One often hears that “whenever there is a stock drop, there will be a lawsuit.” This of course is an overstatement. But how much of an overstatement is it? In this post, we answer that question in some detail. We identify all net-of-market stock drops of specified sizes in 2017 for common shares listed on the New York Stock Exchange and the NASDAQ, and we determine what fraction of those stock drops led to securities class actions.[i] We then look at the distribution of net-of-market stock drops that led to lawsuits. We choose 2017 because it is long enough ago for nearly all potential lawsuits to have materialized,[ii] and recent enough to capture current practices among plaintiffs’ counsel in deciding to file lawsuits.
‘Enforcement 40’ for 2020
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