In a series of statements, comments, and staff actions, the SEC has in recent months evinced a growing concern with SPAC-related activities in the financial marketplace. The agency has now brought its first SPAC-related enforcement action (at least during the current era) against Momentus, Inc., a SPAC-merger target; Stable Road Acquisition Corp., the SPAC itself; and several other participants involved in the SPAC transaction, including the SPAC sponsor. This proceeding may be the first of many. The SEC’s July 13, 2021 press release about the proceedings can be found here. The SEC’s administrative order instituting cease-and-desist proceedings can be found here. The SEC’s separate civil action complaint against the CEO of the merger target can be found here.
Continue Reading SEC Charges SPAC, Merger Target, and Others with Securities Law Violations
Another U.S.-Listed Chinese Company Hit with Securities Suit Following Cybersecurity Regulator Crackdown
In recent posts (here and here), I have noted the securities class action lawsuits that have been filed against U.S.-listed Chinese companies following a crackdown by the Chinese cybersecurity regulator. Now yet another U.S.-listed Chinese company has been hit with a securities suit following the cybersecurity regulator’s actions. On July 13, 2021, a plaintiff shareholder filed a securities class action lawsuit against 360 DigiTech, a Chinese company with securities listed on NASDAQ, following news that the company’s app had been removed from major app stores following Chinese investigations of a number of companies’ data security practices. The July 13, 2021 complaint can be found here.
Continue Reading Another U.S.-Listed Chinese Company Hit with Securities Suit Following Cybersecurity Regulator Crackdown
Two More Chinese Companies Hit with U.S. Securities Suits Following Post-IPO Crackdown by Chinese Regulator
After the news emerged last week that Chinese cybersecurity regulators had cracked down on the ride-sharing firm DiDi Global shortly after the company completed its U.S. IPO, the company was hit with a U.S. securities class action lawsuit. However, DiDi was not the only Chinese company that recently completed a U.S. IPO that was targeted by the Chinese regulator. Two other Chinese companies that completed U.S. IPOs in June – Full Truck Alliance Co. Ltd. and Kanshun Limited – were both also notified that their companies were under review by the cybersecurity regulator. And now both of these companies have also been hit with U.S. securities class action lawsuits, as discussed below.
Continue Reading Two More Chinese Companies Hit with U.S. Securities Suits Following Post-IPO Crackdown by Chinese Regulator
Used Vehicle Re-Seller Hit with SPAC-Related Securities Suit
One of the most distinct securities litigation phenomena so far this year has been the increase in securities litigation involving post-SPAC-merger operating companies. In the latest example of this type of litigation, a plaintiff shareholder has filed a securities class action lawsuit against used vehicle consignment re-seller CarLotz, which became a public company through a January 2021 merger with a Special Purpose Acquisition Company (SPAC). As discussed below, CarLotz’s first financial reports as a public company disappointed investors and litigation has now ensued. A copy of the July 8, 2021 complaint against the company can be found here.
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Chinese Ride-Hailing Firm DiDi Hit With Securities Suit Related to Its Recent IPO
On July 6, 2021, after the Wall Street Journal reported that prior to DiDi’s June 30, 2021 U.S. IPO, government authorities had urged the Chinese ride-hailing firm to postpone the offering, but that the company, under pressure from investors, had gone ahead with the IPO anyway, it seemed that it would only be a matter of time before DiDi would be hit with a U.S. securities lawsuit. Indeed, as it turned out, the same day the Journal article appeared, an investor filed a U.S. securities class action lawsuit against the company. As discussed below, the lawsuit is based on cybersecurity and privacy concerns relating to the company’s ride-hailing app. A copy of the investor’s July 6, 2021 complaint can be found here.
Continue Reading Chinese Ride-Hailing Firm DiDi Hit With Securities Suit Related to Its Recent IPO
DraftKings Hit with SPAC-Related Securities Suit
In the latest example of a post-SPAC-merger company getting hit with a securities class action lawsuit, the online sports gaming and betting company DraftKings has been sued in a securities suit involving alleged pre- and post-SPAC-merger activity of one of the merged companies. As discussed below, the new lawsuit is the latest SPAC-related securities suit based supposed revelations in a short-seller’s report. A copy of the plaintiff’s complaint can be found here.
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Supreme Court Takes Up Discovery Stay Question in State Court Securities Class Action Litigation
In March 2018, when the U.S. Supreme Court held in the Cyan case that state courts retain jurisdiction for securities class action litigation under the ’33 Act, it set up the state courts and state court securities class action litigants for a host of practical problems. The first is that Cyan allowed the possibility of competing sets of plaintiffs’ lawyers to sue the same defendants in parallel state and federal lawsuits, in what can only be called inefficient and wasteful duplicative litigation. The second is that Cyan left unanswered many questions about the procedures applicable in the state court securities litigation, including questions having to do with the applicability of the procedural safeguards under the PSLRA. Among the many procedural questions that state courts now have to wrestle with is whether the PSLRA’s stay of discovery pending a ruling on the defendants’ motion to dismiss applies to state court proceedings.
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Federal Court Securities Lawsuit Filings Decline in Year’s First Half
Federal court securities class action lawsuit filings declined in the first half of 2021 to the lowest semiannual levels in several years. Several factors contributed to this relative decline, most significantly the shift by plaintiffs’ lawyers toward filing federal court merger objection lawsuits as individual actions rather than as class actions. In addition, as discussed further below, other factors contributed to the relative decline. The filing levels in the year’s first six months puts the filing for the full year 2021 on pace for the lowest annual filing levels since 2015, after several intervening years in which filings were at historically high levels.
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Guest Post: Ninth Circuit Invokes Lorenzo to Revive Scheme Liability Claims
As I discussed in a recent post (here), the Ninth Circuit recently reversed in part the district court’s dismissal of the Google+ user data-related securities class action lawsuit. One feature of the decision that perhaps did not attract as much attention is the appellate court’s reversal of district court’s dismissal of the plaintiff’s scheme liability claims. In the following guest post, Bruce Vanyo and Jonathan Rotenberg discuss the significance of the scheme liability portion of the Ninth Circuit’s opinion. Bruce and Jonathan are partners in the Securities Litigation practice at Katten Muchin Rosenman LLP, resident in the New York office. I would like to thank Bruce and Jonathan for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
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Guest Post: IPO Litigation Risk
Securities class action litigation activity involving IPO companies recently has been a significant concern, for the companies themselves as well as for their insurers. In the following guest post, Stanford Law School Professor Michael Klausner and Jason Hegland, Stone Kalisa, and Sam Curry of Stanford Securities Litigation Analytics take a look at the data surrounding IPO-related securities litigation. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
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