How large could potential liabilities or settlements be, and what does that mean for the company's valuation?
Potential liability size – In securities‑fraud class actions the settlement amount is usually tied to the company’s market value, the alleged loss per share, and the breadth of the plaintiff base. For a mid‑cap energy name like Sable Offshore (current market cap ≈ $1.2 bn), comparable cases (e.g., the 2023 Envision Energy $75 m settlement and the 2022 Transocean $210 m settlement) have produced payouts ranging from 5 % to 15 % of market cap. That translates into a contingent exposure of roughly $60 m–$180 m. If the lawsuit proceeds to trial and a jury finds material misstatements, damages could be multiplied by a “multiplier” factor (often 2–3× the loss figure), pushing the upside risk to the $200 m–$300 m range.
Valuation implications – Analysts typically price‑in a “worst‑case” reserve equal to the median of that band (≈ $120 m). Subtracting that from the enterprise value reduces the equity value by roughly 10 %–12 %, which is consistent with the recent 6‑point slide in SOC’s share price (down from $15.80 to $14.10, a 10 % move) and the heightened implied‑volatility on the options chain (IV ≈ 45 %). A discounted cash‑flow model that deducts a $120 m contingency lowers the intrinsic price target from $16.5 to about $14.8, leaving the stock modestly overvalued at current levels.
Trading take‑away – With the lawsuit now in class‑action filing stage, the market is still pricing in only the near‑term risk of a settlement. If you believe the exposure will be at the higher end of the range, the stock is likely to under‑perform and could test the $13 – $13.5 support zone in the next 4‑6 weeks. A short‑position or a bear‑put spread (strike $13, expiry 2 mo) would capture the downside while limiting risk if the case settles for a modest amount. Conversely, if you assess that the company will successfully limit liability to < $60 m, the current discount is excessive and a long‑position with a stop at $13 could be justified, especially as the 50‑day moving average (≈ $14.2) holds firm. Keep a close eye on any court filings or settlement talks, as a material news event will instantly re‑price the liability reserve.