The hidden value of securities class action merger cases
When it comes to securities class actions involving a merger case, it’s not always “what you see is what you get.” Merger cases are often affected by different rules than more traditional class action litigation, specifically how the plans of allocation are dictated in merger/acquisition cases. In addition to that, the way a firm’s data is perceived impacts their potential recovery from a filed claim. Custodians and prime brokers often identify and handle merger transactions differently. In many instances, tendered shares can be missing closing prices, and there are many inconsistencies in how merger transactions are recorded and maintained by custodial systems. It’s important to a firm’s recovery that positions are reconciled in order to match holdings records with the number of shares tendered on the date a merger takes place.
Without knowing the ins and outs of every case, it’s likely a firm could be missing opportunities for a recovery. Even investors that made money in the security (even multi-million dollar market gains) can still be eligible for a significant recovery in a merger case. This scenario is different than the majority of other securities litigation involving fraud or misrepresentation, for example. The reason for the difference is that a merger case recovery is driven by a firm’s eligible pro-rata shares, not by recognized loss, as it is in more standard fraud cases.
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