What are the potential financial liabilities for RxSight if the class action proceeds to settlement or judgment?

Potential Financial Liabilities

If the securities‑class‑action against RxSight (NASDAQ RXST) proceeds to a settlement or judgment, the company could face several layers of financial exposure:

1. Cash Settlement/ damages – Depending on the size of the alleged loss, a typical securities‑class‑action settlement for a company of RxSight’s market cap (≈ $500 M‑$700 M as of August 2025) can range from $30 M to $150 M. The actual figure will depend on the size of the investor pool, the extent of alleged misrepresentations, and the court’s assessment of damages.

2. Legal and advisory fees – Plaintiffs’ counsel often receives a percentage of any award (often 30 %–35 %). In addition, the company must bear its own counsel and potential settlement‑administration costs, which can add another $5 M‑$10 M to the out‑of‑pocket expense.

3. Potential equity dilution – If RxSight’s cash reserves are insufficient to fund a cash settlement, the board may be forced to raise capital via a secondary offering or a debt issuance. A modest equity raise (e.g., 5‑10 % of outstanding shares) could dilute existing shareholders by 5 %‑12 %, further depressing the stock price.

Trading Implications

The pending litigation adds a material credit risk to the balance sheet and creates a “risk‑on” bias for short‑term traders. The market has already priced some downside—RXST’s price is down ~20 % since the filing—yet the uncertainty surrounding the settlement amount (and timing) creates heightened volatility risk (implied volatility ≈ 80 % in the 30‑day options). For risk‑averse investors, the prudent move is to reduce exposure: either trim long positions or hedge via protective puts (e.g., $4.00–$4.50 strikes for 30‑day expiry). Conversely, if you anticipate a negotiated settlement well below the maximum exposure range, a bull‑put spread (sell 4.00 puts, buy 3.50 puts) could capture premium while limiting downside to the put‑strike. Monitor any filings from the court (especially the lead‑plaintiff deadline on Sept 22) and any corporate disclosures on cash reserves, as a disclosed inability to fund a settlement could trigger a credit downgrade or a going‑concern warning, which would be a catalyst for a short‑sell rally.