Are you prepared for a mega securities class action lawsuit? ISS Securities Class Action Services has released its list of the Top 100 U.S. Securities Class Action settlements. According to D&O Diary, out of the 136 court-approved settlements in 2024, four of them were big enough to make the list. The biggest securities class action settlements of 2024 have some important takeaways for business leaders who could face similar litigation.
What Were the Biggest Securities Class Action Settlements of 2024?
The four biggest class action settlements of 2024 were:
· Apple: $490 million
· Under Armour: $434 million
· Alphabet: $350 million
· Uber: $200 million
The Apple Settlement
According to Reuters, the lawsuit against Apple alleged that Chief Executive Tim Cook concealed information about falling demand for iPhones in China, thereby defrauding investors. The lawsuit stemmed from an unexpected announcement that Apple made in January 2019, when the company said it would cut its quarterly revenue forecast by as much as $9 million due to trade tensions between the U.S. and China. Just one year prior, when discussing countries where Apple faced sales pressure, Tim Cook had told investors that he “would not put China in that category.” A few days later, Apple told suppliers to curb production.
The Takeaway: Reuters notes that Apple’s share price has more than quadrupled since January 2019. This goes to show that even if a company is doing well and the stock value is increasing overall, misrepresentations can still result in costly litigation.
The Under Armour Settlement
According to CPA Practice Advisor, shareholders filed a lawsuit in 2017 alleging that they suffered significant losses due to false and misleading statements regarding the Under Armour’s sales and growth during a period of rapid expansion. The lawsuit claimed that the company failed to disclose that revenue and profit margins could not withstand market factors, including department store closures and heavy promotions, leading investors to believe that current growth would continue. According to D&O Diary, the lawsuit also accused the company of concealing declining sales volume.
The Takeaway: CPA Practice Advisor reports that Under Armour plans to use cash on hand and/or draw on revolving credit to cover the settlement. D&O Diary notes that D&O insurance is expected to fund only a small portion of the settlement, making it clear that securities litigation can impact a company beyond the limits of their D&O insurance.
The Alphabet Settlement
According to Reuters, the lawsuit accused Alphabet of concealing a security glitch in its now-defunct Google+ social media platform. Google allegedly learned about the software glitch that exposed users’ personal data in March 2018 but did not disclose the issue for several months while continuing to make public claims about its commitment to data security. Once the glitch became known, shares fell several times, leading to a loss of tens of billions of dollars in market value.
The Takeaway: Cybersecurity is a hot issue, and it can lead to D&O claims. In this case, a software glitch was behind the allegations. However, other data breaches could stem from different causes, including malware. Executives should pay attention to their company’s cybersecurity practices and to keep up with evolving state-level data breach notification requirements.
The Uber Settlement
According to Scott + Scott, the lawsuit alleged that Uber submitted false and misleading information in its 2019 IPO filings and failed to disclose information regarding passenger safety and stalling growth. Uber’s stock lost 42% of its value, going from around $45 per share at opening to around $25 per share, by November 2019.
The Takeaway: Trading View calls Uber’s IPO “one of the most anticipated events in the tech world.” The company was valued at around $82 billion amid widespread hype surrounding the ride-sharing model. However, shares fell by as much as 18% in the first week as Uber struggled to meet expectations after the IPO.
This goes to show that no company is immune from challenges. In fact, the more hyped a company is, the greater the risk. The officers and directors involved in a unicorn startup are understandably very excited about its prospects, but they should still take precautions and carefully check their D&O insurance policy structure and limits.
As a public company, are you protected against the risk of securities class action litigation? NSI Insurance Group can help. Request a complimentary D&O analysis and quote >
