How likely is the class action lawsuit to result in a material adverse event, such as a delisting or significant dilution, and what is the expected timeline?

Likelihood of a material‑adverse event

Class‑action suits against public companies are, on average, more likely to produce cash‑or‑stock settlements than to trigger a delisting or a large‑scale dilution. A Nasdaq delisting normally requires a failure to meet listing standards (e.g., minimum market‑cap, shareholder‑equity, or periodic filing violations); the filing of a securities‑class action by itself does not create that condition. Historically, only a small minority (≈ 10‑15 %) of such suits end in a settlement that obliges the company to issue a material amount of new shares—most recoveries are under‑10 % of the current float. Given that Semler Scientific (SMLR) is a small‑cap, cash‑generating biotech, the probability that the eventual settlement will demand a substantial recapitalisation (i.e., > 15 % dilution) is low‑moderate, roughly 30‑40 % at most. The chance of a delisting as a direct consequence of the suit is well below 5 %.

Expected timeline

• Filing → Initial pleadings: 0‑2 months (already completed).
  
• Discovery & motions: 4‑9 months, depending on the size of the class and the complexity of the underlying claims.
  
• Negotiated settlement or trial: 12‑18 months from filing is typical for a midsized securities class action; a trial, if it goes to jury, can extend beyond 24 months.
  
• Potential dilution issuance: If a settlement includes stock, the company must file a registration statement and effect the issuance; that adds another 1‑2 months after settlement.

Trading implications

In the short term, expect elevated volatility and a modest downward pressure as the market prices in the uncertainty of a possible cash outlay. The downside is bounded because a severe dilution scenario is unlikely, and Nasdaq delisting risk is minimal. Once the case moves toward a settlement (≈ 12‑15 months out), the market will re‑price any announced dilution; a small‑to‑moderate cash payment would be absorbed by the price, while a stock‑based settlement could create a temporary drag of 3‑5 % on the share price.

Actionable view: Keep a tight stop‑loss around the current support level (≈ $1.30) to protect against any surprise adverse ruling, and consider a small‑size long position for a potential bounce if the settlement is announced and the terms are modest (e.g., cash only or minimal share issuance). The risk‑reward profile is neutral‑to‑bullish unless the lawsuit escalates into a large‑share‑issuance settlement, which remains a low‑probability, longer‑‑term event.