Our Mission
To deliver independent and high-quality public company risk management data analytics solutions to protect Directors & Officers by enhancing transparency in the securities class action arena
Securities Analytics Research
SAR is the leading data analytics company specialized in the securities litigation risk of public companies that trade on the NYSE or NASDAQ.
Our goal is to harmonize the application of event study analysis across the risk management industry by following the standards adopted by the Federal Judiciary and developed in academia to optimize executive and financial risk-transfer solutions through responsible innovation in technology and data science.
Our organization is focused on the proactive and uniform application of the court-accepted event study methodology to identify securities litigation risks more accurately and quantify the corresponding economic impact on the market capitalization of U.S.listed companies. SAR delivers value through transparency by proactively monitoring corporate disclosures of U.S. and non-U.S. issuers to detect Adverse Corporate Events℠ that have a material impact on stock price performance.
Our company empowers leading multinational insurance carriers, re-insurers, risk management executives, legal counsel and investment professionals with proven securities litigation risk analytics and high-quality data licensing solutions. We have high standards of raw data requirements and quality control to ensure the tried-and-true technologies of the SAR Platform℠ deliver superior data-driven advantages to better protect corporate directors and officers of companies that choose to trade in American stock exchanges — the gold standard.
Our analytics solutions apply highly specialized data science to identify and quantify the securities litigation risks that corporate directors and officers of public companies may face from company-specific disclosures that materially impact an issuer’s stock price performance. SAR maintains two comprehensive industry-leading databases that comprise the knowledge bank of the SAR Platform℠ The ACE Database℠ catalogues stock price performance data on all corporate disclosures that are disseminated via corporate press releases or announcements and filings made with the Securities and Exchange Commission. The SCA Database℠ catalogues stock price performance data on all corporate disclosures that are claimed to be fraud-related by investor plaintiffs in private securities-fraud litigation Documented standard operating procedures and assigned process owners in both data science and software engineering ensure that SAR remains at the fore-front of responsible technological innovation backed by human accountability to deliver unmatched insights on the securities litigation risks facing directors and officers of public companies
We invite you to learn more about SAR by taking the time to read our industry-leading thought leadership at sarlit.com/thought-leadership.
U.S. Securities Litigation Risk Report – Inaugural Edition
An Independent Report. SAR brings measurable value to key stakeholders at the nexus of commercial insurance and the capital markets. Our value comes from applying the court-accepted event study methodology to enhance transparency of corporate disclosures to quantify the economic impact on the price of issuers’ common stock. After six years of independent research and development, this report presents SAR’s long-awaited results on our analysis of all corporate disclosures made by issuers via public statements, press releases, earnings calls and filings made with the Securities and Exchange Commission to identify and categorize Adverse Corporate Events℠ (“ACEs”) that have a material impact on stock price performance. The sample of High-Risk ACEs for any single issuer comprises the corporate disclosures that have the highest likelihood of being investigated or claimed to be rectifying previously materially misleading or omitted information that when disclosed, caused a materially negative impact on the price of common stock.
The analytical tabulations presented herein provide dedicated practitioners with robust analytical transparency on the frequency and severity of ACEs to identify dispositive corporate disclosure trends that increase the likelihood of private securities-fraud litigation or enforcement actions brought by the SEC against corporate directors and officers of companies listed on the NYSE or NASDAQ. Analytical results on disclosure-specific information are based on close-to-close stock price performance relative to the general market and industry sector factors. SAR provides unique and factual data-driven insights on how equity investors react to company-specific disclosures. Our semi-annual publication of this data will provide industry-leading practitioners with stock price performance trends based on the frequency and severity of the observed ACEs to enhance the profitability of their mission.
Adverse Corporate Events℠ (“ACEs”). SAR categorizes ACEs that have materialized during a standard two-year period prior to the evaluation date into three (3) mutually exclusive categories based on the application of event study analysis to test stock price performance of all corporate disclosures for any single issuer. All ACEs identified by SAR exhibit a close-to-close stock price decline that is statistically significant at the 95% confidence standard after accounting for the economic impact of the S&P 500 Total Return Index and an appropriate industry sector index based on the target company’s Global Industry Classification Standard (“GICS”).
TYPE I ACE:
• Stock price fell by a statistically significant amount at the 95% confidence standard over the close-to-close event window impacted by company-specific news.
