TheCorporateCounsel.net

A recent report published by SAR, a data analytics company focused on the securities litigation risk of U.S. public companies, notes that the market capitalization losses related to high-risk adverse corporate events studied by SAR amount to approximately $10 trillion, an increase of $1.1 trillion relative to the two-year period ending September 2024. The announcement of the report includes a quote from SAR’s CEO noting:

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.

SAR quantifies the securities litigation risk footprint of public companies by analyzing the economic impact of adverse corporate events, together with the change in market capitalization of constituent companies within each of the eleven industry sectors. The firm calculates a “SAR Risk Score,” which is a proprietary score assigned to each company listed on the NYSE or Nasdaq based on the frequency and severity of high-risk adverse corporate events during a two-year period. The SAR Risk Score is calculated by dividing the market capitalization losses observed on high-risk adverse corporate events by the issuer’s market capitalization on the preceding trading day.

In the study, SAR notes that 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.

– Dave Lynn