The number of securities class action lawsuit filings in the first half of 2022 remained at the lower levels that prevailed last year and below the more elevated levels that prevailed during the period 2017-2020. Though the number of securities class action lawsuit filings in the year’s first six months is below the recent higher levels, the number of suits filed is still consistent with long-term averages. The difference in the number of filings so far this year and the elevated numbers during the recent period were both largely due to merger objection lawsuit filings patterns.
According to my tally, there were 103 federal court securities class action lawsuits filed in the first half of 2022. That first half number annualizes to a projected year-end total of 206, which would be slightly below the 211 federal court securities class action lawsuits filed in 2021 and well below the 319 federal court securities suits filed in 2020.
The reason for the relative drop-off in the number of securities suit filings in both 2021 and 2022 has to do with filing patterns involving merger objection lawsuits. As a result of Delaware state court case law developments in 2016, plaintiffs’ lawyers began to file in federal court the merger objection suits that previously had been filed in state court. As a result, the total number of federal court securities class action lawsuits swelled during the period 2017-2020. However, more recently, the patterns have changed. By my count, there were only five federal court merger objection lawsuits filed in the first six months; by way of comparison, during the full 2019, there were 201 federal court merger objection lawsuit filings.
What has changed in more recent periods is that instead of filings the merger objection suits as class actions, the plaintiffs’ lawyers are filing the suits as individual actions. In other words, the lawsuits have not gone away, they just don’t show up in a tally of securities class action lawsuit filings. The end result is that the number of securities suit filings has declined.
Several other significant factors contributed to the lawsuits that were filed in the year’s first half. For example, consistent with filing securities suit filings trends, there were a number of COVID-related securities suit filings in the first half of the year. By my count, there were nine federal court COVID-related securities suits filed in the first six months of the year, compared to 18 for the full year 2021. Since the initial outbreak of the coronavirus in the U.S. in March 2020, there have been a total of 52 COVID-19 related securities class action lawsuits filed.
Another significant factor in the number of securities suit filings so far this year is another trend that was also significant in 2021 – that is, the filing of SPAC-related securities class action lawsuits. By my count, there have been 17 SPAC-related securities class action lawsuit filings so far in 2022, compared to 31 for the full year 2021. Most of these SPAC-related lawsuits arose following the merger of a SPAC with a target company. With nearly 600 SPACs currently seeking merger partners, there is a significant possibility for future SPAC-related litigation.
Lawsuits against companies involved with crypto currencies or digital assets also contributed significantly to the number of first half securities class action lawsuit filings. By my count, there were ten securities class action lawsuits filed in the first half of 2022 involving crypto or digital asset-related companies, compared to eleven for the full year 2021.
The first half securities suits were filed against a broad range of types of companies. The defendant companies hit with securities suits in the first half of the year fell into 49 different Standard Industrial Classification (SIC) codes. (Several of the defendant companies – such as for example many of the crypto-related companies – do not have SIC Code designations.) The largest concentration of securities suits in the year’s first half was involved companies in the 737 SIC Group (Computer Programming and Data Processing); there were 18 lawsuits against companies in this group in the year’s first half, representing approximately 17% of all first half suits. The next largest concentration was in the 283 Group (Drugs); there were 11 first half lawsuits against companies in this group, representing about 10.6% of all first half filings.
Fifteen of the securities suit filings (about 14.5%) in the year’s first half involved non-U.S. companies. The defendants named in these suits are from eight different countries. The countries with the largest number of companies sued were Canada (3) and China (3).
There were 12 lawsuits (representing about 11.5% of the first half filings) against IPO companies in the first six months of 2022. One was from the IPO class of 2019, four were from the IPO class of 2020, and seven were from the IPO class of 2021.