Thursday, July 05, 2007

A Look at the 2007 Securities Lawsuits (So Far)

At the beginning of 2007, I took a closer look at the 2006 securities class action lawsuits (here). Now that we have reached the halfway point of 2007, it seems like a good time to take a look at the securities suits that have been filed so far this year.

I have based my review on the 2007 filings listed on the Stanford Law School Securities Class Action Clearinghouse website (here). I have taken the data as presented. Were I using these data for actuarial purposes, I would probably make a few adjustments. For example, the site’s list includes at least 2 lawsuits against private companies, and at least one lawsuit where the publicly traded company is the plaintiff, not the defendant. For simplicity’s sake, I have taken the data as presented, without any refinement, to avoid the need for a detailed explanation of what I omitted or included.

According to the Stanford website, there were 62 companies sued in securities class action lawsuits during the first half of 2007, which means that we are on pace for roughly 124 lawsuits by year’s end. That would be slightly more than the 118 lawsuits filed in 2006. The projected 2007 number of 124 lawsuits is well below the 1996-2006 average for traditional securities class action lawsuits of 187 per year.

The companies sued so far in 2007 are spread across 47 different Standard Industrial Classification (SIC) Codes. The SIC Code with the highest number of companies sued is 2834 (Pharmaceutical Preparations), which is the SIC Code of 5 of the companies sued. There were four companies sued in SIC Codes 2836 (Biological Products), 4899 (Communications Services), and 6331 (Fire, Marine and Casualty Insurance).

The most frequently sued industrial sector so far this year has been Technology (with 15 of the lawsuits), followed by Services (14), Financial (13) and Healthcare (11). The most frequently sued industries are Biotechnology and Drugs (5), Insurance (Property and Casualty) (4), and Electronic Instruments and Controls (4).

Eight of the lawsuits involve companies domiciled outside the United States (I omitted the one case where the public company is the plaintiff from this count). The list of foreign defendants includes companies based in Israel (2), Canada, Bermuda, South Korea, Great Britain, Switzerland and China.

The lawsuits have been filed in 23 different district courts. The district courts in which companies most frequently have been sued are the Southern District of New York (13), the Central District of California (7) and the Northern District of California (4).

Nine of the class action lawsuits involve allegations involving the defendant company’s initial public offering. Five involve allegations of options backdating. Six involve allegations involving subprime lending (four involving lenders, two involving home builders).

In a prior post (here), I took a closer look at subprime lending lawsuits. And in another prior post (here), I took a look at the lawsuits that have been filed against pharmaceutical companies.

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