AI-related filings more than double and 1933
Act filings continue to decline.
MENLO
PARK, Calif., Jan. 29,
2025 /PRNewswire/ -- The number of securities class
action filings increased for the second consecutive year in 2024,
with artificial intelligence (AI)-related filings more than
doubling from the previous year, according to a new report released
today by Cornerstone Research and the Stanford Law School
Securities Class Action Clearinghouse. The increase came despite a
continued year-over-year decline in federal and state filings
with claims under the Securities Act of 1933.
The report, Securities Class Action Filings—2024 Year in
Review, found that plaintiffs filed 225 securities class action
lawsuits in federal and state courts in 2024, up from 215 filings
in 2023. The number of "core" filings—those excluding M&A
filings—reached 220, 14% higher than the 1997–2023 historical
average of 193.
The number of AI-related filings more than doubled, from seven
in 2023 to 15 in 2024. The number of COVID-19-related filings
increased by 36% relative to 2023, but remained below the high of
20 in 2022. In contrast to the AI and COVID-19 trend
categories, the number of SPAC and cryptocurrency-related filings fell by more than 50% as
compared to 2023. Cybersecurity-related filings also continued to
decline. The top three trend categories in 2024 were AI (15
filings), COVID-19 (15 filings), and SPAC (11 filings),
collectively accounting for nearly 20% of core federal
filings.
"In 2024, federal and state 1933 Act filings declined 34% from
2023 and reached the lowest number since 2013," said Alexander
"Sasha" Aganin, the report's coauthor and a Cornerstone Research
senior vice president, who coheads the firm's finance practice.
"Meanwhile, federal Section 10(b)–only filings increased to the
highest level on record, the number of AI- and COVID-19-related
filings rose, and the total number of overall filings
increased."
Along with an increase in overall filings, the size of core
filings, when measured by the Disclosure Dollar Loss Index®
(DDL Index®), rose 23% to $438
billion in 2024, far above the historical annual average of
$237 billion. Conversely, the aggregate filing size, as
measured by the Maximum Dollar Loss Index® (MDL
Index®), declined sharply to $1.6
trillion in 2024, a 52% drop from $3.3 trillion in 2023. There were 35 mega MDL
filings (filings with more than $10
billion in MDL) in 2024, which accounted for $1.3 trillion in MDL, nearly 80% of total
MDL.
"Retrospectively, 'no news' is the big news in the world of
securities litigation. The U.S. Supreme Court initially agreed to
hear two cases involving private securities litigation but then
dismissed both with no decision on the underlying questions of law.
The concern among practitioners is that the Court will, in the
future, be even more selective in deciding whether to hear
securities cases," commented former SEC
Commissioner Joseph Grundfest,
now professor emeritus at Stanford Law School. "Prospectively,
crypto is the elephant in the room.
How will the statutes and regulations be reformed? If much of
crypto is redefined as not
constituting a security, then securities litigation in that sector
will obviously plummet. Stay tuned, is about all one can say."
Key Trends
- Of the 15 AI-related filings in 2024, eight were in the
Technology sector, four were in the Communications sector, two were
in the Industrial sector, and one filing was in the Consumer
Non-Cyclical sector.
- The number of filings in the Consumer Non-Cyclical sector
increased from 54 in 2023 to 67 in 2024, largely driven by an
increase in filings against Biotechnology companies in 2024
H2.
- While the likelihood of core filings targeting U.S.
exchange-listed companies increased to 3.9% in 2024 from 3.2% in
2023, the probability of an S&P 500 company being the subject
of a core federal filing dropped one percentage point to 6.1%.
- The count of mega DDL filings (27) in 2024 was the highest on
record, and the total index value of mega DDL filings was the third
highest on record.
- For the second year in a row, the number of core federal
filings in the Ninth Circuit (69) exceeded those in the Second
Circuit (64). The number of core federal filings in the Ninth
Circuit was relatively flat compared to 2023, but the number of
core federal filings in the Second Circuit increased from 49 to
64.
- The share of core federal filings with Rule 10b-5 claims rose to the highest level in more
than five years.
About Cornerstone Research
Cornerstone
Research provides economic and financial consulting and expert
testimony in all phases of complex disputes and regulatory
investigations. The firm works with an extensive network of
prominent academics and industry practitioners to identify the
best-qualified expert for each assignment. With a reputation for
high quality and effectiveness, Cornerstone Research has
consistently delivered rigorous, state-of-the-art analysis since
1989. The firm has more than 1,000 professionals in nine offices
across the United States, UK, and
EU.
About the Stanford Law School Securities Class Action
Clearinghouse
The Securities Class Action Clearinghouse is
an authoritative source of data and analysis on the financial and
economic characteristics of federal securities fraud class action litigation. The SCAC maintains a
database of more than 6,500 securities class action lawsuits filed
since the passage of the Private Securities Litigation Reform Act
of 1995. The database also contains copies of complaints, briefs,
filings, and other litigation-related materials filed in these
cases.
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SOURCE Cornerstone Research
