A record pace of shareholder class action filings continued during the first half of 2018—and the cases are getting much bigger, according to a midyear report released today.

The report, by Cornerstone Research and Stanford Law School's Securities Class Action Clearinghouse, found 204 filings so far this year. That's on pace to match last year's record total of 412—the highest number of cases filed since 2008.

But, unlike in 2017, the potential dollar value of the cases grew significantly, driven by several mega-filings, which are those seeking at least $5 billion.

Credit: Cornerstone Research and Stanford Law School's Securities Class Action Clearinghouse

“We still have very high volume of traditional cases, and these traditional cases are now getting larger in terms of dollars,” said Sasha Aganin, vice president of Cornerstone Research. “We have some mega-filings, which were relatively rare in the previous couple of cycles, so we're now back to the situation where large cases, or giant cases, reflect a large portion of dollar losses that we are measuring.”

According to the report, the maximum dollar loss, which calculates the total market capitalization decrease during the entire class period, totaled $643 billion in the first half of 2018—the highest semiannual level since the second half of 2002. And the disclosure dollar loss—the value of the market capitalization decrease at the time the alleged misstatements were disclosed—was 162 percent higher than the historical aggregate average of $157 billion.

The report didn't cite specific cases, but one of the biggest shareholder lawsuits filed this year, for example, was against Facebook Inc. following the Cambridge Analytica scandal.

The jump in dollar value is anticipated to continue, Aganin said, particularly as some experts predict a market correction in the second half of 2018. The filings also could lead to larger settlement values, which reached historic lows in 2017, he said.

Filings over mergers and acquisitions continued to play a lead role in the increase, although their numbers dipped slightly this year. Core filings, which include cases brought when a stock price drops, jumped 28 percent from the second half of 2017, the report said.

The report didn't mention the plaintiffs firms filing the cases so far this year. But Aganin said that the same three law firms that drove last year's growth—The Rosen Law Firm and Pomerantz, both in New York, and Los Angeles-based Glancy Prongay & Murray—are “very active” in this year's filings.

Credit: Cornerstone Research and Stanford Law School's Securities Class Action Clearinghouse

The data shows that companies are more likely to face a shareholder class action than ever before. The report anticipated that, as in 2017, shareholders could end up suing 8.5 percent of companies listed on the Nasdaq or New York Stock Exchange this year. That's well above the historic average of 2.9 percent.

“The costs of shareholder litigation are rising,” Aganin said. “There is a high chance a typical company would be sued in a shareholder case, either over an M&A transaction or because of a stock price drop.”

What remains unclear is the impact of the U.S. Supreme Court's March 20 ruling in Cyan v. Beaver County Employees Retirement Fund, which allowed plaintiffs to bring claims in state courts under Section 11 of the Securities Act of 1933. Filings had dropped prior to the ruling, but Aganin predicted that cases in state courts would be “more likely” during the second half of this year.

Also unclear is the prevalence of shareholder class actions brought over initial coin offerings or other cryptocurrencies. In 2017, there were five such cases; so far this year, there were seven. But the U.S. Securities and Exchange Commission is considering potential regulation.

“The attractiveness of bringing a lawsuit related to underlying cryptocurrencies in federal court will depend to a large degree on what the SEC develops as its framework,” Aganin said.