The first half of 2015 was an active period for new securities class action lawsuit filings. The filings through the year’s first six months suggest we are on pace for the highest annual number of new filings since 2011. The heightened levels of lawsuits involving non-U.S. companies and IPO companies contributed to the uptick in securities suit filings in the year’s first half.
A preliminary word about my counting methodology. My tally includes lawsuits alleging violations of the Securities Act of 1933 but that were filed in state court pursuant to the concurrent jurisdiction provisions of Section 22 of the Act. (For a more detailed discussion of the state court ’33 Act lawsuits filed pursuant to these provisions, refer here). As a result, my lawsuit tally for the year’s first six months will be slightly higher than those published by other sources. I believe these state court lawsuits should be included in the count even though they were not filed in federal court, because they are securities class action lawsuits seeking to recover damages under the federal securities laws. For the record, there were five of these state court lawsuits in the first six months of 2015, four in California Superior Court and one in New York Supreme Court.
According to my tally, there were a total of 91 new securities class action lawsuits filed in the year’s first half, putting the year on pace for a total of 182 new securities suits. Were the total number of filings to reach that level by year’s end, the total would represent an increase of about seven percent over the 2014 year end total and would also represent the highest annual number of securities lawsuits since 2011. Of the 91 lawsuits filed in the first half, 41 were filed in the first quarter and 50 were filed in the second quarter, which suggests that the filing pace picked up as the year progressed.
The 91 securities suits in the year’s first half were filed in twenty-one different federal districts (as well as the two state courts mentioned above). The largest number of lawsuits were filed in the Central District of California, where there were 21 filings, representing 23% of all of the first six months’ filings. There were also 13 filings in the Northern District of California, meaning that these two California districts alone accounted for 37% of all of the filings in the year’s first half. Another 17 suits were filed in the Southern District of New York, representing about 19% of all of the year to date filings. There were a total of 51 filings just in these three districts, representing about 57% of all of the filings in the first half of the year.
The lawsuits filed in the first six months of 2015 hit a broad variety of kinds of companies. The companies that were sued in the year’s first half represented 59 different Standard Industrial Classification (SIC) Code categories. The SIC Code category with the highest number of first half lawsuits was SIC Code 7372 (prepackaged software), which had eight filings. There were a total of 11 new lawsuits in the Industry Group 737(Computer Programming, Data Processing).
Life sciences companies generally have experienced heightened class action securities litigation frequency in recent years, and that trend continued in the first half of 2015. There were six new lawsuits against companies in SIC Code 2834 (Pharmaceutical Preparations), and a total of nine lawsuits in the Industry Group 283 (Drugs). In addition, there were four lawsuits filed against companies in the Industry Group 384 (Surgical, Medical, And Dental Instruments and Supplies). Taken together, there were a total of 13 new lawsuits filed against companies in these Life Sciences-related SIC Code categories, representing about 14% of all securities suits filed in the year’s first half. In addition, there were also a total of six new lawsuits in the Industry Group 357(Computer and Office Equipment).
As I noted in a prior blog post, the number of lawsuits against non-U.S. companies with listings on U.S. exchanges were an important factor in the first half filing activity. There were a total of 20 lawsuit filed in the year’s first six months against non-U.S. companies, representing about 22% of all first half filings. These lawsuits were filed against companies from a total of eleven different countries. However, ten of these filings were against companies domiciled in either China (9) or Hong Kong (1). Australia, Cayman Islands, Chile, Ireland, Japan, Mexico, South Korea, Switzerland, and UAE each had one company sued in the year’s first half. Interestingly of the 20 companies sued, eight had completed IPOs on a U.S. exchange within the preceding three years. One had completed its IP in 2012, one in 2013, and six in 2014.
Counting the state court lawsuits in the tally, there were a total of 13 new lawsuits filed against IPO companies in the year’s first half, representing about 14 percent of all first half filings. One of the companies had completed its IPO in 2012, two in 2013, eight in 2014, and two in 2015. As I noted in the preceding paragraph, eight non-U.S. IPO companies were sued in the first half, representing 61 percent of all new securities suits filed against IPO companies in the year’s first half and just under nine percent of all new securities class action lawsuit filing in the first six months of the year. Because 2014 was an active year for IPO, it seems likely that the IPO-related litigation will continue for the foreseeable future. Although 2015 IPO activity is down from 2014’s level, 2015 has also been an active year for IPOs (as I will discuss in a forthcoming post).
One trend that began in 2014 and that appears to have continued into 2015 is the filing of lawsuits against companies that allegedly used stock promotion firms. As I noted in a post this spring, plaintiff shareholders have filed a number of suits alleging that the defendant companies allegedly used the services of stock promotion firms to drive their share prices. By my count there were a total of three of these cases filed in the year’s first half, including the case filed on June 29, 2015 in the Southern District of Texas against Uranium Energy Corp. and certain of its directors and officers (about which refer here). These cases join the roughly half a dozen lawsuits filed in 2014 against companies that allegedly had used the services of a stock promotion firm (as discussed in detail here).