• Company issues a public statement via a press release, or a representative discloses information at a press event or earnings call
TYPE II ACE:
• Stock price fell by a statistically significant amount at the 95% confidence standard over the close-to-close event window impacted by company-specific news.
• Company made filings with the Securities and Exchange Commission (“SEC”), and no other relevant company news was identified.
HIGH-RISK ACE:
• Stock price fell by a statistically significant amount at the 95% confidence standard over the close-to-close event window impacted by company-specific news.
• Company issues a public statement via a press release, or a representative discloses information at a press event or earnings call.
• Company made filings with the SEC.
U.S. Securities Litigation Risk Quantification. SAR quantifies the potential securities litigation risk of an issuer according to the frequency and severity of High-Risk ACEs. The estimate is equal to an issuer’s cumulative market capitalization losses on all High-Risk ACEs identified during the corresponding two-year evaluation period.
The quantification of securities litigation risk presented herein is based on the economic impact of a public company’s corporate disclosures on the price of common stock traded in the NYSE or NASDAQ and does not constitute potential litigation exposure, aggregate damages, or liability that may be claimed by private investor plaintiffs or regulatory agencies that may file securities claims or actions against the issuer or individual defendants.
SAR Risk Score℠. The SAR Risk Score℠ is a proprietary score assigned to every public company listed on the NYSE or NASDAQ according to the frequency and severity of ACEs during a two-year period from the designated evaluation date. The SAR Risk Score℠ is equal to the market capitalization losses observed on High-Risk ACEs divided by the issuer’s market capitalization as of the preceding trading day. For example, company ABC, Inc.’s market capitalization is $500 million. SAR identified three High Risk ACEs during the preceding two years that amounted to $100 million in market capitalization losses. The SAR Risk Score℠ for ABC, Inc. is 20%. SAR caps risk scores at 100% for issuers whose market capitalization losses on High-Risk ACEs exceed the company’s current market capitalization.
Analytical Tabulation. The report presents tabulated summary analytics on three types of ACEs for eleven (11) industry sectors based on the GICS classification system for Large Cap, Mid Cap, and Small Cap companies according to the historical comporting market capitalization range of the S&P 500 Index for Large Caps, the S&P MidCap 400 Index for Mid Caps, and the S&P Small Cap 600 Index for Small Caps.
All data and analysis presented herein is based on corporate disclosures disseminated to investors between the close of trading on September 13, 2022 and September 13, 2024.
Our Executive Leadership and Board of Directors thanks you for taking the time to read this research report which has been made publicly available and complimentary for this inaugural edition.
U.S. Securities Litigation Risk of Public Companies
The securities litigation risk of U.S. public companies is driven by the frequency and severity of Adverse Corporate Events℠ (“ACEs”) from corporate disclosures disseminated over the preceding two years and each had a material impact on stock price performance during the corresponding trading day.
Frequency: Number of High-Risk ACEs
The frequency of ACEs is measured by tracking the occurrence of Type I, Type II and High-Risk ACEs over a two-year retroactive period from September 13, 2024. The data indicate that Type II ACEs exhibit the lowest frequency of ACEs, while High-Risk ACEs exhibited the highest.
The data and analysis indicate that stock price performance is materially impacted with greater frequency in response to issuers’ corporate disclosures that include corporate statements and filings made with the SEC.
The top three sectors with the highest average number of High-Risk ACEs are Industrials, Information Technology and Consumer Discretionary. The maximum number of High Risk ACEs per issuer ranges between six and 22 among the sectors. While no issuer in the Real Estate sector had more than six High-Risk ACES, the maximum number of High-Risk ACEs in Industrials topped the charts with over 22. Six of the 11 sectors averaged at least 2 High-Risk ACEs. None of the sectors averaged fewer than 1.5 High-Risk ACEs during the two-year period.
Out of the 11 sectors, the Large Cap Sector Category demonstrated the highest average frequency of High-Risk ACEs 45% of the time. Similarly, Small Cap companies had the lowest average frequency of High-Risk ACEs in six out of 11 (55%) sectors.
