What are the possible financial liabilities or settlement costs for SelectQuote if the class action proceeds?
Possible liabilities & settlement exposure
A securities‑fraud class action of this scope typically results in a cash settlement that ranges from 5 % to 15 % of the target’s market capitalization at the time the suit is filed, depending on the size of the alleged loss pool, the strength of the plaintiffs’ claims, and the company’s balance‑sheet capacity. SelectQuote’s current market cap hovers around $300 million (as of the latest NYSE quotation). By that rule‑of‑thumb, an out‑of‑court settlement could cost $15 million–$45 million in cash or equity. In many recent fintech‑related cases, companies have also been required to set aside a “settlement reserve” equal to the estimated exposure plus legal fees (often an additional 20‑30 % of the cash figure). Consequently, investors should be prepared for a potential $20 million–$60 million hit to the company’s equity or cash resources, either through a direct payout, a reverse split, or issuance of new shares to fund the settlement.
Trading implications
The market is already pricing in litigation risk, reflected in the steep negative sentiment (‑70) and a 30 %‑35 % discount to the 12‑month average price. If the case proceeds to a settlement, the immediate cash‑outflow or dilution will likely pressure the stock 5‑10 % lower on the announcement, especially if the company must tap its $70 million cash balance and raise additional capital. However, if the settlement is negotiated at the low end of the range and the company can absorb the cost without impairing operations, the price could stabilize and even rebound once the uncertainty is removed. Traders could consider a short‑position or put‑spread to capture the downside risk ahead of any settlement filing, while keeping an eye on any early settlement talks that could trigger a rapid bounce. Monitoring the 13‑week moving average (currently providing support near $7.20) and volume spikes around earnings or court dates will help confirm whether the market is over‑reacting or under‑pricing the true liability exposure.