Drop in settlement size attributable to lower plaintiff-style damages, among other factors.
The number of securities class action settlements increased slightly in 2024 while the size of those settlements declined, according to a new report from Cornerstone Research.
The report, Securities Class Action Settlements—2024 Review and Analysis, found that the number of securities class action settlements in 2024 increased to 88, up 6% compared to the 83 settlements in 2023. The median settlement amount ($14 million) declined from the 13-year high in 2023, but remained at a historically high level compared to the past decade. The total ($3.7 billion) and average ($42.4 million) settlement amounts also declined year-over-year by 8% and 13%, respectively. We highlight key statistics in an interactive page featuring this year’s report.
“The decline in settlement sizes can largely be attributed to lower ‘plaintiff-style damages’—a proxy for the amount of potential investor losses that plaintiffs may claim in a securities class action, which our research finds to be the single most important factor in explaining individual settlement amounts,” said Dr. Laarni T. Bulan, a report coauthor and vice president at Cornerstone Research. “What is interesting in 2024 is the high proportion of settled cases related to SPACs. The median settlement for SPAC cases was 21% lower than the median for non-SPAC cases.”
What is interesting in 2024 is the high proportion of settled cases related to SPACs. The median settlement for SPAC cases was 21% lower than the median for non-SPAC cases.
—Laarni Bulan
According to the report, 19% of settlements in 2024 were related to a special purpose acquisition company (SPAC). The median settlement amount for SPAC cases was $12.0 million compared to $15.3 million for non-SPAC cases.
Issuer defendant firms were 65% smaller than in 2023, as measured by median total assets, reaching the lowest observed level since 2018. Additionally, institutional investors served as lead plaintiff in only 39% of 2024 settled cases, reaching the lowest level over the last 10 years.
“In conjunction with the decline of median issuer defendant total assets, the percentage of 2024 settlements that involved issuers that were delisted from a major exchange and/or had declared bankruptcy was also higher compared to 2023,” added Eric Tam, a report coauthor and principal at Cornerstone Research. “Issuer defendant firm assets and issuer distress both have potential implications for the ability to fund a settlement, which is consistent with the smaller settlements in 2024.”
In conjunction with the decline of median issuer defendant total assets, the percentage of 2024 settlements that involved issuers that were delisted from a major exchange and/or had declared bankruptcy was also higher compared to 2023.
—Eric Tam
Median plaintiff-style damages declined 20% year-over-year to $272 million, following a record high in 2023. Previous reports have presented “simplified tiered damages” as a measure of potential investor losses. This year marks the introduction of “plaintiff-style damages,” a measure of potential investor losses that accounts for additional case-specific data while still using a consistent approach across a large volume of cases. The latest investments in big data analytics and capabilities from Cornerstone Research’s Data Science Center enabled this new approach.