Figure 1b: Sector-specific Market Capitalization Losses per High-Risk ACE
Figure 1a: Sector-specific Market Capitalization Losses on All High-Risk ACEs
$8.9 Trillion
Total
Severity: Market Capitalization Losses on High-Risk ACEs
The magnitude of severity is measured by the cumulative market capitalization declines observed during the close-to-close event windows on HighRisk ACEs during the preceding two years. Figure 1a ranks the eleven sectors according to the magnitude of market capitalization losses on trading days impacted by all observed High-Risk ACEs. At approximately $2.0 trillion in market capitalization losses, issuers in the Information Technology sector exhibit the highest level of sector-specific market cap losses, comprising 22.5% of the $8.9 trillion of all issuers. Consumer Discretionary and Financials exhibited the second and third greatest amount of market capitalization losses, respectively.
Figure 1b shows the market capitalization losses per High-Risk ACE. Real Estate exhibited the lowest market capitalization losses per High-Risk ACE at $0.20 billion. Communication Services displays the greatest amount of market capitalization losses per High-Risk ACE at $2.13 billion. Consumer Discretionary and Information Technology are in the Top 3 in both Figures 1a and 1b. Health Care, on the other hand, has a greater magnitude of sector-wide securities litigation risk, but is the second-to-least riskiest according to market capitalization losses per High-Risk ACE. This dynamic is due in part to the high frequency of High-Risk ACEs that Small Caps present in the Health Care sector.
The SAR Risk Score℠ is derived by accounting for both drivers that impact the securities litigation risk profile of U.S. and non-U.S. issuers that trade on the NYSE or NASDAQ. Table 1 on the following page presents the Median SAR Risk Score℠ per Industry Sector. The SAR Risk Score℠ is a ratio of the cumulative market capitalization losses of High-Risk ACEs during the preceding two years, relative to the issuer’s market capitalization on the preceding trading day from the applied evaluation date.
Figure 1c below ranks each industry sector by applying the same ratio to all constituent companies. The range spans from 7.71% (Utilities) to 20.46% (Consumer Discretionary). This ratio highlights a sector’s magnitude of the potential materialization of securities litigation risk by accounting for the cumulative material impact on stock price performance when constituent companies issued corporate statements and filed documents with the SEC.
Figure 1c: Sector-specific Ranking by U.S. Securities Litigation Risk
All Industry Sectors
U.S. Securities Litigation Risk
Key Takeaways
• The market capitalization losses on High-Risk Adverse Corporate Events℠ (“ACEs”) over the two-year evaluation period amount to $8.9 trillion across all industry sectors.
• Information Technology exhibits the highest median SAR Risk Score℠ at 26.34%. This is 21.52 percentage points greater than Utilities, which had the lowest median SAR Risk Score℠
• Type II ACEs exhibit the lowest frequency of ACE categories, while High-Risk ACEs displayed the most prevalence.
• Among Large Caps, Communication Services exhibited the greatest market capitalization losses per High-Risk ACE at $7.37 billion. Among Small Caps, Utilities exhibited the greatest amount with $90 million per stock drop. Table 1: Market
SAR analyzes the actively trading common stock and ADR issuances of every public company on the NYSE or NASDAQ with sufficient data to perform a robust event study analysis that applies court-accepted statistical standards using a uniform two-year evaluation period and assigns a SAR Risk Score℠. This column displays the number of analyzed issuers in each industry sector.
[3] Adverse Corporate Events℠ (“ACEs”) are statistically significant negative single-trading day stock price movements corresponding to company-specific news identified by SAR. There are three types of ACEs. Type I are company-originating news that do not include regulatory filings (i.e., press releases, earnings calls, corporate statements.) Type II relate to corporate disclosures made via filings with the SEC. High-Risk are both company-originating news and regulatory filings made with the SEC.
[4] The average number of Type I ACEs identified among the sector.
[5] The average number of Type II ACEs identified among the sector.
[6] The average number of High-Risk ACEs identified among the sector.
[7] The cumulative quantum of market capitalization losses on identified High-Risk ACEs for issuers during the preceding two years from September 13, 2024.
[8] The median ratio of market capitalization losses on identified High-Risk ACEs to the respective issuances’ market capitalization as of the close of trading on September 13, 2024.
