What are out-of-pocket-losses in a securities class action lawsuit?

In a securities class action lawsuit, out-of-pocket losses refer to the financial losses incurred by individual investors as a result of purchasing securities that have been misrepresented or manipulated by a company. These losses typically occur when investors buy shares of a company's stock based on false or misleading information provided by the company or its executives. When the truth about a company's financial situation or business prospects is revealed and the stock price drops, investors who bought the stock at an inflated price suffer financial losses. These losses can be substantial and can include the amount paid to purchase the securities as well as any subsequent decline in the value of the investment.

Out-of-pocket losses are an important aspect of securities class action lawsuits because they form the basis for calculating damages that may be awarded to investors. In a class action lawsuit, individual investors who have suffered similar losses due to the same alleged misconduct join together to file a lawsuit against the company and any other parties responsible for the misrepresentation or manipulation. The purpose of the lawsuit is to seek compensation for the investors' losses.

To determine the amount of damages that should be awarded to the investors, the court typically looks at the difference between the price paid for the securities and their actual value after the truth is revealed in a corrective disclosure. This difference represents the out-of-pocket losses suffered by the investors. Other factors, such as any decline in the value of the investment after the truth is revealed, may also be taken into account when calculating damages.

It is important to note that in a securities class action lawsuit, investors do not need to prove that they relied on the false or misleading information directly. Instead, they can rely on a legal presumption that they relied on such information when making their investment decisions. This presumption exists because it would be impractical and burdensome for each investor to prove that they relied on the misrepresentation or manipulation.

Overall, out-of-pocket losses are a key component of securities class action lawsuits as they represent the financial harm suffered by investors due to fraudulent or deceptive practices. Seeking compensation for these losses through a class action lawsuit can provide investors with an opportunity to recover their investment and hold accountable those responsible for their financial losses.

​The Law Offices of Timothy L. Miles
Tapestry at Brentwood Town Center
​300 Centerview Dr., #247
Brentwood, TN 37027
Phone: (855) 846–6529
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timothy l. miles, esq.

Nashville attorney Timothy L. Miles is a nationally recognized shareholder rights attorney raised in Nashville, Tennessee. Mr. Miles has dedicated his career to representing shareholders, employees, and consumers in complex class-action litigation. Whether serving as lead, co-lead, or liaison counsel, Mr. Miles has helped recover hundreds of millions of dollars for defrauded investors,  shaped precedent-setting decisions, and delivered real corporate governance reforms. Judges and peers have repeatedly recognized Mr. Miles’ relentless advocacy for the underdog, as well as his unbendable ethical standards. Mr. Miles was recently selected by Martindale-Hubbell® and ALM as a 2022 Top Ranked Lawyer, 2022 Top Rated Litigator. and a 2022 Elite Lawyer of the South. Mr. Miles also maintains the AV Preeminent Rating by Martindale-Hubbell®, their highest rating for both legal ability and ethics. Mr. Miles is a member of the prestigious Top 100 Civil Plaintiff Trial Lawyers: The National Trial Lawyers Association,​Class Action:  Class Action: Top National Trial Lawyers, National Trial Lawyers Association (2023), a superb rated attorney by Avvo, a recipient of the Lifetime Achievement Award by Premier Lawyers of America (2019) and recognized as a Distinguished Lawyer, Recognizing Excellence in Securities Law, by Lawyers of Distinction (2019); a Top Rated Litigator by Martindale-Hubbell® and ALM  (2019-2022); America’s Most Honored Lawyers 2020 – Top 1% by America’s Most Honored (2020-2022).  Mr. Miles has published over sixty articles on various issues of the law, including class actions, whistleblower cases, products liability, civil procedure, derivative actions, corporate takeover litigation, corporate formation, mass torts, dangerous drugs, and more.  Please visit our website or call for free anytime.

CONTACT                                                      
The Law Offices of Timothy L. Miles
Tapestry at Brentwood Town Center
​300 Centerview Dr., #247
Brentwood, TN 37027
​​Phone: (855) 846-6529
​Email: [email protected]