In the latest SPAC-related securities class action lawsuit filing, a plaintiff shareholder has filed a class action lawsuit against Katapult Holdings, an ecommerce firm providing online financing and product purchase options for non-prime consumers. The defendants named in the complaint include two former officers of the SPAC with which Katapult merged in June 2021. A copy of the August 27, 2021 complaint can be found here.
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SPAC-Related Securities Suit Hits Smart Building Products Tech Company
In my previous blog post, I noted that plaintiffs’ attorneys’ have been and are continuing to file SPAC-related securities class action suits, and I also noted that the latest filings are targeting SPAC and SPAC merger entities that completed their IPOs in the early stages of the SPAC IPO frenzy in late 2020 and early 2021. As if to underscore this point, yesterday a plaintiff shareholder filed a securities class action lawsuit against a post-SPAC-merger smart home products technology company, based on alleged misrepresentations in the company’s warranty accruals. The new lawsuit represents the latest example of the SPAC-related securities litigation trend. A copy of the complaint in the new lawsuit can be found here.
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Home Health Equipment Company Hit with SPAC-Related Securities Suit
In its recent report on securities suit filings in the year’s first half, Cornerstone Research noted that while securities suit filings generally in the first six months of the year were down, SPAC-related securities suit filings were up, with first half suit filings involving SPACs double the number of SPAC-related suits during the full prior year. As further evidence that this first half 2021 securities suit filing trend will continue as the year progresses, last week a plaintiff shareholder filed a securities class action lawsuit against a home healthcare equipment company that merged with a publicly traded SPAC in November 2019. As discussed below, this latest suit has much in common with many of the prior SPAC-related lawsuits, but it also has certain distinctive features as well.
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Cornerstone Research: Securities Suit Filings Declined in Year’s First Half
Largely due to a “substantial reduction” in the number of merger objection lawsuit filings, as well as a decline in the number of Section 11 and 1933 Act securities class action filings, the number of federal and state court securities class action lawsuits filed in the first six months of 2021 “dropped considerably” compared to the second half of 2020, according to a new report from Cornerstone Research. Filings of core Section 10(b) suit filings were, however, only “down modestly.” The report, entitled “Securities Class Action Filings: 2021 Midyear Assessment,” can be found here. Cornerstone Research’s July 28, 2021 press release about the report can be found here. My own analysis of the 1H21 federal court securities class action lawsuit filings can be found here.
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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: 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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Guest Post: COVID-19 Update: Investor Related Class Actions
As readers of this blog are aware, since the outbreak of the pandemic early last year, there has been a flow of COVID-19-related securities class action lawsuits filed in U.S. courts. I have tried to track these cases as they have been filed and to note them on this site. ISS Securities Class Action Services has also been tracking these cases. In the following guest post, Jeff Lubitz and Louis Angelo Panis analyze the COVID-19 securities suits. Jeff is the Executive Director and Louis is an analyst at ISS Securities Class Action Services. The ISS SCAS data is slightly more inclusive than the data I have compiled and reported on this site, as the ISS SCAS data includes state court securities class action lawsuits as well as federal court securities class action lawsuits, whereas my data set is limited to federal court actions only. Please note that several graphic displays of the ISS SCAS litigation data follow the article. A version of this article previously was published as an ISS Insights article. I would like to thank Jeff and Louis for allowing me to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Jeff and Louis’s article.
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Online Gaming Platform Hit with Post-SPAC Merger Securities Suit
In the latest SPAC-related securities class action lawsuit filing, a plaintiff shareholder has initiated a securities suit against Skillz, Inc., an online gaming platform that in December 2020 merged with Flying Eagle Acquisition Corp. (FEAC), a publicly traded special purpose acquisition company (SPAC). The share price of the post-merger publicly traded company declined after short sellers issued reports questioning the company’s revenue recognition practices and other financial details. The lawsuit followed after the share price decline. The individual defendants named in the securities complaint include the former President of FEAC, who became a director of Skillz following the merger. A copy of the plaintiff’s May 7, 2021 complaint can be found here.
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SPAC-Related State Court Merger Objection Litigation
In reporting in prior posts on SPAC-related litigation, I have primarily focused on federal court securities class action litigation (for example, here). In addition to the federal court litigation, there has also recently been state-court SPAC-related litigation filed, as I have also briefly noted (here, for example). In early April 2021, the Akin Gump law firm published a client alert memo noting that, at the time, over thirty SPACs has been sued in merger objection lawsuits filed in New York state court. In a May 5, 2021 post on her On the Case blog (here), Alison Frankel updated the Akin Gump filing data and reported that there have now been over 60 New York state court SPAC-related lawsuits filed. As Frankel’s article notes, the litigation itself is only part of the picture, as the plaintiffs’ lawyers involved have also been active in presenting SPACs with pre-lawsuit demand letters as well.
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Accounting-Related Securities Suit Filings and Settlements Increased in 2020
Even though the overall number of federal court securities class action lawsuit filings decrease in 2020 relative to 2019, the number of securities suits involving accounting allegations increased slightly, according to a new report from Cornerstone Research. The report, which is entitled “Accounting Class Action Filings and Settlements: 2020 Review and Analysis” also notes that the number of and value of settlements of accounting-related securities suits increased in 2020, as well. The April 7, 2021 report can be found here. Cornerstone Research’s April 7, 2021 press release about the report can be found here.
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