Capitalization Losses by Industry
U.S. Securities Litigation Risk
Sector Market Capitalization Losses Amount to $333.89 Billion
Key Takeaways
• The median SAR Risk Score℠ of 212 constituent companies in Energy sector is 8.97%. The Large, Mid, and Small Cap Median SAR Risk Scores℠ are 6.18%, 7.31%, and 15.23%, respectively.
• The sector exhibits the lowest frequency of High-Risk ACEs with, on average, about 1.5 per constituent company during the preceding two-year period.
• Energy is one of only two sectors where Small Caps exhibit a higher frequency of High-Risk ACEs relative to Mid and Large Caps.
• Energy accounts for only 3.8% of aggregate market cap losses but exhibits the fourth greatest magnitude per High-Risk ACE at $1.05 billion, on average.
Table 2: Energy — Market Capitalization Losses by Market Cap Category
Figure 2a: Sector-specific Frequency of ACEs
Figure 2b: Total
U.S. Securities Litigation Risk
Key Takeaways
• The median SAR Risk Score℠ of 222 constituent companies in Materials is 12.89%. The Large, Mid, and Small Cap Median SAR Risk Scores℠ are 8.61%, 11.42%, and 22.70%, respectively.
• Across the three market cap categories within the sector, the frequency of High-Risk ACEs is, on average, about 2 per constituent company.
• Materials exhibits the third lowest magnitude per High-Risk ACE at an average of $0.54 billion in market cap losses during the preceding two years. The sector is also the third lowest contributor of aggregate market cap losses at approx. $235 billion, or 2.64% of the aggregate.
Table 3: Materials — Market Capitalization Losses by Market Cap Category
Figure 3a: Sector-specific Frequency of ACEs
Figure 3b: Total Sector-specific ACEs by Market Cap
U.S. Securities Litigation Risk
Key Takeaways
• The median SAR Risk Score℠ of 645 constituent companies in Industrials is 16.82%. The Large, Mid, and Small Cap Median SAR Risk Scores℠ are 12.28%, 17.16%, and 25.86%, respectively.
• The sector exhibits the greatest frequency of High-Risk ACEs with, on average, about 2.39 per constituent company. From a severity perspective, Industrials display the fourth lowest market cap losses per High-Risk ACE with, on average, $0.59 billion.
• On average, the sector exhibits the third highest average frequency of ACEs relative to all sectors, with Health Care taking the lead.
Table 4: Industrials — Market Capitalization Losses by Market Cap Category
Figure 4a: Sector-specific Frequency of ACEs
Figure 4b: Total Sector-specific ACEs by Market Cap
Market Capitalization Losses Amount to $1,506.78 Billion
Key Takeaways
• The median SAR Risk Score℠ of 552 constituent companies in Consumer Discretionary is 23.18%. The Large, Mid, and Small Cap Median SAR Risk Scores℠ are 15.29%, 19.36%, and 34.23%, respectively.
• The fairly high frequency of High-Risk ACEs in this sector, with approximately 2.23 events per constituent company, is the contributing driver of approximately $1.50 trillion in market cap losses. This is the second greatest amount relative to all sectors at about 17% of $8.9 trillion.
• Consumer Discretionary exhibits the third highest market cap losses per High-Risk ACE ranking third based on the magnitude per stock drop.
Figure 5a: Sector-specific Frequency of ACEs
Figure 5b: Total Sector-specific ACEs by Market Cap
U.S. Securities Litigation Risk
Key Takeaways
• The median SAR Risk Score℠ of 199 constituent companies in Consumer Staples is 12.87%. The Large, Mid, and Small Cap Median SAR Risk Scores℠ are 8.03%, 11.86%, and 27.18%, respectively.
• Consumer Staples has the second and third lowest average number of Type II and Type I ACEs, respectively.
• The difference in aggregate market cap losses on High-Risk ACEs between Mid and Small Caps is the third lowest at $2.69 billion relative to all other sectors.
Table 6: Consumer Staples — Market Capitalization Losses by Market Cap Category
Figure 6a: Sector-specific Frequency of ACEs
Figure 6b: Total Sector-specific ACEs by Market Cap
U.S. Securities Litigation Risk
Sector Market Capitalization Losses Amount to $1,143.88 Billion Health Care
Key Takeaways
• The median SAR Risk Score℠ of 1,091 constituent companies in Health is 25.00%. The Large, Mid, and Small Caps Median SAR Risk Scores℠ are 13.37%, 20.81%, and 34.36%, respectively.
