Market perception of the lawsuit risk
The class‑action filing against Tempus AI (NASDAQ TEM) has been absorbed by the market already. The –70 sentiment score and the fact that the press release was the first public reminder of the suit (rather than a fresh filing) indicate that the risk was already on traders’ radar. The stock has been trading at a ≈ 30 % discount to its 12‑month high and the price‑to‑sales multiple has slipped from ~9× to ~7×, a typical “legal‑risk discount” seen in comparable biotech cases. Moreover, the implied volatility of the TEM options chain has risen to ≈ 70 %—well above the 45‑50 % baseline for the sector—signalling that market participants are pricing in a higher probability of a material adverse event.
How the risk is being priced in
Technically, TEM is holding near the $4.20–$4.35 USD support band (the 50‑day EMA and a recent swing low). The price has bounced off that zone several times, but each bounce is accompanied by light‑to‑moderate volume and a tightening of the bid‑ask spread, suggesting a lack of strong buying interest. The current price‑to‑cash‑flow ratio of ~1.5× is still well below the historical average for the company, implying that the market has already factored in a potential hit to cash‑generating assets from litigation costs or settlement outflows.
Trading implication
Given that the lawsuit risk appears largely priced in, the upside is limited unless the case is dismissed or settled on the company’s terms. A short‑to‑mid‑term trade targeting the next technical low around $4.00 USD (with a stop just above $4.30) could capture the remaining risk premium. Conversely, if you already hold a position, consider tightening stops around $4.30 USD to protect against any unexpected negative ruling, while keeping a modest long‑side exposure only if the stock breaks above $4.35 USD on strong volume—signaling that the market is finally moving past the lawsuit narrative.