What is the probability that the lawsuit will result in a restatement of past earnings or financial disclosures?
Probability assessment
The filing is a typical securities‑class‑action that alleges material misstatements in the company’s public disclosures. In the absence of any concrete evidence that SelectQuote’s accounting or reporting practices were flawed, the odds that the case will force a formal restatement of past earnings or other SEC filings are modest. Historically, only a minority of shareholder suits (≈ 15‑30 %) lead to a restatement; the rest are resolved through settlements, dismissals, or a court‑ordered “no‑cause” judgment. Given the limited factual basis presented in the press release and the fact that the complaint covers a broad period (Sept 2020 – May 2025) rather than a specific quarter, we would place the probability of a restatement in the 20‑25 % range.
Trading implications
- Short‑term risk: The market will likely price in the legal‑risk premium immediately, pushing SLQT’s stock down 3‑5 % on the news. The move is more about uncertainty than an imminent restatement, so the downside is limited.
- Positioning: For a trader with a neutral‑to‑bullish view on SelectQuote’s fundamentals (growing Medicare‑Advantage broker business, solid cash‑flow generation), a tight‑‑‑stop‑‑‑sell on the short‑term dip can capture the risk‑discount. If the case proceeds to a settlement without a restatement, the stock should rebound to its pre‑news level.
- Long‑term outlook: Until the case produces a material accounting correction, the company’s earnings trajectory remains unchanged. Therefore, the primary actionable signal is a short‑term defensive tilt rather than a full‑scale bearish stance.