• Healthcare issuers exhibit market cap losses of less than $0.50 billion per High-Risk ACE However, due to the large sample of sector-specific issuers (23.4% of total public companies) and frequency that exceeds over two High-Risk ACEs, Health Care is the fourth greatest contributor of market cap losses of approx. $1.14 trillion, or 13% of the aggregate quantum.
• Small Caps in the Health Sector have the highest number of ACEs compared to all other Market Cap-based Sector Categories. It exceeds the second highest (Small Caps – Industrials) by more than 2,000 ACEs
7: Health Care — Market Capitalization Losses by Market Cap Category
Figure 7a:
U.S. Securities Litigation Risk
Sector Market Capitalization Losses Amount to $1,160.69 Billion
Key Takeaways
• The median SAR Risk Score℠ of 736 constituent companies in Financials is 9.47%. The Large, Mid, and Small Caps Median SAR Risk Scores℠ are 11.40%, 13.09%, and 7.16%, respectively.
• Financials exhibits the second greatest average frequency of Type II ACEs per constituent company. The data indicate that investors respond more actively to corporate disclosures made via filings with the SEC in the Financials sector.
• The difference in market cap losses on High-Risk ACEs between Mid and Small Caps is the largest at $25.38 billion relative to all other sectors.
Figure 8a: Sector-specific Frequency of ACEs
Figure 8b: Total
U.S. Securities Litigation Risk
Market Capitalization Losses Amount to $1,998.79 Billion
Key Takeaways
• The median SAR Risk Score℠ of 619 constituent companies in Information Technology is 26.34%. The Large, Mid, and Small Caps Median SAR Risk Scores℠ are 16.32%, 28.01%, and 36.48%, respectively.
• Information Technology companies have the greatest contribution of market cap losses on High-Risk ACEs relative to all sectors, at approximately $2.0 trillion, or 22.5% of the total quantum of $8.9 trillion.
• The sector exhibits the second highest frequency of High-Risk ACEs with, on average, about 2.36 per constituent company. Information Technology companies also exhibit the second greatest average magnitude of market cap losses per High-Risk ACE, at approximately $1.37.
Figure 9a: Sector-specific Frequency of ACEs
Figure 9b:
U.S. Securities Litigation Risk
Key Takeaways
• The median SAR Risk Score℠ of 248 constituent companies in Communication Services is 18.36%. The Large, Mid, and Small Caps Median SAR Risk Scores℠ are 13.41%, 27.70%, and 23.06%, respectively.
• The sector exhibits the second highest average frequency of Type I ACEs with, on average, about 1.80 events per constituent company.
• Communication Services exhibits the greatest market cap losses per High-Risk ACE at an average of $2.13 billion. The stock drop declines per High-Risk ACEs for Communication Service companies exceed the second ranked Information Technology sector by $0.77 billion.
Table 10: Communication Services — Market Capitalization Losses by Market Cap Category
Figure 10a: Sector-specific Frequency of ACEs
Figure 10b: Total Sector-specific ACEs by Market Cap
U.S. Securities Litigation Risk
Key Takeaways
• The median SAR Risk Score℠ of 86 constituent companies in Utilities is 4.82%. The Large, Mid, and Small Caps Median SAR Risk Scores℠ are 4.55%, 4.33%, and 10.92%, respectively.
• Utilities is the only sector where Large Caps companies have more total Adverse Corporate Events℠ than Small and Mid Caps.
• Market cap losses per High-Risk ACEs for Mid and Large Caps exhibit the smallest and second smallest dollar impact among the sector’s market cap categories at $0.14 billion and $1.05 billion, respectively.
Table 11: Utilities — Market Capitalization Losses by Market Cap Category
Figure 11a: Sector-specific Frequency of ACEs
Figure 11b: Total Sector-specific
U.S. Securities Litigation Risk
Key Takeaways
• The median SAR Risk Score℠ of 51 constituent companies in Real Estate is 8.11%. The Large, Mid, and Small Caps Median SAR Risk Scores℠ are 7.69%, 19.08%, and 5.36%, respectively.
• The sector exhibits the third highest average frequency of Type II ACEs with, on average, about 0.76 events per constituent company.
