood that plaintiffs will seek federal jurisdiction for M&A-related cases. The class-action lawsuit challenged the takeover of Trulia by Zillow; in the decision, the judge made disclosure-only settlements—which can often be less costly to the company—more difficult to obtain.
The report also found that filings against S&P 500 companies were at the highest annualized rate since 2008. Of the companies in the S&P at the beginning of the year, 6.4 percent were defendants, on an annualized basis, in a class action filed during the first half of the year.
