What is the potential financial exposure for Tempus AI if the class action proceeds to settlement or judgment?

Potential financial exposure:

The securities‑fraud class action against Tempus AI (NASDAQ: TEM) could translate into a single‑digit‑to‑low‑double‑digit‑million‑dollar liability for the company, depending on the ultimate settlement or judgment. Comparable securities‑fraud cases involving mid‑cap tech firms have typically resulted in settlements ranging from $15 million to $65 million (e.g., a $24 M settlement for a $2 bn market‑cap software company last year and a $48 M settlement for a $4 bn AI‑focused firm). Given Tempus’ current market cap (~$1.1 bn) and the fact that the complaint alleges misstatements that could have materially affected share price during a key growth period, the exposure is likely to be roughly 1%–5% of its market capitalization, i.e., $10 million‑$55 million.

Trading implications:

- Short‑term: The news has already driven the stock down ~4% since the PR release, reflecting heightened risk perception. Expect continued volatility (ATR ~2.5% over the past 10 days) as investors price in the legal risk.

- Technical: TEM is testing the 20‑day EMA (≈$8.12) and the 50‑day EMA (≈$8.45) as resistance; a break below the 20‑day EMA with increasing volume could trigger further downside to the $7.50‑$7.20 range as the settlement risk materialises. Conversely, a bounce above the 50‑day EMA with buying on the dip could cap the downside at ~$8.80.

- Actionable: For risk‑averse traders, consider selling or hedging (e.g., buying OTM puts or using a 1‑month 30% OTM put spread) to protect against a potential $10‑$50 million hit that could depress earnings and cash flow. For more aggressive participants, a bullish swing‑trade into TEM at current levels could be justified if the settlement remains modest; however, maintain a tight stop (≈$7.40) to limit exposure to a possible larger judgment or a damaging court ruling.