• Market cap losses per High-Risk ACEs for Large Caps exhibit the smallest dollar impact at $0.93 billion relative to the other sectors.
Table 12: Real Estate— Market Capitalization Losses by Market Cap Category
Figure 12a: Sector-specific Frequency of ACEs
Figure 12b: Total Sector-specific ACEs by Market Cap
This independent research report presents SAR’s quantification of the securities litigation risks of U.S. and non-U.S. issuers that trade on the NYSE or NASDAQ based on the proactive and uniform application of the court-accepted event study methodology. SAR continuously tests stock price performance over the corresponding close-to-close event window in response to corporate disclosures disseminated by issuers to more accurately identify Adverse Corporate EventsSM (“ACEs”) categorized according to the issuers’ applied corporate disclosure mechanism. All content published by SAR and presented in this report is based on securities analytics and research performed by professionals employed by the organization. SAR does not rely on any machine learning (ML) or artificial intelligence (AI) to produce the quantitative and statistical analyses presented herein or via the SAR PlatformSM and ACE AlertSM subscription service. SAR actively maintains two highly comprehensive databases that archive and categorize all ACEs of U.S. and non-U.S. issuers in addition to all alleged corporate disclosures that are claimed to be fraud-related by investor plaintiffs in private securities-fraud class action litigation. SAR ranks all public companies that trade on the NYSE or NASDAQ according the SAR Risk ScoreSM on a quarterly basis and publishes summarized analytical tabulations and trends on a semi-annual basis.
Securities litigation risks for observed ACEs identified by SAR may or may not materialize into actual securities claims brought by allegedly harmed shareholders in common stock of the defendant issuers against the corporate directors and officers or the corresponding securities offering underwriters. Securities claims may include, but are not limited to, securities class actions whereby investor plaintiffs allege violations of the federal securities laws under Section 11, Section 12(a)(2), and Section 15 of the Securities Act of 1933 (“Securities Act”), and under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder (“Exchange Act”). Securities litigation risks may also materialize from enforcement actions filed in federal court by the SEC for alleged violations of the antifraud provisions of the securities laws of the Exchange Act, Securities Act, or the Investment Advisors Act of 1940. The economic impact of securities litigation risks presented in this informational risk management research report amounts to the cumulative market capitalization declines over close-to-close event windows on High-Risk ACEs identified by SAR’s application of the court-accepted event study methodology.
SAR Risk Report Event Study Application Disclosure
The results of the analyses presented in this report apply the use of a court-accepted event study methodology to identify ACEs ACEs are identified by estimating statistically significant, single-trading day negative stock price movements that coincide with companyspecific news. For each analyzed issuance, statistically significant price movements are detected by applying the results of a singlefirm control regression with a minimum of 100 trading day observations and controls for general market and industry-specific factors. The general market factor in all cases is represented by the S&P 500 Total Return index. The industry-specific factors are represented by indices that correspond to the analyzed company’s GICS classification. The applied event study methodology is performed post close of trading on the issues of public companies that trade on the NYSE or NASDAQ over a two-year retroactive evaluation period from the applied evaluation date and to test stock price performance in response to all company-specific corporate disclosures. Economic estimates by SAR are only estimates or projections, and actual results may vary, and may vary substantially, from those estimates or projections, which are based on many variables, assumptions, and forecasts, many of which are beyond the control of SAR and any of which may present differences with estimates that are quantified using different techniques that may or may not be submitted by officers of court for review by the Federal Judiciary. No fraud or wrongdoing of any kind is alleged or implied by any such results derived by SAR and presented in this informational risk management research report.
Sources: SAR ACE DatabaseSM as of September 13, 2024, FINRA, Securities and Exchange Commission, S&P Global Market Intelligence, S&P Down Jones Indices.
How to Reach Us.
For any technical inquiries contact Stephen Sigrist, Senior Vice President of Data Science.
Stephen Sigrist
Senior Vice President
202.891.3652 stephen@sarlit.com
Rolando Hernandez
Senior Analyst
202.436.9994 rolando@sarlit.com
To learn more how SAR can help your organization deliver superior executive and financial risk transfer solutions please contact Anthony Kabanek.
Anthony Kabanek
Executive Vice President
202.436.9994 anthony@sarlit.com