Class action
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Investors enjoyed continued strong recoveries from U.S. securities class action settlements in 2024, even as these payouts pulled back a bit from the previous year, according to a report from Cornerstone Research released on Wednesday. 

The number of class action settlements rose last year, climbing 6% year-over-year, the data showed. However, the aggregate value of those settlements declined to US$3.7 billion in 2024 from US$4 billion the previous year.

With the value of settlements declining, as the number of them rose, the average value dropped by 13% year-over-year, the report noted.

There were also fewer so-called “mega” settlements (valued at US$100 million or more) in 2024, with seven of these kinds of cases in 2024 — representing 54% of total settlement value — down from nine in 2023. 

“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 Laarni Bulan, vice-president at Cornerstone Research, in a release. 

In part, the decline in average settlements also reflects the fact that a significant share — 19% — of the settlements involved special purpose acquisition companies (SPACs), which had lower settlement values than non-SPAC cases.

According to the report, the median settlement for SPAC cases was US$12 million last year, compared with US$15.3 million for non-SPAC cases.

Additionally, the cases settled last year tended to involve smaller issuers (measured by total assets), the report noted. 

“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,” said Eric Tam, principal at Cornerstone Research in a release. 

“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,” he added.

Cornerstone also reported that the median time to settling cases declined by 14% to 3.2 years from the record of 3.7 years in 2023, it said.