Class action lawsuits

While the number of federal securities fraud class actions filed in 2004 increased only moderately from 2003 levels, rising to 212 companies sued from 181, the decline in stock market capitalisation corresponding to these actions increased dramatically, according to a report by the Stanford Law

School Securities Class Action Clearinghouse in cooperation with Cornerstone Research.

The total decline in the market capitalization of the defendant firms from the trading day just before the end of the class period to the trading day immediately after the end of the class period, or the “Disclosure Dollar Loss (DDL),” nearly tripled from $58 billion in 2003 to $169 billion for cases filed in 2004.

This 192 percent increase in the DDL index is attributable entirely to eight filings, in which each defendant firm experienced disclosure dollar losses in excess of $5 billion. In sharp contrast, there was only one filing with losses that large in all of 2003.

The full report is at http://securities.stanford.edu/