Wednesday, November 29, 2006

Predicting Securities Class Actions - Part II

The Pre-Crime Unit, occasionally discussed by Bruce Carton over at the now defunct Securities Litigation Watch, appears to have grown some new legs.

The Corporate Library today announced that it had developed a ratings system to help predict the likelihood that a particular public company will face a securities class action within the next 18 months.

The analysis identifies six factors which, according to the press release
in combination with performance fundamentals such as share price volatility and leverage, provide a reliable tool for assessing the probability of [securities class actions].
The factors include:
  • Excessive CEO compensation;
  • Director age, tenure, over-commitment, and lack of independence;
  • Institutional share ownership;
  • Industry-specific risk;
  • Company size; and
  • Share trading volume
The group also released a report:
identifying the 75 most likely -- and 50 least likely -- public companies to face a Securities Class Action (SCA) lawsuit within the next 18 months.
The report was authored by Ric Marshall, chief analyst at The Corporate Library, and can be purchased from their online store, here, for $1,100.

An earlier Corporate Library report was discussed in this post, back in August.

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