Our team analyzes public company disclosures for over 4,500 public companies and summarizes that information in an easy-to-use report.Beyond creating company reports, our data can be used to analyze general trends and provide insight into many aspects the public company marketplace. Two members of our team, Joseph Burke PhD and Joseph Yarbrough, PhD, have analyzed our data to delve deeper into the risk that companies face from securities class action lawsuits and published their findings on Google Scholar.
There are different facets to their research (last week we posted about six leading indicators of litigation), their analysis includes a comparison the relative exposure to security class action suits for public companies by industry.
In this post we are updating that research to include results from 2019, when 8.2% of companies traded on the Nasdaq or NYSE were defendants in a securities class action suit. Industry classifications are based on NAICS codes.
5. Manufacturing Companies
This segment is composed of companies like Kraft Heinz, Pfizer and Tesla.
Companies classified as manufacturing companies made up the largest segment of all public companies traded on the Nasdaq and NYSE in 2019 at 38%. Manufacturing companies also had a 9% chance of being named a defendant in a securities class action suit in 2019, 10% more likely than the average company. About 40% of the defendants in this category were pharmaceutical or biotechnology companies.
4. Construction Companies
This is one of the smaller segments, with only 70 companies in 2019, they comprise about 1% of the market. In 2019, construction companies had a 10% chance of being named a defendant in 2019, about 22% more likely than the average company.
3. Information Companies
Companies like Netflix, AT&T, and Slack Technologies
Information companies had a 10.3% chance of being the defendant in a securities class action for 2019. That means if you had a client in the information industry, they were 25% more likely than the average company to be named as a defendant in a class action securities litigation.
2. Education and Healthcare Companies
This relatively small industry only accounts for 2% of all public companies traded on the Nasdaq and NYSE, but 10.9% of them were named as defendants in securities class action lawsuits in 2019. Education and Healthcare companies were 33% more likely to be named as a defendant than the average company.
1. Retail Companies
This category is comprised of companies like Wayfair, Barnes & Noble, and Sotheby’s.
Companies classified as retail comprise 4% of the market and are the most likely to be named as a defendant in a securities class action lawsuit at 13.9%. Retail companies are 69% more likely than the average company to be subject to a securities class action lawsuit, making retail the riskiest industry for securities class action litigation in 2019.
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